FEDERATED INDEX TRUST, N-30D, 1998-12-31

FEDERATED INDEX TRUST
N-30D, 1998-12-31

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Federated Mid-Cap Fund

Annual Report For 12 Months Ended October 31, 1998
Management Discussion and Analysis

The fund's total return based on net asset value for the 12-month reporting
period ended October 31, 1998 was 5.73%.* The target Index (S&PMidCap400)** had
a total return of 6.57 % during the reporting period. Fund 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 encountered its first major correction since 1990 in the
months of July through September 1998. Concerns over the problems in Asia,
Russia, and Latin America (Brazil), the failure of a large and respected hedge
fund, and talk of an overvalued stock market caused investors to lose confidence
and pull out of the stock market in favor of high quality bonds and money market
funds.

The Federal Reserve Board (the "Fed") acted by lowering interest rates 3 times
in the last 2 months, for a total reduction of 0.75% in the Fed funds rate. The
rate cuts were very encouraging to U.S. and foreign financial markets as
concerns over a worldwide recession subsided. The Fed showed that it was
concerned over financial market turmoil and would take definite steps to aid
market liquidity and avoid economic recession.

These positive developments caused a sharp "superball" rebound in the stock
market to levels close to record levels before the correction. However, mid-size
and small company stocks lagged behind large company stocks as investors showed
a bias towards stocks with greater liquidity and earnings stability.+

During the last 12 months, software, cellular telephones, and biotechnology were
among the strongest performing sectors while oil and gas, metals, and
transportation 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 fluctuate, 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 Mid-Cap Fund

Growth of $25,000 Invested in Federated Mid-Cap Fund

The graph below illustrates the hypothetical investment of $25,000* in the
Federated Mid-Cap Fund (the "Fund") from November5,1992 (start of performance)
to October 31, 1998 compared to the Standard and Poor's Mid Cap 400
Index(S&P400).+

The graphic presentation here displayed consists of a line graph. 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 & 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 $25,000
hypothetical investment in the Fund and the S&P 500. The "x" axis reflects
computation periods from 11/5/92 to 10/31/98. The "y" axis reflects the cost of
the investment in $5,000 increments, beginning with $25,000 and ending with
$65,000. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 500; the ending values were
$58,096 and $62,279, respectively.

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1998
1 Year 5.73%
5 Year 14.44%
Start of Performance (11/5/92) 15.12%

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, 1998 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 400 has been adjusted to reflect reinvestment of
dividends on securities in the index.

+ The S&P 400 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.

[This Page Intentionally Left Blank]

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061
Cusip 31420E205

006686A (12/98)

Federated is a registered mark
of Federated Investors, Inc.

1998 (C)Federated Investors, Inc. [RECYCLED PAPER LOGO]

Federated Mini-Cap Fund

Annual Report For 12 Months Ended October 31, 1998
Management Discussion and Analysis

The total return based on net asset value for Institutional Shares for the 12-
month reporting period ended October 31, 1998 was (13.46%)*. The total return
based on net asset value for Class C Shares was (14.47%)* from inception
(11/10/97) through October31, 1998.

The target Index (Russell 2000) had a total return of (11.90%)** for the
reporting period. Fund 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.***

During the last 12 months, technology, utilities, and consumer discretionary
were among the strongest performing sectors while energy, producer durables, and
financial services were among the worst performing sectors in the Index.

** This index is unmanaged.

*** Redemption is at the then-current net asset value, which may be more or
less than their original cost.

+ Small cap stocks have historically experienced greater volatility than
average.

Federated Mini-Cap Fund
Institutional Shares

Growth of $25,000 Invested in Federated Mini-Cap Fund (Institutional Shares)

The graph below illustrates the hypothetical investment of $25,000* in the
Federated Mini-Cap Fund (the "Fund") from August 11, 1992 (start of performance)
to October 31, 1998 compared to the Russell 2000 Index (RUS2).+

The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Institutional Shares Class of the Federated Mini-Cap Fund (the "Fund) are
represented by a solid line. The Standard & 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 $25,000 hypothetical investment in the
Institutional Shares of the Fund and the S&P 500. The "x" axis reflects
computation periods from 8/11/92 to 10/31/98. The "y" axis reflects the cost of
the investment in $5,000 increments, beginning with $25,000 and ending with
$65,000. The right margin reflects the ending value of the hypothetical
investment in the Fund's Institutional Shares as compared to the S&P 500; the
ending values were $47,164 and $53,201, respectively.

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1998
1 Year -13.46%
5 Year 7.95%
Start of Performance (8/11/92) 10.74%

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1998, 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 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 Fund's performance. This index is
unmanaged.

Federated Mini-Cap Fund
Class C Shares

Growth of $10,000 Invested in Federated Mini-Cap Fund (Class C Shares)

The graph below illustrates the hypothetical investment of $10,000* in the
Federated Mini-Cap Fund (the "Fund") from November10,1997 (start of performance)
to October 31, 1998 compared to the Russell 2000 Index (RUS2).+

The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated Mini-Cap Fund (the "Fund) are represented by a solid
line. The Standard & 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 $10,000 hypothetical investment in the Class C Shares of the Fund and
the S&P 500. The "x" axis reflects computation periods from 11/10/97 to
10/31/98. The "y" axis reflects the cost of the investment in $500 increments,
beginning with $8,000 and ending with $11,000. The right margin reflects the
ending value of the hypothetical investment in the Fund's Class C Shares as
compared to the S&P 500; the ending values were $8,476 and $8,810, respectively.

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1998**
Start of Performance (11/10/97) -15.24%

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1998, and, together with financial statements contained therein,
constitutes the Fund's annual report.

* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 1.00% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The RUS2 has
been adjusted to reflect reinvestment of dividends on securities in the
index.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ The RUS2 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

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061
Cusip 31420E304

Cusip 31420E601
006683 (12/98)

Federated is a registered mark
of Federated Investors, Inc.

1998 (C)Federated Investors, Inc. [RECYCLED PAPER LOGO]

Federated Max-Cap Fund

Annual Report For 12 Months Ended October 31, 1998

Management Discussion and Analysis

Total returns based on net asset value for Institutional Shares and
Institutional Service Shares for the 12-month reporting period ended October 31,
1998 were 21.56% and 21.21%, respectively.* The total return based on net asset
value for Class C shares was 19.57% from inception (11/10/97) through October
31, 1998.*

The target Index (S&P 500)** had a total return of 21.90% during the reporting
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 encountered its first major correction since 1990 in the
months of July through September 1998. Concerns over the problems in Asia,
Russia, and Latin America (Brazil), the failure of a large and respected hedge
fund, and talk of an overvalued stock market caused investors to lose confidence
and pull out of the stock market in favor of high quality bonds and money market
funds.

During the last 12 months, communications equipment, retailing, and computers
were among the strongest performing sectors while oil and gas, leisure, and
containers were among the worst performing sectors in the Index.

** 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 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, 1998, compared to the Standard and Poor's
500 Index (S&P 500).+

The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Institutional Shares Class of the Federated Max-Cap Fund (the "Fund) are
represented by a solid line. The Standard & 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 $25,000 hypothetical investment in the
Institutional Shares Class of the Fund and the S&P 500. The "x" axis reflects
computation periods from 7/11/90 to 10/31/98. The "y" axis reflects the cost of
the investment in $20,000 increments, beginning with $20,000 and ending with
$100,000. The right margin reflects the ending value of the hypothetical
investment in the Fund's Institutional Shares Class as compared to the S&P 500;
the ending values were $93,337 and $95,414, respectively.

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1998
1 Year 21.56%
5 Year 20.88%
Start of Performance (7/11/90) 17.18%

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1998, 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.

<PAGE>

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, 1998, compared to the

Standard and Poor's 500 Index (S&P).+

The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Institutional Service Shares Class of the Federated Max-Cap Fund (the "Fund) are
represented by a solid line. The Standard & 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 $25,000 hypothetical investment in the
Institutional Service Shares Class of the Fund and the S&P 500. The "x" axis
reflects computation periods from 9/7/93 to 10/31/98. The "y" axis reflects the
cost of the investment in $10,000 increments, beginning with $20,000 and ending
with $80,000. The right margin reflects the ending value of the hypothetical
investment in the Fund's Institutional Service Shares as compared to the S&P
500; the ending values were $64,624 and $67,147, respectively.

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1998
1 Year 21.21%
5 Year 20.51%
Start of Performance (9/7/93) 20.25%

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1998, 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

Class C Shares

Growth of $10,000 Invested in Federated Max-Cap Fund (Class C Shares)

The graph below illustrates the hypothetical investment of $10,000* in the
Federated Max-Cap Fund (Class C Shares) (the "Fund") from November 10, 1997
(start of performance) to October 31, 1998, compared to the Standard and Poor's
500 Index (S&P 500).+

The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated Max-Cap Fund (the "Fund) are represented by a solid
line. The Standard & 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 $10,000 hypothetical investment in Class C Shares of the Fund and the
S&P 500. The "x" axis reflects computation periods from 11/10/97 to 10/31/98.
The "y" axis reflects the cost of the investment in $500 increments, beginning
with $10,000 and ending with $12,500. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class C Shares as compared to the
S&P 500; the ending values were $11,857 and $12,190, respectively.

AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED OCTOBER 31, 1998
Start of Performance (11/10/97) 18.57%

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1998, and, together with financial statements contained therein,
constitutes the Fund's annual report.

* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 1.00% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. 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.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ 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.

[This Page Intentionally Left Blank]

Federated

Federated Max-Cap Fund

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061
Cusip 31420E106

Cusip 31420E403
Cusip 31420E502

006685A (12/98)

Federated is a registered mark
of Federated Investors, Inc.

1998 (copyright)Federated Investors, Inc.

LOGO RECYCLED PAPER

FEDERATED MAX-CAP FUND

A Portfolio of Federated Index Trust

CLASS C SHARES

A mutual fund seeking to provide investment results that correspond to the
aggregate price and dividend performance of publicly-traded common stocks by
duplicating the composition of the Standard & Poor's 500 Composite Stock Price
Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's.

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

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 4
What do Shares Cost? 5
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem and Exchange Shares 8
Account and Share Information 10
Who Manages the Fund? 11
Financial Information 12
</TABLE>

DECEMBER 31, 1998

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

"Index"). While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the strategies and policies

described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in the large capitalization common
stocks comprising the Index.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

The value of the stocks in the Fund's portfolio will go up and down. These
fluctuations could be a sustained trend or a drastic movement. Fluctuations in
the Fund's portfolio may reflect changes in individual portfolio stocks or
general changes in stock valuations and will result in changes in the Fund's
share price. The Fund's investment manager (Manager) attempts to manage market
risk through diversification by limiting the amount the Fund invests in each
stock. Another risk of investing in the Fund includes sector risk.

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

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Shares as of the calendar
year-end for each of the last seven years.

The `y' axis reflects the "% Total Return" beginning with 0% and increasing
in increments of 10% up to 40%.

The `x' axis represents calculation periods from the earliest calendar year
end of the Institutional Shares' start of business through the calendar year
ended December 31, 1997. The light gray shaded chart features seven distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Institutional Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1991 through 1997 are: 30.01%, 7.22%, 9.52%, 1.22%, 36.63%,
22.75%, 32.69%, respectively.

The total returns shown here are for Institutional Shares which is another class
of shares offered by Federated Max-Cap Fund. Institutional Shares are not
offered in this prospectus for the Fund's Class C Shares. The total returns for
Institutional Shares are disclosed here because Class C Shares have only been
offered since November 10, 1997. These total returns would be substantially
similar to the annual returns for Class C Shares over the same period and would
differ only to the extent that the two classes do not have the same expenses. It
is anticipated that expenses of Class C Shares will exceed those of the
Institutional Shares.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.
The Fund's Institutional Shares total return from January 1, 1998 to September
30, 1998 was 5.81%.

Within the period shown in the chart, the Fund's Institutional Shares highest
quarterly return was 17.39% (quarter ended June 30, 1997). Its lowest quarterly
return was (3.86%) (quarter ended March 31, 1994).

Average Annual Total Return

Calendar Period Institutional Shares S&P 500
<S> <C> <C>
1 Year 32.69% 33.36%
5 Years 19.79% 20.27%
Life of Fund/1/ 17.15% 18.54%
</TABLE>

1 Since inception date of July 11, 1990.

The table shows the Fund's Shares average annual total returns averaged over a
period of years relative to the Standard & Poor's 500 Index, a broad-based
market index, for the calendar periods ending December 31, 1997.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
rewards.

What are the Fund's Fees and Expenses?

FEDERATED MAX-CAP FUND

FEES AND EXPENSES

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

<TABLE>

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

Annual Fund Operating Expenses (before waivers)/1/

Expenses That are Deducted From Fund Assets (as a percentage of average net assets)

Management Fee/2/ 0.30%
Distribution (12b-1) Fee 0.75%
Shareholder Services Fee 0.25%
Other Expenses 0.04%
Total Annual Fund Operating Expenses 1.34%
</TABLE>

1 Although not contractually obligated to do so, the adviser waived certain
amounts. These are shown along with the net expenses the Fund actually paid
for the fiscal year ended October 31, 1998. Waiver of Fund Expenses 0.02%
Total Actual Annual Fund Operating Expenses (after waivers) 1.32%

2 The adviser has voluntarily waived a portion of the management fee. The
adviser can terminate this voluntary waiver at any time. The management fee
paid by the Fund (after the voluntary waiver) was 0.28% for the year ended
October 31, 1998.

EXAMPLE

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

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

Class C Shares 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Expenses assuming $236 $425 $734 $1,613
redemption

Expenses assuming no $136 $425 $734 $1,613
redemption
</TABLE>

What are the Fund's Investment Strategies?

The Fund pursues its investment objective by investing in the stocks of the
Index in the same weights as the Index. This is called a "full replication"
strategy. Market capitalization is determined by multiplying the number of
outstanding shares by the current market price per share. As of September 30,
1998, the capitalization range of the Index was $537 million to $271.2 billion.
As of the same date, the weighted median market capitalization of the Fund was
$43.4 billion.

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in Which the Fund Invests?

Common Stocks

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

STOCK INDEX FUTURES

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

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will go up and down.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. This will result in changes in the Fund's
share price.

SECTOR RISK

Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may perform differently than other sectors or as the market as a whole. The more
significant a sector is in the composition of the Index, the more the Fund's
performance will be susceptible to any economic, business or other developments
which generally affect that sector.

What do Shares Cost?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next determined net asset value (NAV) plus any applicable
sales charge (public offering price).

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

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

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

Minimum Maximum Sales Charge
Initial/

Subsequent
Investment
Amounts/1/

Shares Offered Front-End Contingent
Sales Charge Deferred

Sales Charge/2/

<S> <C> <C> <C>
Class C $1,500/$100 None 1.00%
</TABLE>

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

2 See "Sales Charge When You Redeem".

SALES CHARGE WHEN YOU REDEEM

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

Class C Shares

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

You Will Not be Charged a CDSC When Redeeming Shares:

. purchased with reinvested dividends or capital gains;

. purchased within 120 days of redeeming Shares of an equal or lesser amount;
. that you exchanged into the same share class of another Federated Fund where

the shares were held for the applicable CDSC holding period (other than a
money market fund);

. purchased through investment professionals that did not receive advanced
sales payments; or

. if after you purchase Shares you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

. if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;

. if your redemption is a required retirement plan distribution;
. upon the death of the last surviving shareholder(s).

If your redemption qualifies, you or your investment professional
should notify the Distributor at the time of redemption to eliminate the CDSC.
If the Distributor is not notified, the CDSC will apply.

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

. Shares that are not subject to a CDSC;

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

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

How is the Fund Sold?

The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Class C Shares, each representing interests in a single portfolio of
securities.

This prospectus relates only to Class C Shares. Each share class has different
sales charges and other expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other classes.

The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to institutions or individuals, directly or through
investment professionals. When the Distributor receives marketing fees, it may
pay some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

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

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and

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

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

In order to maximize the Fund's ability to track the Index, investors are
urged to transmit purchase requests prior to 2:00 p.m. (Eastern time).

DIRECTLY FROM THE FUND

. Establish your account with the Fund by submitting a completed New

Account Form; and

. Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

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

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

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

By Check

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

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).

THROUGH AN EXCHANGE

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

BY SYSTEMATIC INVESTMENT PROGRAM

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

BY AUTOMATED CLEARINGHOUSE (ACH)

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

RETIREMENT INVESTMENTS

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

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

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

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time)
you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV
after the Fund receives your written request in proper form. Send requests by
mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

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

registration into which you are exchanging.

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within

the last thirty days;

. a redemption is payable to someone other than the shareholder(s) of record;

. if exchanging (transferring) into another fund with a different shareholder
registration.

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

PAYMENT METHODS FOR REDEMPTIONS

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

when the account was opened:

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;
. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

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

EXCHANGE PRIVILEGES

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

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

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

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

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

Dividends are taxable as ordinary income; capital gains are taxable at different
rates depending upon the length of time the Fund holds its assets.

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

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
Manager, Federated Management. The Manager, in turn, oversees the management of
the Fund's assets by the Sub-Manager, Northern Trust Quantitative Advisors, Inc.
The Manager's responsibilities include selecting the Sub-Manager and continued
review and evaluation of the Sub-Manager's performance. The Manager's address is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Manager and other subsidiaries of Federated advise and/or provide
administrative services to more than 300 mutual funds and private accounts,
which total over $120 billion in assets as of December 31, 1997. Federated was
established in 1955 and is one of the largest mutual fund investment managers in
the United States with more than 2,000 employees. Over 4,000 investment
professionals make Federated Funds available to their customers.

The Manager receives an annual management fee equal to 0.30% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Manager delegates daily management of the Fund assets to the Sub-Manager,
who is paid by the Manager and not by the Fund, based on net assets under
management. The Sub-Manager develops, maintains and runs the computer program
designed to determine which securities are purchased and sold to replicate the
composition of the Index. The Sub-Manager has complete discretion, subject to
the Manager's oversight, to purchase and sell portfolio securities for the Fund.
The Sub-Manager's address is 50 South LaSalle Street, Chicago, IL 60675.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub- Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non- financial institution clients invest. In total, the Sub- Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Fund.

While it is impossible to determine in advance all of the risks to the Fund,
the Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to
fix any Year 2000 problems. In addition, they are working to gather information
from third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Manager is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities,
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets. The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

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

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

Financial Highlights--Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors,
on page 37.

Period Ended October 31 1998/1/

- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 19.81
- ---------------------------------------------------------------------------------------------------------
Income from Investment Operations:

- ---------------------------------------------------------------------------------------------------------
Net investment income 0.12

- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 3.66
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 3.78

- -----------------------------------------------------------------------------------------------------------------------
Less Distributions:

- ---------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.15)

- ---------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments and futures contracts (0.62)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.77)

- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.82
- -----------------------------------------------------------------------------------------------------------------------
Total Return/2/ 19.57%

Ratios to Average Net Assets:

- -----------------------------------------------------------------------------------------------------------------------
Expenses 1.32%/3/

- -----------------------------------------------------------------------------------------------------------------------
Net investment income 0.35%/3/

- -----------------------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement4 0.02%/3/

- -----------------------------------------------------------------------------------------------------------------------
Supplemental Data:

- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,784
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 3%

- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Reflects operations for the period from November 10, 1997 (date of initial
public investment) to October 31, 1998.

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

3 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

OCTOBER 31, 1998

Shares Value

- -----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--98.1%
Basic Industry--4.0%

<C> <S> <C>
8,700 ASARCO, Inc. $ 186,506
-------------------------------------------------------------------------------
49,800 Air Products & Chemicals, Inc. 1,879,950
-------------------------------------------------------------------------------
48,700 Alcan Aluminum, Ltd. 1,232,719
-------------------------------------------------------------------------------
41,992 Allegheny Teledyne, Inc. 863,461
-------------------------------------------------------------------------------
40,200 Aluminum Co. of America 3,185,850
-------------------------------------------------------------------------------
128,882 Archer-Daniels-Midland Co. 2,150,718
-------------------------------------------------------------------------------
23,200 /2/Armco, Inc. 110,200
-------------------------------------------------------------------------------
25,200 Avery Dennison Corp. 1,044,225
-------------------------------------------------------------------------------
6,500 Ball Corp. 274,219
-------------------------------------------------------------------------------
79,900 Barrick Gold Corp. 1,707,863
-------------------------------------------------------------------------------
49,300 Battle Mountain Gold Co. 268,069
-------------------------------------------------------------------------------
11,400 Bemis Co., Inc. 423,225
-------------------------------------------------------------------------------
27,900 /2/Bethlehem Steel Corp. 251,100
-------------------------------------------------------------------------------
12,100 Boise Cascade Corp. 338,800
-------------------------------------------------------------------------------
20,600 Champion International Corp. 657,913
-------------------------------------------------------------------------------
49,900 Corning, Inc. 1,811,994
-------------------------------------------------------------------------------
26,800 Crown Cork & Seal Co., Inc. 854,250
-------------------------------------------------------------------------------
20,050 Cyprus Amax Minerals 249,372
-------------------------------------------------------------------------------
48,200 Dow Chemical Co. 4,512,725
-------------------------------------------------------------------------------
243,400 Du Pont (E.I.) de Nemours & Co. 13,995,500
-------------------------------------------------------------------------------
17,025 Eastman Chemical Co. 1,000,219
-------------------------------------------------------------------------------
27,680 Ecolab, Inc. 826,940
-------------------------------------------------------------------------------
30,962 Engelhard Corp. 650,202
-------------------------------------------------------------------------------
47,400 Fort James Corp. 1,910,813
-------------------------------------------------------------------------------
38,000 Freeport-McMoRan Copper & Gold, Inc., Class B 467,875
-------------------------------------------------------------------------------
20,100 Georgia-Pacific Corp. 1,040,175
-------------------------------------------------------------------------------
15,900 Goodrich (B.F.) Co. 572,400
-------------------------------------------------------------------------------
15,900 /2/Grace (W.R.) & Co. 276,263
-------------------------------------------------------------------------------
12,800 Great Lakes Chemical Corp. 532,800
-------------------------------------------------------------------------------
20,700 Hercules, Inc. 689,569
-------------------------------------------------------------------------------
45,300 Homestake Mining Co. 537,938
-------------------------------------------------------------------------------
35,800 Inco Ltd. 382,613
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Basic Industry--continued

-------------------------------------------------------------------------------
66,076 International Paper Co. $ 3,068,404
-------------------------------------------------------------------------------
23,500 Louisiana-Pacific Corp. 417,125
-------------------------------------------------------------------------------
22,500 Mead Corp. 711,563
-------------------------------------------------------------------------------
9,300 Millipore Corp. 229,013
-------------------------------------------------------------------------------
129,200 Monsanto Co. 5,248,750
-------------------------------------------------------------------------------
28,000 Morton International, Inc. 696,500
-------------------------------------------------------------------------------
14,300 Nalco Chemical Co. 442,406
-------------------------------------------------------------------------------
35,957 Newmont Mining Corp. 764,086
-------------------------------------------------------------------------------
18,800 Nucor Corporation 851,875
-------------------------------------------------------------------------------
11,500 Owens Corning 417,594
-------------------------------------------------------------------------------
33,400 /2/Owens-Illinois, Inc. 1,020,788
-------------------------------------------------------------------------------
38,100 PPG Industries, Inc. 2,178,844
-------------------------------------------------------------------------------
26,733 Pall Corp. 675,008
-------------------------------------------------------------------------------
12,600 Phelps Dodge Corp. 726,075
-------------------------------------------------------------------------------
51,920 Pioneer Hi-Bred International 1,453,760
-------------------------------------------------------------------------------
53,800 Placer Dome, Inc. 847,350
-------------------------------------------------------------------------------
6,200 Potlatch Corp. 226,300
-------------------------------------------------------------------------------
33,800 Praxair, Inc. 1,360,450
-------------------------------------------------------------------------------
15,500 Reynolds Metals Co. 929,031
-------------------------------------------------------------------------------
38,100 Rohm & Haas Co. 1,285,875
-------------------------------------------------------------------------------
17,700 /2/Sealed Air Corp. 627,244
-------------------------------------------------------------------------------
37,100 Sherwin-Williams Co. 934,456
-------------------------------------------------------------------------------
21,500 Sigma-Aldrich Corp. 664,484
-------------------------------------------------------------------------------
4,300 Springs Industries, Inc., Class A 152,113
-------------------------------------------------------------------------------
22,608 Stone Container Corp. 216,189
-------------------------------------------------------------------------------
12,100 Temple-Inland, Inc. 587,606
-------------------------------------------------------------------------------
13,100 Tupperware Corp. 203,869
-------------------------------------------------------------------------------
18,920 USX-U.S. Steel Group, Inc. 439,890
-------------------------------------------------------------------------------
14,900 Union Camp Corp. 640,700
-------------------------------------------------------------------------------
29,100 Union Carbide Corp. 1,120,350
-------------------------------------------------------------------------------
21,850 Westvaco Corp. 538,056
-------------------------------------------------------------------------------
42,800 Weyerhaeuser Co. 2,003,575
-------------------------------------------------------------------------------
23,800 Willamette Industries, Inc. 737,800
-------------------------------------------------------------------------------
20,750 Worthington Industries, Inc. 281,422
-----------------------------------------------------------------------------------------------
Total 77,585,017

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

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Consumer Durables--2.8%

20,400 Black & Decker Corp. $ 1,054,425
-------------------------------------------------------------------------------
5,300 Briggs & Stratton Corp. 249,100
-------------------------------------------------------------------------------
21,400 Brunswick Corp. 415,963
-------------------------------------------------------------------------------
12,700 Centex Corp. 425,450
-------------------------------------------------------------------------------
139,070 Chrysler Corp. 6,692,744
-------------------------------------------------------------------------------
16,900 Cooper Tire & Rubber Co. 280,963
-------------------------------------------------------------------------------
35,445 Dana Corp. 1,482,044
-------------------------------------------------------------------------------
69,400 Eastman Kodak Co. 5,378,500
-------------------------------------------------------------------------------
15,400 Eaton Corp. 1,042,388
-------------------------------------------------------------------------------
7,800 Fleetwood Enterprises, Inc. 251,550
-------------------------------------------------------------------------------
260,600 Ford Motor Co. 14,137,550
-------------------------------------------------------------------------------
140,700 General Motors Corp. 8,872,894
-------------------------------------------------------------------------------
38,350 Genuine Parts Co. 1,208,025
-------------------------------------------------------------------------------
33,800 Goodyear Tire & Rubber Co. 1,820,975
-------------------------------------------------------------------------------
28,500 Hasbro, Inc. 999,281
-------------------------------------------------------------------------------
8,352 Jostens, Inc. 188,442
-------------------------------------------------------------------------------
8,400 Kaufman & Broad Homes Corp. 239,925
-------------------------------------------------------------------------------
62,925 Mattel, Inc. 2,257,434
-------------------------------------------------------------------------------
19,700 Maytag Corp. 973,919
-------------------------------------------------------------------------------
35,000 Newell Co. 1,540,000
-------------------------------------------------------------------------------
9,600 Polaroid Corp. 255,000
-------------------------------------------------------------------------------
9,200 Pulte Corp. 236,900
-------------------------------------------------------------------------------
32,100 Rubbermaid, Inc. 1,065,319
-------------------------------------------------------------------------------
1 /2/SPX Corp. 15
-------------------------------------------------------------------------------
13,100 Snap-On Tools Corp. 464,231
-------------------------------------------------------------------------------
19,100 Stanley Works 573,000
-------------------------------------------------------------------------------
26,200 TRW, Inc. 1,491,763
-------------------------------------------------------------------------------
16,300 Whirlpool Corp. 835,375
-----------------------------------------------------------------------------------------------
Total 54,433,175

-----------------------------------------------------------------------------------------------
Consumer Non-Durables--10.1%

12,200 Alberto-Culver Co., Class B 324,063
-------------------------------------------------------------------------------
15,600 American Greetings Corp., Class A 625,950
-------------------------------------------------------------------------------
103,700 Anheuser-Busch Cos., Inc. 6,163,669
-------------------------------------------------------------------------------
56,600 Avon Products, Inc. 2,246,313
-------------------------------------------------------------------------------
61,800 BestFoods 3,368,100
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Consumer Non-Durables--continued

14,800 Brown-Forman Corp., Class B $ 1,005,475
-------------------------------------------------------------------------------
96,600 Campbell Soup Co. 5,149,988
-------------------------------------------------------------------------------
22,300 Clorox Co. 2,436,275
-------------------------------------------------------------------------------
87,000 Coca Cola Enterprises, Inc. 3,137,438
-------------------------------------------------------------------------------
530,200 Coca-Cola Co. 35,854,775
-------------------------------------------------------------------------------
63,600 Colgate-Palmolive Co. 5,620,650
-------------------------------------------------------------------------------
104,900 ConAgra, Inc. 3,192,894
-------------------------------------------------------------------------------
7,900 Coors Adolph Co., Class B 395,000
-------------------------------------------------------------------------------
37,200 Fortune Brands, Inc. 1,229,925
-------------------------------------------------------------------------------
15,700 /2/Fruit of the Loom, Inc., Class A 239,425
-------------------------------------------------------------------------------
33,300 General Mills, Inc. 2,447,550
-------------------------------------------------------------------------------
241,500 Gillette Co. 10,852,406
-------------------------------------------------------------------------------
77,900 Heinz (H.J.) Co. 4,527,938
-------------------------------------------------------------------------------
30,800 Hershey Foods Corp. 2,088,625
-------------------------------------------------------------------------------
23,100 International Flavors & Fragrances, Inc. 864,806
-------------------------------------------------------------------------------
87,500 Kellogg Co. 2,887,500
-------------------------------------------------------------------------------
117,748 Kimberly-Clark Corp. 5,681,341
-------------------------------------------------------------------------------
14,300 Liz Claiborne, Inc. 420,063
-------------------------------------------------------------------------------
61,900 Nike, Inc., Class B 2,704,256
-------------------------------------------------------------------------------
316,800 PepsiCo, Inc. 10,692,000
-------------------------------------------------------------------------------
523,100 Philip Morris Cos., Inc. 26,743,488
-------------------------------------------------------------------------------
288,400 Procter & Gamble Co. 25,631,550
-------------------------------------------------------------------------------
29,300 Quaker Oats Co. 1,730,531
-------------------------------------------------------------------------------
69,900 RJR Nabisco Holdings Corp. 1,996,519
-------------------------------------------------------------------------------
67,100 Ralston Purina Co. 2,239,463
-------------------------------------------------------------------------------
12,100 /2/Reebok International Ltd. 201,163
-------------------------------------------------------------------------------
7,800 Russell Corp. 191,588
-------------------------------------------------------------------------------
100,500 Sara Lee Corp. 5,998,594
-------------------------------------------------------------------------------
74,500 Seagram Co. Ltd. 2,449,188
-------------------------------------------------------------------------------
39,900 UST, Inc. 1,356,600
-------------------------------------------------------------------------------
137,700 Unilever N.V., ADR 10,361,925
-------------------------------------------------------------------------------
26,200 V.F. Corp. 1,095,488
-------------------------------------------------------------------------------
28,900 /2/Venator Group, Inc. 243,844
-------------------------------------------------------------------------------
25,000 Wrigley (Wm.), Jr. Co. 2,023,438
-----------------------------------------------------------------------------------------------
Total 196,419,804

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

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Energy Minerals6.9%

19,700 Amerada-Hess Corp. $ 1,088,425
-------------------------------------------------------------------------------
205,200 Amoco Corp. 11,516,850
-------------------------------------------------------------------------------
25,600 Anadarko Petroleum Corp. 867,200
-------------------------------------------------------------------------------
21,200 Apache Corp. 600,225
-------------------------------------------------------------------------------
16,400 Ashland, Inc. 789,250
-------------------------------------------------------------------------------
69,100 Atlantic Richfield Co. 4,759,263
-------------------------------------------------------------------------------
68,290 Baker Hughes, Inc. 1,506,648
-------------------------------------------------------------------------------
38,165 Burlington Resources, Inc. 1,571,921
-------------------------------------------------------------------------------
140,700 Chevron Corp. 11,467,050
-------------------------------------------------------------------------------
524,400 Exxon Corp. 37,363,500
-------------------------------------------------------------------------------
94,400 Halliburton Co. 3,392,500
-------------------------------------------------------------------------------
10,800 Helmerich & Payne, Inc. 257,175
-------------------------------------------------------------------------------
10,200 Kerr-McGee Corp. 406,725
-------------------------------------------------------------------------------
168,100 Mobil Corp. 12,723,069
-------------------------------------------------------------------------------
75,900 Occidental Petroleum Corp. 1,508,513
-------------------------------------------------------------------------------
22,700 /2/Oryx Energy Co. 317,800
-------------------------------------------------------------------------------
10,200 Pennzoil Co. 365,925
-------------------------------------------------------------------------------
55,600 Phillips Petroleum Co. 2,404,700
-------------------------------------------------------------------------------
18,600 /2/Rowan Companies, Inc. 270,863
-------------------------------------------------------------------------------
461,200 Royal Dutch Petroleum Co., ADR 22,714,100
-------------------------------------------------------------------------------
117,000 Schlumberger Ltd. 6,142,500
-------------------------------------------------------------------------------
20,137 Sun Co., Inc. 690,951
-------------------------------------------------------------------------------
115,200 Texaco, Inc. 6,832,800
-------------------------------------------------------------------------------
62,500 USXMarathon Group 2,042,969
-------------------------------------------------------------------------------
54,394 Union Pacific Resources Group, Inc. 707,122
-------------------------------------------------------------------------------
51,900 Unocal Corp. 1,761,356
-----------------------------------------------------------------------------------------------
Total 134,069,400

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

Finance--15.7%

36,350 AON Corp. 2,253,700
-------------------------------------------------------------------------------
178,210 Allstate Corp. 7,674,168
-------------------------------------------------------------------------------
98,200 American Express Co. 8,678,425
-------------------------------------------------------------------------------
54,430 American General Corp. 3,728,455
-------------------------------------------------------------------------------
225,833 American International Group, Inc. 19,252,263
-------------------------------------------------------------------------------
74,466 Associates First Capital Corp., Class A 5,249,853
-------------------------------------------------------------------------------
61,600 BB&T Corp. 2,198,350
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Finance--continued

251,886 Bank One Corp. $ 12,310,914
-------------------------------------------------------------------------------
160,700 Bank of New York Co., Inc. 5,072,094
-------------------------------------------------------------------------------
373,692 BankAmerica Corp. 21,463,934
-------------------------------------------------------------------------------
63,300 BankBoston Corp. 2,330,231
-------------------------------------------------------------------------------
20,600 Bankers Trust New York Corp. 1,293,938
-------------------------------------------------------------------------------
24,500 Bear Stearns Cos., Inc. 874,344
-------------------------------------------------------------------------------
22,900 Block (H&R), Inc. 1,026,206
-------------------------------------------------------------------------------
45,700 CIGNA Corp. 3,333,244
-------------------------------------------------------------------------------
14,200 Capital One Financial Corp. 1,444,850
-------------------------------------------------------------------------------
184,240 Chase Manhattan Corp. 10,467,135
-------------------------------------------------------------------------------
35,600 Chubb Corp. 2,189,400
-------------------------------------------------------------------------------
36,000 Cincinnati Financial Corp. 1,343,250
-------------------------------------------------------------------------------
491,650 Citigroup, Inc. 23,138,278
-------------------------------------------------------------------------------
33,450 Comerica, Inc. 2,157,525
-------------------------------------------------------------------------------
67,161 Conseco, Inc. 2,329,647
-------------------------------------------------------------------------------
23,900 Countrywide Credit Industries, Inc. 1,032,181
-------------------------------------------------------------------------------
145,900 Federal Home Loan Mortgage Corp. 8,389,250
-------------------------------------------------------------------------------
223,000 Federal National Mortgage Association 15,791,188
-------------------------------------------------------------------------------
57,600 Fifth Third Bancorp 3,816,000
-------------------------------------------------------------------------------
208,398 First Union Corp. 12,087,084
-------------------------------------------------------------------------------
122,120 Fleet Financial Group, Inc. 4,877,168
-------------------------------------------------------------------------------
54,400 Franklin Resources, Inc. 2,057,000
-------------------------------------------------------------------------------
16,300 General RE Corp. 3,580,906
-------------------------------------------------------------------------------
12,400 Golden West Financial Corp. 1,124,525
-------------------------------------------------------------------------------
50,200 Hartford Financial Services Group, Inc. 2,666,875
-------------------------------------------------------------------------------
105,859 Household International, Inc. 3,870,470
-------------------------------------------------------------------------------
45,500 Huntington Bancshares, Inc. 1,308,125
-------------------------------------------------------------------------------
38,000 J.P. Morgan & Co., Inc. 3,581,500
-------------------------------------------------------------------------------
22,837 Jefferson-Pilot Corp. 1,387,348
-------------------------------------------------------------------------------
94,600 KeyCorp 2,867,563
-------------------------------------------------------------------------------
25,300 Lehman Brothers Holdings, Inc. 959,819
-------------------------------------------------------------------------------
21,600 Lincoln National Corp. 1,638,900
-------------------------------------------------------------------------------
21,300 MBIA Insurance Corporation 1,301,963
-------------------------------------------------------------------------------
161,727 MBNA Corp. 3,689,397
-------------------------------------------------------------------------------
24,500 MGIC Investment Corp. 955,500
-------------------------------------------------------------------------------
55,000 Marsh & McLennan Cos., Inc. 3,052,500
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Finance--continued

56,100 Mellon Bank Corp. $ 3,373,013
-------------------------------------------------------------------------------
32,700 Mercantile Bancorporation, Inc. 1,493,981
-------------------------------------------------------------------------------
74,900 Merrill Lynch & Co., Inc. 4,437,825
-------------------------------------------------------------------------------
125,957 Morgan Stanley, Dean Witter & Co. 8,155,716
-------------------------------------------------------------------------------
70,900 National City Corp. 4,559,756
-------------------------------------------------------------------------------
164,700 Norwest Corp. 6,124,781
-------------------------------------------------------------------------------
64,800 PNC Bank Corp. 3,240,000
-------------------------------------------------------------------------------
15,600 Progressive Corp., Ohio 2,297,100
-------------------------------------------------------------------------------
29,100 Provident Cos., Inc. 845,719
-------------------------------------------------------------------------------
20,400 Providian Financial Corp. 1,619,250
-------------------------------------------------------------------------------
46,000 Regions Financial Corp. 1,702,000
-------------------------------------------------------------------------------
23,200 Republic New York Corp. 970,050
-------------------------------------------------------------------------------
30,300 SAFECO Corp. 1,312,369
-------------------------------------------------------------------------------
36,000 SLM Holding Corp. 1,442,250
-------------------------------------------------------------------------------
57,450 Schwab (Charles) Corp. 2,754,009
-------------------------------------------------------------------------------
50,752 St. Paul Cos., Inc. 1,681,160
-------------------------------------------------------------------------------
34,700 State Street Corp. 2,164,413
-------------------------------------------------------------------------------
37,400 Summit Bancorp 1,418,863
-------------------------------------------------------------------------------
42,050 SunAmerica, Inc. 2,964,525
-------------------------------------------------------------------------------
44,900 SunTrust Banks, Inc. 3,128,969
-------------------------------------------------------------------------------
56,250 Synovus Financial Corp. 1,304,297
-------------------------------------------------------------------------------
30,000 Torchmark Corp. 1,312,500
-------------------------------------------------------------------------------
13,500 Transamerica Corp. 1,404,000
-------------------------------------------------------------------------------
159,765 U.S. Bancorp, Inc. 5,831,423
-------------------------------------------------------------------------------
29,700 UNUM Corp. 1,319,794
-------------------------------------------------------------------------------
27,300 Union Planters Corp. 1,267,744
-------------------------------------------------------------------------------
44,400 Wachovia Corp. 4,034,850
-------------------------------------------------------------------------------
127,476 Washington Mutual, Inc. 4,772,383
-------------------------------------------------------------------------------
18,266 Wells Fargo & Co. 6,758,420
-----------------------------------------------------------------------------------------------
Total 303,536,626

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

Health Care--12.5%

331,200 Abbott Laboratories 15,545,700
-------------------------------------------------------------------------------
31,055 Aetna Services, Inc. 2,317,479
-------------------------------------------------------------------------------
14,000 Allergan, Inc. 874,125
-------------------------------------------------------------------------------
18,600 /2/Alza Corp. 890,475
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Health Care--continued

283,000 American Home Products Corp. $ 13,796,250
-------------------------------------------------------------------------------
54,600 /2/Amgen, Inc. 4,289,513
-------------------------------------------------------------------------------
12,200 Bard (C.R.), Inc. 520,788
-------------------------------------------------------------------------------
11,800 Bausch & Lomb, Inc. 491,913
-------------------------------------------------------------------------------
61,400 Baxter International, Inc. 3,680,163
-------------------------------------------------------------------------------
53,200 Becton, Dickinson & Co. 2,241,050
-------------------------------------------------------------------------------
24,000 Biomet, Inc. 814,500
-------------------------------------------------------------------------------
42,100 /2/Boston Scientific Corp. 2,291,819
-------------------------------------------------------------------------------
213,900 Bristol-Myers Squibb Co. 23,649,319
-------------------------------------------------------------------------------
28,700 Cardinal Health, Inc. 2,713,944
-------------------------------------------------------------------------------
138,807 Columbia/HCA Healthcare Corp. 2,914,947
-------------------------------------------------------------------------------
32,400 Guidant Corp. 2,478,600
-------------------------------------------------------------------------------
92,700 HBO & Co. 2,433,375
-------------------------------------------------------------------------------
23,150 /2/HCR Manor Care, Inc. 752,375
-------------------------------------------------------------------------------
90,900 /2/HEALTHSOUTH Corp. 1,102,163
-------------------------------------------------------------------------------
35,900 /2/Humana, Inc. 679,856
-------------------------------------------------------------------------------
35,700 IMS Health, Inc. 2,374,050
-------------------------------------------------------------------------------
289,200 Johnson & Johnson 23,569,800
-------------------------------------------------------------------------------
536 /2/Ligand Pharmaceuticals, Inc., Warrants 2,881
-------------------------------------------------------------------------------
236,900 Lilly (Eli) & Co. 19,174,094
-------------------------------------------------------------------------------
100,900 Medtronic, Inc. 6,558,500
-------------------------------------------------------------------------------
256,100 Merck & Co., Inc. 34,637,525
-------------------------------------------------------------------------------
281,000 Pfizer, Inc. 30,154,813
-------------------------------------------------------------------------------
109,255 Pharmacia & Upjohn, Inc. 5,783,687
-------------------------------------------------------------------------------
157,900 Schering Plough Corp. 16,243,963
-------------------------------------------------------------------------------
5,700 Shared Medical Systems Corp. 284,288
-------------------------------------------------------------------------------
18,141 /2/St. Jude Medical, Inc. 512,483
-------------------------------------------------------------------------------
66,300 /2/Tenet Healthcare Corp. 1,852,256
-------------------------------------------------------------------------------
42,000 United Healthcare Corp. 1,829,625
-------------------------------------------------------------------------------
176,500 Warner-Lambert Co. 13,833,188
-----------------------------------------------------------------------------------------------
Total 241,289,507

-----------------------------------------------------------------------------------------------
Producer Manufacturing--6.7%

6,000 Aeroquip-Vickers, Inc. 189,000
-------------------------------------------------------------------------------
120,700 Allied-Signal, Inc. 4,699,756
-------------------------------------------------------------------------------
8,700 Armstrong World Industries, Inc. 539,400
-------------------------------------------------------------------------------
16,100 Case Corp. 354,200
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

78,400 Caterpillar, Inc. $ 3,528,000
-------------------------------------------------------------------------------
25,000 Cooper Industries, Inc. 1,103,125
-------------------------------------------------------------------------------
14,775 Crane Co. 425,705
-------------------------------------------------------------------------------
8,200 Cummins Engine Co., Inc. 279,825
-------------------------------------------------------------------------------
52,700 Deere & Co. 1,864,263
-------------------------------------------------------------------------------
47,700 Dover Corp. 1,514,475
-------------------------------------------------------------------------------
94,700 Emerson Electric Co. 6,250,200
-------------------------------------------------------------------------------
7,300 /2/FMC Corp. 372,756
-------------------------------------------------------------------------------
699,700 General Electric Co. 61,223,750
-------------------------------------------------------------------------------
10,278 Harnischfeger Industries, Inc. 96,999
-------------------------------------------------------------------------------
27,100 Honeywell, Inc. 2,164,613
-------------------------------------------------------------------------------
25,400 ITT Industries, Inc. 908,050
-------------------------------------------------------------------------------
53,800 Illinois Tool Works, Inc. 3,449,925
-------------------------------------------------------------------------------
35,500 Ingersoll-Rand Co. 1,792,750
-------------------------------------------------------------------------------
18,200 Johnson Controls, Inc. 1,023,750
-------------------------------------------------------------------------------
24,700 Loews Corp. 2,320,256
-------------------------------------------------------------------------------
73,200 Masco Corp. 2,063,325
-------------------------------------------------------------------------------
12,900 McDermott International, Inc. 378,131
-------------------------------------------------------------------------------
8,600 Milacron Inc. 166,625
-------------------------------------------------------------------------------
86,900 Minnesota Mining & Manufacturing Co. 6,952,000
-------------------------------------------------------------------------------
1,748 NACCO Industries, Inc., Class A 160,816
-------------------------------------------------------------------------------
9,200 National Service Industries, Inc. 330,050
-------------------------------------------------------------------------------
15,570 /2/Navistar International Corp. 325,024
-------------------------------------------------------------------------------
16,680 PACCAR, Inc. 727,665
-------------------------------------------------------------------------------
23,800 Parker-Hannifin Corp. 850,850
-------------------------------------------------------------------------------
59,000 Pitney Bowes, Inc. 3,248,688
-------------------------------------------------------------------------------
18,200 Raychem Corp. 556,238
-------------------------------------------------------------------------------
36,500 Tenneco, Inc. 1,108,688
-------------------------------------------------------------------------------
35,200 Textron, Inc. 2,618,000
-------------------------------------------------------------------------------
35,700 /2/Thermo Electron Corp. 711,769
-------------------------------------------------------------------------------
12,200 Thomas & Betts Corp. 545,188
-------------------------------------------------------------------------------
13,500 Timken Co. 240,469
-------------------------------------------------------------------------------
138,521 Tyco International Ltd. 8,579,644
-------------------------------------------------------------------------------
70,700 Xerox Corp. 6,849,063
-----------------------------------------------------------------------------------------------
Total 130,513,031

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

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Retail Trade--5.7%

52,900 Albertsons, Inc. $ 2,939,256
-------------------------------------------------------------------------------
59,000 American Stores Co. 1,921,188
-------------------------------------------------------------------------------
32,600 /2/AutoZone, Inc. 857,788
-------------------------------------------------------------------------------
83,700 CVS Corp. 3,824,044
-------------------------------------------------------------------------------
21,500 Circuit City Stores, Inc. 778,031
-------------------------------------------------------------------------------
23,100 /2/Consolidated Stores Corp. 379,706
-------------------------------------------------------------------------------
46,550 /2/Costco Cos., Inc. 2,641,713
-------------------------------------------------------------------------------
94,400 Dayton-Hudson Corp. 4,000,200
-------------------------------------------------------------------------------
23,800 Dillards, Inc., Class A 739,288
-------------------------------------------------------------------------------
39,750 Dollar General Corp. 949,031
-------------------------------------------------------------------------------
45,300 /2/Federated Department Stores, Inc. 1,741,219
-------------------------------------------------------------------------------
84,500 Gap (The), Inc. 5,080,563
-------------------------------------------------------------------------------
8,200 Great Atlantic & Pacific Tea Co., Inc. 192,700
-------------------------------------------------------------------------------
15,200 Harcourt General, Inc. 740,050
-------------------------------------------------------------------------------
316,000 Home Depot, Inc. 13,746,000
-------------------------------------------------------------------------------
105,900 /2/K Mart Corp. 1,495,838
-------------------------------------------------------------------------------
34,000 /2/Kohl's Corp. 1,625,625
-------------------------------------------------------------------------------
55,200 /2/Kroger Co., Inc. 3,063,600
-------------------------------------------------------------------------------
48,964 Limited, Inc. 1,254,703
-------------------------------------------------------------------------------
8,300 Longs Drug Stores Corp. 324,219
-------------------------------------------------------------------------------
75,700 Lowe's Cos., Inc. 2,550,144
-------------------------------------------------------------------------------
49,700 May Department Stores Co. 3,031,700
-------------------------------------------------------------------------------
33,100 /2/Meyer (Fred), Inc. 1,764,644
-------------------------------------------------------------------------------
32,000 Nordstrom, Inc. 874,000
-------------------------------------------------------------------------------
54,400 Penney (J.C.) Co., Inc. 2,584,000
-------------------------------------------------------------------------------
13,600 Pep Boys-Manny Moe & Jack 212,500
-------------------------------------------------------------------------------
55,600 Rite Aid Corp. 2,206,625
-------------------------------------------------------------------------------
84,400 Sears, Roebuck & Co. 3,792,725
-------------------------------------------------------------------------------
61,800 /2/Staples, Inc. 2,016,225
-------------------------------------------------------------------------------
68,200 TJX Cos., Inc. 1,291,538
-------------------------------------------------------------------------------
21,630 Tandy Corp. 1,072,037
-------------------------------------------------------------------------------
59,300 /2/Toys 'R' Us, Inc. 1,160,056
-------------------------------------------------------------------------------
480,800 Wal-Mart Stores, Inc. 33,175,200
-------------------------------------------------------------------------------
107,000 Walgreen Co. 5,209,563
-------------------------------------------------------------------------------
31,900 Winn-Dixie Stores, Inc. 1,082,606
-----------------------------------------------------------------------------------------------
Total 110,318,325

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

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Services--4.7%

37,800 /2/AES Corp. $ 1,547,438
-------------------------------------------------------------------------------
37,335 Browning-Ferris Industries, Inc. 1,323,059
-------------------------------------------------------------------------------
154,000 CBS Corp. 4,302,375
-------------------------------------------------------------------------------
184,529 /2/Cendant Corp. 2,110,550
-------------------------------------------------------------------------------
53,400 /2/Clear Channel Communications, Inc. 2,433,038
-------------------------------------------------------------------------------
29,900 Darden Restaurants, Inc. 493,350
-------------------------------------------------------------------------------
17,400 Deluxe Corp. 563,325
-------------------------------------------------------------------------------
440,600 Disney (Walt) Co. 11,868,663
-------------------------------------------------------------------------------
29,800 Donnelley (R.R.) & Sons Co. 1,285,125
-------------------------------------------------------------------------------
20,200 Dow Jones & Co. 925,413
-------------------------------------------------------------------------------
36,500 Dun & Bradstreet Corp. 1,035,688
-------------------------------------------------------------------------------
31,800 Equifax, Inc. 1,230,263
-------------------------------------------------------------------------------
17,000 Fluor Corp. 659,813
-------------------------------------------------------------------------------
8,700 Foster Wheeler Corp. 138,113
-------------------------------------------------------------------------------
61,200 Gannett Co., Inc. 3,786,750
-------------------------------------------------------------------------------
21,200 Grainger (W.W.), Inc. 976,525
-------------------------------------------------------------------------------
21,650 /2/Harrah's Entertainment, Inc. 305,806
-------------------------------------------------------------------------------
56,000 Hilton Hotels Corp. 1,123,500
-------------------------------------------------------------------------------
28,900 Ikon Office Solutions, Inc. 272,744
-------------------------------------------------------------------------------
29,250 Interpublic Group Cos., Inc. 1,711,125
-------------------------------------------------------------------------------
15,800 /2/King World Productions, Inc. 414,750
-------------------------------------------------------------------------------
17,000 Knight-Ridder, Inc. 865,938
-------------------------------------------------------------------------------
70,500 Laidlaw, Inc. 665,344
-------------------------------------------------------------------------------
53,600 Marriott International, Inc., Class A 1,440,500
-------------------------------------------------------------------------------
147,200 McDonald's Corp. 9,844,000
-------------------------------------------------------------------------------
21,400 McGraw-Hill Cos., Inc. 1,924,663
-------------------------------------------------------------------------------
11,300 Meredith Corp. 418,100
-------------------------------------------------------------------------------
38,500 /2/Mirage Resorts, Inc. 652,094
-------------------------------------------------------------------------------
19,017 Moore Corp. Ltd. 215,130
-------------------------------------------------------------------------------
41,200 New York Times Co., Class A 1,163,900
-------------------------------------------------------------------------------
36,500 Omnicom Group, Inc. 1,804,469
-------------------------------------------------------------------------------
35,100 Paychex, Inc. 1,746,225
-------------------------------------------------------------------------------
55,300 Service Corp. International 1,970,063
-------------------------------------------------------------------------------
25,800 Super Valu Stores, Inc. 619,200
-------------------------------------------------------------------------------
72,600 Sysco Corp. 1,955,663

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Services--continued

128,840 Time Warner, Inc. $ 11,957,963
-------------------------------------------------------------------------------
19,000 Times Mirror Co., Class A 1,053,313
-------------------------------------------------------------------------------
26,200 Tribune Co. 1,509,775
-------------------------------------------------------------------------------
32,830 /2/Tricon Global Restaurants, Inc. 1,428,105
-------------------------------------------------------------------------------
76,968 /2/Viacom, Inc., Class B 4,608,459
-------------------------------------------------------------------------------
122,928 Waste Management, Inc. 5,547,126
-------------------------------------------------------------------------------
28,300 Wendy's International, Inc. 594,300
-----------------------------------------------------------------------------------------------
Total 90,491,743

-----------------------------------------------------------------------------------------------
Technology--16.4%

77,200 /2/3Com Corp. 2,784,025
-------------------------------------------------------------------------------
46,980 AMP, Inc. 1,929,116
-------------------------------------------------------------------------------
14,500 Adobe System, Inc. 538,313
-------------------------------------------------------------------------------
30,400 /2/Advanced Micro Devices, Inc. 685,900
-------------------------------------------------------------------------------
18,962 /2/Andrew Corp. 310,503
-------------------------------------------------------------------------------
29,000 /2/Apple Computer, Inc. 1,076,625
-------------------------------------------------------------------------------
78,800 /2/Applied Materials, Inc. 2,733,375
-------------------------------------------------------------------------------
46,600 /2/Ascend Communications, Inc. 2,248,450
-------------------------------------------------------------------------------
10,000 Autodesk, Inc. 311,875
-------------------------------------------------------------------------------
64,700 Automatic Data Processing, Inc. 5,034,469
-------------------------------------------------------------------------------
44,400 /2/BMC Software, Inc. 2,133,975
-------------------------------------------------------------------------------
217,408 Boeing Co. 8,152,800
-------------------------------------------------------------------------------
35,400 /2/Cabletron Systems, Inc. 402,675
-------------------------------------------------------------------------------
15,600 /2/Ceridian Corp. 895,050
-------------------------------------------------------------------------------
334,400 /2/Cisco Systems, Inc. 21,067,200
-------------------------------------------------------------------------------
359,361 Compaq Computer Corp. 11,364,792
-------------------------------------------------------------------------------
120,662 Computer Associates International, Inc. 4,751,066
-------------------------------------------------------------------------------
34,000 /2/Computer Sciences Corp. 1,793,500
-------------------------------------------------------------------------------
10,400 /2/Data General Corp. 176,800
-------------------------------------------------------------------------------
272,300 /2/Dell Computer Corp. 17,835,650
-------------------------------------------------------------------------------
9,700 EG & G, Inc. 243,713
-------------------------------------------------------------------------------
107,400 /2/EMC Corp. Mass 6,913,875
-------------------------------------------------------------------------------
105,800 Electronic Data Systems Corp. 4,304,738
-------------------------------------------------------------------------------
96,100 First Data Corp. 2,546,650
-------------------------------------------------------------------------------
33,500 /2/Gateway 2000, Inc. 1,869,719
-------------------------------------------------------------------------------
27,240 General Dynamics Corp. 1,612,268
-------------------------------------------------------------------------------
32,400 /2/General Instrument Corp. 832,275
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Technology--continued

17,100 Harris Corp. $ 599,569
-------------------------------------------------------------------------------
223,500 Hewlett-Packard Co. 13,451,906
-------------------------------------------------------------------------------
361,300 Intel Corp. 32,223,444
-------------------------------------------------------------------------------
200,700 International Business Machines Corp. 29,791,406
-------------------------------------------------------------------------------
18,700 /2/KLA-Tencor Corp. 689,563
-------------------------------------------------------------------------------
30,400 /2/LSI Logic Corp. 459,800
-------------------------------------------------------------------------------
42,088 Lockheed Martin Corp. 4,687,551
-------------------------------------------------------------------------------
282,834 Lucent Technologies, Inc. 22,679,751
-------------------------------------------------------------------------------
15,700 Mallinckrodt, Inc. 447,450
-------------------------------------------------------------------------------
45,800 Micron Technology, Inc. 1,740,400
-------------------------------------------------------------------------------
529,900 /2/Microsoft Corp. 56,103,163
-------------------------------------------------------------------------------
128,600 Motorola, Inc. 6,687,200
-------------------------------------------------------------------------------
35,200 /2/National Semiconductor Corp. 446,600
-------------------------------------------------------------------------------
140,260 Northern Telecom Ltd. 6,004,881
-------------------------------------------------------------------------------
14,800 Northrop Grumman Corp. 1,180,300
-------------------------------------------------------------------------------
76,000 /2/Novell, Inc. 1,130,500
-------------------------------------------------------------------------------
209,375 /2/Oracle Corp. 6,189,648
-------------------------------------------------------------------------------
58,500 /2/Parametric Technology Corp. 972,563
-------------------------------------------------------------------------------
49,600 /2/Peoplesoft, Inc. 1,050,900
-------------------------------------------------------------------------------
10,600 Perkin-Elmer Corp. 893,713
-------------------------------------------------------------------------------
72,900 Raytheon Co., Class B 4,232,756
-------------------------------------------------------------------------------
41,100 Rockwell International Corp. 1,687,669
-------------------------------------------------------------------------------
17,000 Scientific-Atlanta, Inc. 253,938
-------------------------------------------------------------------------------
52,000 /2/Seagate Technology, Inc. 1,371,500
-------------------------------------------------------------------------------
40,300 /2/Silicon Graphics, Inc. 453,375
-------------------------------------------------------------------------------
81,500 /2/Sun Microsystems, Inc. 4,747,375
-------------------------------------------------------------------------------
10,800 Tektronix, Inc. 193,050
-------------------------------------------------------------------------------
41,700 /2/Tellabs, Inc. 2,293,500
-------------------------------------------------------------------------------
83,900 Texas Instruments, Inc. 5,364,356
-------------------------------------------------------------------------------
54,700 /2/Unisys Corp. 1,456,388
-------------------------------------------------------------------------------
49,000 United Technologies Corp. 4,667,250
-----------------------------------------------------------------------------------------------
Total 318,700,862

-----------------------------------------------------------------------------------------------
Transportation--1.0%

39,200 /2/AMR Corp. 2,626,400
-------------------------------------------------------------------------------
101,733 Burlington Northern Santa Fe 3,141,006
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Transportation--continued

47,000 CSX Corp. $ 1,844,750
-------------------------------------------------------------------------------
16,300 Delta Air Lines, Inc. 1,720,669
-------------------------------------------------------------------------------
31,740 /2/FDX Corp. 1,668,334
-------------------------------------------------------------------------------
81,500 Norfolk Southern Corp. 2,684,406
-------------------------------------------------------------------------------
16,400 Ryder Systems, Inc. 403,850
-------------------------------------------------------------------------------
72,250 Southwest Airlines Co. 1,530,797
-------------------------------------------------------------------------------
20,200 /2/U.S. Airways Group, Inc. 1,142,563
-------------------------------------------------------------------------------
53,200 Union Pacific Corp. 2,533,650
-----------------------------------------------------------------------------------------------
Total 19,296,425

-----------------------------------------------------------------------------------------------
Utilities11.6%

388,478 AT&T Corp. 24,182,756
-------------------------------------------------------------------------------
123,400 /2/Airtouch Communications, Inc. 6,910,400
-------------------------------------------------------------------------------
59,000 Alltel Corp. 2,761,938
-------------------------------------------------------------------------------
29,400 Ameren Corp. 1,174,163
-------------------------------------------------------------------------------
41,100 American Electric Power Co., Inc. 2,011,331
-------------------------------------------------------------------------------
237,100 Ameritech Corp. 12,788,581
-------------------------------------------------------------------------------
31,950 Baltimore Gas & Electric Co. 1,002,431
-------------------------------------------------------------------------------
334,084 Bell Atlantic Corp. 17,748,213
-------------------------------------------------------------------------------
211,600 BellSouth Corp. 16,888,325
-------------------------------------------------------------------------------
32,500 Carolina Power & Light Co. 1,490,938
-------------------------------------------------------------------------------
45,500 Central & SouthWest Corp. 1,265,469
-------------------------------------------------------------------------------
33,840 Cinergy Corp. 1,167,480
-------------------------------------------------------------------------------
45,700 Coastal Corp. 1,610,925
-------------------------------------------------------------------------------
17,850 Columbia Energy Group 1,033,069
-------------------------------------------------------------------------------
79,450 Comcast Corp., Class A 3,922,844
-------------------------------------------------------------------------------
50,300 Consolidated Edison Co. 2,521,288
-------------------------------------------------------------------------------
20,500 Consolidated Natural Gas Co. 1,082,656
-------------------------------------------------------------------------------
31,100 DTE Energy Co. 1,325,638
-------------------------------------------------------------------------------
42,250 Dominion Resources, Inc. 1,951,422
-------------------------------------------------------------------------------
77,672 Duke Energy Corp. 5,024,408
-------------------------------------------------------------------------------
4,800 Eastern Enterprises 197,100
-------------------------------------------------------------------------------
76,100 Edison International 2,007,138
-------------------------------------------------------------------------------
70,900 Enron Corp. 3,739,975
-------------------------------------------------------------------------------
53,000 Entergy Corp. 1,523,750
-------------------------------------------------------------------------------
39,000 FPL Group, Inc. 2,439,938
-------------------------------------------------------------------------------
51,000 FirstEnergy Corp. 1,530,000
-------------------------------------------------------------------------------

Shares Value

- ----------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Utilities--continued

36,900 Frontier Corp. $ 1,109,306
-------------------------------------------------------------------------------
27,500 GPU, Inc. 1,185,938
-------------------------------------------------------------------------------
207,300 GTE Corp. 12,165,919
-------------------------------------------------------------------------------
63,651 Houston Industries, Inc. 1,977,157
-------------------------------------------------------------------------------
381,997 /2/MCI Worldcom, Inc. 21,105,334
-------------------------------------------------------------------------------
131,100 /2/MediaOne Group, Inc. 5,547,169
-------------------------------------------------------------------------------
61,400 /2/NEXTEL Communications, Inc., Class A 1,112,875
-------------------------------------------------------------------------------
10,400 NICOR, Inc. 440,700
-------------------------------------------------------------------------------
40,300 Niagara Mohawk Power Corp. 589,388
-------------------------------------------------------------------------------
32,600 Northern States Power Co. 880,200
-------------------------------------------------------------------------------
6,600 ONEOK, Inc. 226,050
-------------------------------------------------------------------------------
82,200 P G & E Corp. 2,501,963
-------------------------------------------------------------------------------
32,491 P P & L Resources, Inc. 881,318
-------------------------------------------------------------------------------
63,600 Pacificorp 1,212,375
-------------------------------------------------------------------------------
47,700 Peco Energy Co. 1,845,394
-------------------------------------------------------------------------------
7,600 Peoples Energy Corp. 280,250
-------------------------------------------------------------------------------
49,900 Public Service Enterprises Group, Inc. 1,896,200
-------------------------------------------------------------------------------
420,746 SBC Communications, Inc. 19,485,799
-------------------------------------------------------------------------------
51,818 Sempra Energy 1,347,269
-------------------------------------------------------------------------------
23,600 Sonat, Inc. 715,375
-------------------------------------------------------------------------------
150,100 Southern Co. 4,230,944
-------------------------------------------------------------------------------
92,500 Sprint Corp. 7,099,375
-------------------------------------------------------------------------------
112,600 /2/Tele-Communications, Inc., Class A 4,743,275
-------------------------------------------------------------------------------
60,125 Texas Utilities Co. 2,630,415
-------------------------------------------------------------------------------
107,855 U.S. West, Inc. 6,188,181
-------------------------------------------------------------------------------
46,700 Unicom Corp. 1,760,006
-------------------------------------------------------------------------------
91,400 Williams Cos., Inc. (The) 2,507,788
-----------------------------------------------------------------------------------------------
Total 224,968,139

-----------------------------------------------------------------------------------------------
Total Common Stocks (identified cost $1,194,767,223) 1,901,622,054

Principal Value
Amount

- ----------------------------------------------------------------------------------------------------------------
/3/SHORT-TERM U.S. GOVERNMENT OBLIGATION0.3%

$ 5,500,000 United States Treasury Bill, 1/7/1999 (identified cost $5,426,048) $ 5,460,345
-----------------------------------------------------------------------------------------------
/4/REPURCHASE AGREEMENT--1.7%

33,425,000 Westdeutsche Landesbank Girozentrale, 5.42%, dated 10/30/1998, due 33,425,000
11/2/1998 (at amortized cost)
-----------------------------------------------------------------------------------------------
/5/Total Investments (identified cost $1,233,618,271) $1,940,507,399
----------------------------------------------------------------------------------------------
</TABLE>

1 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 total market value of
open Index futures contracts is $40,616,100 at October 31, 1998, which
represents 2.1% of net assets. Taking into consideration these open Index
futures contracts, the Fund's effective total exposure to the Index is
100.2%.

2 Non-income producing security.

3 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.

4 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.

5 The cost of investments for federal tax purposes amounts to $1,233,803,476.
The net unrealized appreciation of investments on a federal tax basis amounts
to $706,703,923 which is comprised of $743,886,153 appreciation and
$37,182,230 depreciation at October 31, 1998.

Note: The categories of investments are shown as a percentage of net assets
($1,938,718,957) at October 31, 1998.

The following acronym(s) are used throughout this portfolio:

ADR--American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1998

<TABLE>
Assets:

- --------------------------------------------------------------------------------------
<S> <C> <C>
Total investments in securities, at value (identified cost $1,233,618,271
and tax cost $1,233,803,476) $1,940,507,399
- --------------------------------------------------------------------------------------
Income receivable 1,929,741

- --------------------------------------------------------------------------------------
Receivable for shares sold 8,833,315

- --------------------------------------------------------------------------------------
Receivable for daily variation margin 317,550

- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,951,588,005

- ----------------------------------------------------------------------------------------------------------------------
Liabilities:

- --------------------------------------------------------------------------------------
Payable for investments purchased $1,179,707

- --------------------------------------------------------------------------------------
Payable for shares redeemed 9,260,716

- --------------------------------------------------------------------------------------
Payable to Bank 2,132,708

- --------------------------------------------------------------------------------------
Accrued expenses 295,917

- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 12,869,048

- ----------------------------------------------------------------------------------------------------------------------
Net Assets for 84,679,467 shares outstanding $1,938,718,957
- ----------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:

- --------------------------------------------------------------------------------------
Paid in capital $1,216,212,206

- --------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and futures 709,526,138
contracts

- --------------------------------------------------------------------------------------
Accumulated net realized gain on investments and futures contracts 11,951,208
- --------------------------------------------------------------------------------------
Undistributed net investment income 1,029,405

- ----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $1,938,718,957

- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:

- --------------------------------------------------------------------------------------
Institutional Shares:

- --------------------------------------------------------------------------------------
$1,445,175,075 (divide) 63,086,344 shares outstanding $ 22.91
- ----------------------------------------------------------------------------------------------------------------------
Institutional Service Shares:

- --------------------------------------------------------------------------------------
$477,759,740 (divide) 20,901,469 shares outstanding $ 22.86
- ----------------------------------------------------------------------------------------------------------------------
Class C Shares:

- --------------------------------------------------------------------------------------
$15,784,142 (divide) 691,654 shares outstanding $ 22.82
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1998

<TABLE>

<S> <C> <C> <C>
Investment Income:

- ----------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $144,101) $ 25,799,402
- ----------------------------------------------------------------------------------
Interest 4,536,016

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 30,335,418

- ------------------------------------------------------------------------------------------------------------------------------
Expenses:

- ----------------------------------------------------------------------------------
Investment advisory fee $ 5,328,240
- ----------------------------------------------------------------------------------
Custodian fees 107,961

- ----------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 257,800
- ----------------------------------------------------------------------------------
Directors'/Trustees' fees 15,275

- ----------------------------------------------------------------------------------
Auditing fees 22,693

- ----------------------------------------------------------------------------------
Legal fees 8,703

- ----------------------------------------------------------------------------------
Portfolio accounting fees 169,234

- ----------------------------------------------------------------------------------
Distribution services fee Institutional Service Shares 1,135,050
- ----------------------------------------------------------------------------------
Distribution services fee Class C Shares 55,890
- ----------------------------------------------------------------------------------
Shareholder services fee Institutional Shares 3,475,695

- ----------------------------------------------------------------------------------
Shareholder services fee Institutional Service Shares 945,875
- ----------------------------------------------------------------------------------
Shareholder services fee Class C Shares 18,630
- ----------------------------------------------------------------------------------
Share registration costs 3,422

- ----------------------------------------------------------------------------------
Printing and postage 48,275

- ----------------------------------------------------------------------------------
Insurance premiums 11,000

- ----------------------------------------------------------------------------------
Miscellaneous 22,189

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 11,625,932

- ------------------------------------------------------------------------------------------------------------------------------
Waivers:

- ----------------------------------------------------------------------------------
Waiver of investment advisory fee $ (414,314)
- ----------------------------------------------------------------------------------
Waiver of distribution services fee Institutional Service Shares (832,370)
- ----------------------------------------------------------------------------------
Waiver of shareholder services fee Institutional Shares (3,475,695)
- ----------------------------------------------------------------------------------
Waiver of shareholder services fee Institutional Service Shares (113,505)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL WAIVERS (4,835,884)

- ------------------------------------------------------------------------------------------------------------------------------
Net expenses 6,790,048

- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 23,545,370

- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments and Futures Contracts:

- ----------------------------------------------------------------------------------
Net realized gain on investments and futures contracts 15,258,606
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and 284,412,168
futures contracts
- ----------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 299,670,774
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $323,216,144
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

Increase (Decrease) in Net Assets

- ----------------------------------------------------------------------------------
Operations:

- ----------------------------------------------------------------------------------
Net investment income $ 23,545,370 $ 20,091,885
- ----------------------------------------------------------------------------------
Net realized gain on investments and futures contracts ($18,621,157 and 15,258,606 47,684,197
$45,104,576, respectively, as computed for federal tax purposes)
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and futures contracts 284,412,168 237,223,689
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 323,216,144 304,999,771
- -----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:

- ----------------------------------------------------------------------------------
Distributions from net investment income

- ----------------------------------------------------------------------------------
Institutional Shares (19,446,188) (19,400,997)
- ----------------------------------------------------------------------------------
Institutional Service Shares (4,226,227) (2,132,811)
- ----------------------------------------------------------------------------------
Class C Shares (43,855)

- ----------------------------------------------------------------------------------
Distributions from net realized gains on investments and futures contracts

- ----------------------------------------------------------------------------------
Institutional Shares (36,852,857) (13,509,884)
- ----------------------------------------------------------------------------------
Institutional Service Shares (8,247,035) (1,138,590)
- ----------------------------------------------------------------------------------
Class C Shares (554)

- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (68,816,716) (36,182,282)
- -----------------------------------------------------------------------------------------------------------------------
Share Transactions:

- ----------------------------------------------------------------------------------
Proceeds from sale of shares 1,232,374,399 751,612,116
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions 40,899,081 17,547,453
declared

- ----------------------------------------------------------------------------------
Cost of shares redeemed (977,021,217) (608,777,760)
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 296,252,263 160,381,809
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS 550,651,691 429,199,298
- -----------------------------------------------------------------------------------------------------------------------
Net Assets:

- ----------------------------------------------------------------------------------
Beginning of period 1,388,067,266 958,867,968
- -----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $1,029,405 and $1,938,718,957 $1,388,067,266
$1,160,137, respectively)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1998

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 60 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 these repurchase
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.

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
The following reclassifications have been made to the financial statements.

Increase/(Decrease)

- ---------------------------------------------------------------
Undistributed Accumulated Paid in
Net Investment Income Net Realized Gain Capital

- ---------------------------------------------------------------
<S> <C> <C>
$40,168 $(1,293,585) $1,253,417

</TABLE>

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

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.

Futures Contracts

The Fund purchases stock index futures contracts to manage cash flows, 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, 1998, the Fund had realized gains of
$12,845,024 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, 1998, the Fund had outstanding futures
contracts as set forth below:

Contracts

Expiration to Deliver/ Unrealized
Date Receive Position Appreciation

- -------------------------------------------------------------------------
<S> <C> <C> <C>
December 147 S&P 500
1998 Index Futures Long $2,637,010

- -------------------------------------------------------------------------
</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:

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Institutional Shares Shares Amount Shares Amount

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 37,421,180 $ 818,155,777 30,235,597 $ 544,279,687

- -------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 1,421,571 29,500,992 873,354 14,693,792
- -------------------------------------------------
Shares redeemed (33,733,666) (751,275,289) (31,244,017) (559,167,698)
- ---------------------------------------------------------------------------------------------------------------
Net change resulting from Institutional share 5,109,085 $ 96,381,480 (135,066) $ (194,219)
transactions

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Institutional Service Shares Shares Amount Shares Amount

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 18,076,229 $ 397,272,246 11,212,771 $ 207,332,429

- -------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 546,583 11,354,168 165,190 2,853,661
- -------------------------------------------------
Shares redeemed (10,230,460) (223,926,039) (2,667,078) (49,610,062)
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM INSTITUTIONAL

SERVICE SHARE TRANSACTIONS 8,392,352 $ 184,700,375 8,710,883 $ 160,576,028
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Class C Shares Shares Amount Shares Amount

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 771,237 $ 16,946,376 -- --
- -------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 1,948 43,921 -- --
- -------------------------------------------------
Shares redeemed (81,531) (1,819,889) -- --
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM CLASS C SHARE

TRANSACTIONS 691,654 $ 15,170,408 -- --
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM SHARE

TRANSACTIONS 14,193,091 $ 296,252,263 8,575,817 $ 160,381,809
- ---------------------------------------------------------------------------------------------------------------
</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 Northern Trust
Quantitative Advisors, Inc. (the "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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or
terminate this voluntary waiver at any time at its sole discretion. For the
period ended October 31, 1998, 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 and Class C Shares. The Plan provides that the Fund
may incur distribution expenses according to the following schedule annually, to
compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC
can modify or terminate this voluntary waiver at any time at its sole
discretion.

Percentage of
Average Daily Net

Share Class Name Assets of Class

- -------------------------------------------------------------
<S> <C>
Institutional Service Shares 0.30%

- -------------------------------------------------------------
Class C Shares 0.75%

- -------------------------------------------------------------
</TABLE>

Transfer and Dividend Disbursing Agent Fees
and Expenses

Federated Services Company ("FServ"), through its subsidiary, 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 of the 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, 1998, were as follows:

<TABLE>

- ----------------------------------------------------------------
<S> <C>
Purchases $316,843,502

- ----------------------------------------------------------------
Sales $ 51,459,513
- ----------------------------------------------------------------
</TABLE>

YEAR 2000 (UNAUDITED)

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

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, 1998, 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, 1998, 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, 1998, 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
the periods presented, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Boston, Massachusetts
December 21, 1998

A Statement of Additional Information (SAI) dated December 31, 1998, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is available in the Fund's annual report to shareholders. The
annual report discusses market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain the SAI, the annual report and other information without charge call your
investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at http://
www.sec.gov. You can call 1-800-SEC-0330 for information on the Public Reference
Room's operations and copying charges.

Federated

WORLD-CLASS INVESTMENT MANGER(SM)

FEDERATED

MAX-CAP FUND

A Portfolio of Federated Index Trust

CLASS C SHARES

P R O S P E C T U S

Federated(SM)

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Cusip 31420E502

G00717-01 (12/98)

Federated is a registered mark [RECYCLED

of Federated Investors, Inc. PAPER

1998 (C) Federated Investors, Inc. LOGO] DECEMBER 31, 1998

Statement of Additional Information December 31, 1998

Federated Max-Cap Fund

[A Portfolio of Federated Index Trust]

Institutional Shares, Institutional Service Shares, Class C Shares

This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectuses for Institutional Shares,
Institutional Service Shares, and Class C Shares of Federated Max-Cap Fund
(Fund), dated December 31, 1998. Obtain the prospectuses without charge by
calling 1-800-341-7400.

-----------------------------------------------------------------------------
Table of Contents

=============================================================================

How is the Fund Organized?
Securities in Which the Fund Invests

What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind

Massachusetts Partnership Law

Account and Share Information
Tax Information
Who Manages and Provides

Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?

Standard & Poor's
Addresses

[Federated Investors Logo]
Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.

CUSIP 31420E403
CUSIP 31420E502
CUSIP 31420E106
0032104B (12/98)

HOW IS THE FUND ORGANIZED?

================================================================================

The Fund is a diversified portfolio of Federated Index Trust (Trust). The Trust
is an open-end, management investment company that was established under the
laws of the Commonwealth of Massachusetts on January 30, 1990. The Trust may
offer separate series of shares representing interests in separate portfolios of
securities. On December 5, 1994, the Trustees changed the name of the Fund from
Max-Cap Fund to the Federated Max-Cap Fund.

The Board of Trustees (the Board) has established three classes of shares of the
Fund, known as Institutional Shares, Institutional Service Shares and Class C
Shares (Shares). This SAI relates to all of the above-mentioned Shares.

SECURITIES IN WHICH THE FUND INVESTS

================================================================================

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

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

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

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

Interests In Other Limited Liability Companies. Corporations typically issue
stocks. Other types of entities may issue securities comparable to common or
preferred stocks. These entities include limited partnerships, limited
liability companies, business trusts and companies organized outside the
United States.

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

Warrants give the Fund the option to buy the issuer's stock or other equity
securities at a specified price. The Fund may buy the designated shares by
paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. Rights are the same as warrants, except they are
typically issued to existing stockholders.

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be fixed or adjusted periodically. The issuer must also repay
the principal amount of the security, normally within a specified time. Fixed
income securities provide more regular income than equity securities. However,
the returns on fixed income securities are limited and normally do not increase
with the issuer's earnings. This limits the potential appreciation of fixed
income securities as compared to equity securities.

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

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

Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risk.

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). Some
GSEs are supported by the full, faith and credit of the United States. Other
GSEs receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Investors
regard agency securities as having low credit risk, but not as low as Treasury
securities.

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

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

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

For example, a Fund could close out an open purchase (or sale) contract by
entering into an offsetting sale (or purchase) contract for the same amount of
the same assets and the same delivery date. If the offsetting purchase price is
less than the original sale price, the Fund realizes a gain; if it is more, the
Fund realizes a loss. Conversely, if the offsetting sale price is more than the
original purchase price, the Fund realizes a gain; if it is less, the Fund
realizes a loss. The Fund might not always be able to close out a position when
it wants to; if this happens, the Fund will be required to keep the contract
open (even if it is losing money on the contract ), and to make any payments
required under the contract (even if it has to sell portfolio securities at
unfavorable prices to do so), and the Fund could incur substantial losses.
Inability to close out a contract could also harm the Fund by preventing it from
disposing of or trading any assets it has been using to secure its obligations
under the contract.

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

Depending upon how they are used and the relationships between the market value
of a derivative contract and the underlying asset, derivative contracts may
increase or decrease the Fund's exposure to Market Risk and Currency Risk, and
may also expose the Fund to Liquidity Risk and Leverage Risk. OTC contracts also
expose the Fund to Credit Risk in the event that a counterparty defaults on the
contract.

The Fund may trade in the following types of derivative contracts in an amount
not to exceed 20% of total net assets.

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a price, date,
and time specified when the contract is made. Entering into a contract to buy
is commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling
a contract or holding a short position. Futures are considered to be commodity
contracts. The Fund may buy and sell Stock Index futures as a substitute for
direct investment in the Index in order to help fully replicate the
performance of the Index.

Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period of time. A
call option gives the holder (buyer) the right to purchase the underlying
asset from the seller (writer) of the option. A put option gives the holder
the right to sell the underlying asset to the writer of the option. The writer
of the option receives a payment, or "premium," from the buyer, which the
writer keeps regardless of whether the buyer uses (or exercises) the option.

The Fund may:

Buy call options on the Index, stock index futures contracts, and portfolio
securities (in anticipation of an increase in the value of the underlying
asset).

Buy listed put options on the Index (in anticipation of a decrease in the
value of the underlying asset).

Write listed call options on portfolio securities of securities that the Fund
can purchase without further consideration (or has segregated cash equivalents
for such consideration) on the Index (to generate income from premiums, and in
anticipation of a decrease or only limited increase in the value of the
underlying asset). If a call written by a Fund is exercised, the Fund foregoes
any possible profit from an increase in the market price of the underlying
asset over the exercise price plus the premium received.

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

Buy or write options to close out existing options positions.

Foreign Securities are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S.

Depositary Receipts represent interests in underlying securities issued by a
foreign company, but traded in another market than the underlying security. The
foreign securities underlying American Depositary Receipts (ADRs) are traded in
the U.S. ADRs provide a way to buy shares of foreign-based companies in the U.S.
rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally or
outside the U.S. Depositary Receipts involve many of the same risks of investing
directly in foreign securities, including Country Risk and Currency Risk.

Special Transactions

Repurchase Agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting an
agreed upon interest rate effective for the period the Fund owns the security
subject to repurchase. The agreed upon interest rate is unrelated to the
interest rate on the underlying security. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Manager to be creditworthy.

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

Repurchase Agreements are subject to Credit Risk.

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

When Issued Transactions are arrangements in which a Fund purchases securities
for a set price, with payment and delivery scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to purchase the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices. Therefore, when issued
transactions create Market Risk for the Fund. When issued transactions also
involve Credit Risk in the event of a counterparty default.

Securities Lending. A Fund may lend portfolio securities to firms that the
Manager has determined are creditworthy. In return, it will receive either
cash or liquid securities as collateral from the borrower. A Fund will
reinvest cash collateral in securities that qualify as an otherwise acceptable
investment for the Fund. However, the Fund must pay interest to the borrower
for the use of any cash collateral. If the market value of the loaned
securities increases, the borrower must furnish additional collateral. While
portfolio securities are on loan, the borrower pays the Fund the equivalent of
any dividends or interest received on them. Loans are subject to termination
at the option of the Fund or the borrower. The Fund will not have the right to
vote on securities while they are being lent, but it will terminate a loan in
anticipation of any important vote. 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 collateral to a securities lending agent or
broker.

Securities lending activities are subject to Market Risk and Credit Risk.

Asset Coverage. In order to secure its obligations in connection with futures
contracts, and when-issued, and delayed-delivery transactions, the Fund will
"cover" such transactions, as required under applicable interpretations of the
SEC, either by owning the underlying securities; entering into an offsetting
transaction; or segregating, earmarking, or depositing into an escrow account
readily marketable securities in an amount at all times equal to or exceeding
the Fund's commitment with respect to these instruments or contracts. As a
result, use of these instruments will impede the Fund's ability to freely trade
the assets being used to cover them, which could result in harm to the Fund.

INVESTMENT RISKS

The following risks relate to investments in equity securities.

Stock Market Risks

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

. The value of equity securities in the Fund's portfolio will go up and down.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. This will result in changes in
the Fund's share price.

Sector Risk

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

Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may perform differently than other sectors or as the market as a whole. The
more significant a sector is in the composition of the Index, the more the
Fund's performance will be susceptible to any economic, business or other
developments which generally affect that sector.

Risk of Foreign Investing

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

. Exchange rates for currency fluctuate daily. The combination of currency risk
and market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.

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

. Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

The following risks relate to investments in fixed income securities.

Market Risk

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

. Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

. Interest rate changes have a greater effect on fixed income securities with
longer durations.

Credit Risk

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

. Credit risk is the possibility that an issuer will default (the issuer fails
to repay interest and principal when due). If an issuer defaults, the Fund
will lose money.

. Many fixed income securities receive credit ratings from companies such as
Standard & Poor's and Moody's Investor Services. Fixed income securities
receive different credit ratings depending on the rating company's assessment
of the likelihood of default by the issuer. The lower the rating of the fixed
income security, the greater the credit risk.

. Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of the
security and the yield of a U.S. Treasury security with a comparable maturity
(the "spread") measures the additional interest received for taking risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating is
lowered, or the security is perceived to have an increased credit risk. An
increase in the spread will cause the price of the security to decline.

Call Risk

- ---------

. Call risk is the possibility that an issuer may redeem a fixed income
security before maturity ("call") at a price below it's current market price.
An increase in the likelihood of a call may reduce the security's price.

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

Liquidity Risks

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

. Fixed income securities that have noninvestment grade credit ratings, have
not been rated or that are not widely held may trade less frequently than
other securities. This may increase the price volatility of these securities.

Risks Associated with Non-Investment Grade Securities

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

. Securities rated below investment grade, also known as junk bonds, generally
entail greater risks than investment grade securities. For example, their
prices are more volatile, their values are more negatively impacted by
economic downturns, and their trading market may be more limited.

Risk of Foreign Investing

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

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors. Due to these risk factors, foreign securities may be more
volatile and less liquid than similar securities traded in the U.S.

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 manager 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 limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act. The following limitations, however, may be changed by the Board
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."

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 in the market in which
they are primarily traded (either a national securities exchange or the over-
the-counter market), 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, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

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

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

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

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

WHAT DO SHARES COST?

================================================================================

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

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE (Class C Shares)

These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC) or nominal sales efforts
are associated with the original purchase of Shares.

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

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

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

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

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

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

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

HOW IS THE FUND SOLD?

================================================================================

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (Institutional Service Shares and Class C Shares)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment managers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

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

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

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Manager or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

When an investment professional's customer purchases shares, the investment
professional may receive an amount up to 1.00% of the NAV of Class C Shares.

SUBACCOUNTING SERVICES

================================================================================

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

REDEMPTION IN KIND

================================================================================

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

================================================================================

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

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

ACCOUNT AND SHARE INFORMATION

================================================================================

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund or
class, only Shares of that Fund or class are entitled to vote.

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

As of December 8, 1998, the following shareholders of record, beneficially, or
both, 5% or more of outstanding Shares: Mitra & Co., Marshall & Ilsley Trust
Operations, Milwaukee, Wisconsin, 14.14% of Institutional Shares; Resources
Trust Company, for the exclusive benefit of various customers of IMS, Englewood,
Colorado, 7.78% of Institutional Service Shares; National City Bank, RPO HWI
Restated Employees S & PSP, Cleveland, Ohio, 5.34% of Institutional Service
Shares; Ingersoll & Co., Brenton National Bank, Des Moines, Iowa, 7.56% of Class
C Shares; Laurel Trust Company, RPO Riggs Industrial Inc., Johnstown,
Pennsylvania, 14.81% of Class C Shares; The Provident Bank, RPO Pioneer French
Baking 401K Union, Cincinnati, Ohio, 5.91% of Class C Shares..

TAX INFORMATION

================================================================================

FEDERAL INCOME TAX

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

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

FOREIGN INVESTMENTS

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

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

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

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

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

================================================================================

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years, and other notable positions held,
total compensation received as a Trustee from the Trust for its most recent
fiscal year, and the total compensation received from the Federated Fund Complex
for the most recent calendar year. The Trust is comprised of three funds and
the Federated Fund Complex is comprised of 56 investment companies, whose
investment advisers are affiliated with the Fund's Manager.

As of December 8, 1998, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Institutional Shares, Institutional Service Shares

and Class C Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
John F. Donahue##* Chief Executive Officer and Director or Trustee of $0 $0 for the
Birthdate: July 28, 1924 the Federated Fund Complex. Chairman and Director, Trust and
Federated Investors Tower Federated Investors, Inc.; Chairman and Trustee, 56 other investment
1001 Liberty Avenue Federated Advisers, Federated Management, and companies in the
Pittsburgh, PA Federated Research; Chairman and Director, Fund Complex
CHAIRMAN and TRUSTEE Federated Research Corp., and Federated Global
Research Corp.; Chairman, Passport Research, Ltd.

Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: February 3, 1934 Director, Member of Executive Committee, Children's Trust and
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, Ernst & 56 other investment
Pittsburgh, PA Young LLP; Director, MED 3000 Group, Inc.; Director, companies in the
TRUSTEE Member of Executive Committee, University of Pittsburgh. Fund Complex

John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Birthdate: June 23, 1937 President, Investment Properties Corporation; Senior Trust and
Wood/IPC Commercial Dept. Vice President, John R. Wood and Associates, Inc., 56 other investment
John R. Wood Associates, Realtors; Partner or Trustee in private real estate companies in the
Inc. Realtors ventures in Southwest Florida; formerly: President, Fund Complex
3255 Tamiami Trail Naples Property Management, Inc. and Northgate Village
North Naples, FL Development Corporation.

TRUSTEE

Nicholas Constantakis+ Director or Trustee of the Federated Fund Complex; $1,684.27 $0 for the
Birthdate: September 3, 1939 formerly: Partner, Andersen Worldwide SC. Trust and
175 Woodshire Drive 36 other investment
Pittsburgh, PA companies in the

TRUSTEE Fund Complex

William J. Copeland Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Birthdate: July 4, 1918 Director and Member of the Executive Committee, Trust and
One PNC Plaza-23rd Floor Michael Baker, Inc.; formerly: Vice Chairman and 56 other investment
Pittsburgh, PA Director, PNC Bank, N.A., and PNC Bank Corp.; Director, companies in the
TRUSTEE Ryan Homes, Inc. Fund Complex

Retired: Director, United Refinery; Director, Forbes Fund;
Chairman, Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

J. Christopher Donahue##* President or Executive Vice President of the Federated $0 $0 for the
Birthdate: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Trust and
Federated Investors Tower in the Federated Fund Complex; President and Director, 18 other investment
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee, companies in the
Pittsburgh, PA Federated Advisers, Federated Management, and Fund Complex
EXECUTIVE VICE PRESIDENT Federated Research; President and Director, Federated
and TRUSTEE Research Corp. and Federated Global Research Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated

Services Company.

James E. Dowd, Esq. Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Birthdate: May 18, 1922 Attorney-at-law; Director, The Emerging Germany Fund, Trust and
571 Hayward Mill Road Inc. 56 other investment
Concord, MA companies in the
TRUSTEE Retired: President, Boston Stock Exchange, Inc.; Fund Complex
Regional Administrator, United States Securities and
Exchange Commission.

</TABLE>

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical Trust and
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - 56 other investment
Suite 1111 Downtown; Hematologist, Oncologist, and Internist, companies in the
Pittsburgh, PA Presbyterian and Montefiore Hospitals; Member, Fund Complex
TRUSTEE National Board of Trustees, Leukemia Society of
America.

Edward L. Flaherty, Jr., Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Esq.# Attorney, of Counsel, Miller, Ament, Henny & Kochuba; Trust and
Birthdate: June 18, 1924 Director, Eat'N Park Restaurants, Inc.; formerly: Counsel, 56 other investment
Miller, Ament, Henny & Horizon Financial, F.A., Western Region; Partner, Meyer companies in the
Kochuba and Flaherty. Fund Complex
205 Ross Street
Pittsburgh, PA

TRUSTEE

Peter E. Madden Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts Trust and
One Royal Palm Way General Court; President, State Street Bank and Trust 56 other investment
100 Royal Palm Way Company and State Street Corporation. companies in the
Palm Beach, FL Fund Complex
TRUSTEE Retired: Director, VISA USA and VISA International;
Chairman and Director, Massachusetts Bankers Association;
Director, Depository Trust Corporation.

John E. Murray, Jr., Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
J.D., S.J.D. President, Law Professor, Duquesne University; Trust and
Birthdate: December 20, 1932 Consulting Partner, Mollica & Murray. 56 other investment
President, Duquesne companies in the
University Retired: Dean and Professor of Law, University of Fund Complex
Pittsburgh, PA Pittsburgh School of Law; Dean and Professor of Law,
TRUSTEE Villanova University School of Law.

Wesley W. Posvar Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: September 14, 1925 President, World Society of Ekistics, Athens; Professor, Trust and
1202 Cathedral of Learning International Politics; Management Consultant; Trustee, 56 other investment
University of Pittsburgh Carnegie Endowment for International Peace, RAND companies in the
Pittsburgh, PA Corporation, Online Computer Library Center, Inc., Fund Complex
TRUSTEE 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.
Retired: Professor, United States Military Academy;
Professor, United States Air Force Academy.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust and
4905 Bayard Street 56 other investment
Pittsburgh, PA Retired: National Spokesperson, Aluminum Company of companies in the
TRUSTEE America; business owner. Fund Complex

Glen R. Johnson Trustee, Federated Investors, Inc.; staff member, $0 $0 for the
Birthdate: May 2, 1929 Federated Securities Corp. Trust and
Federated Investors Tower 8 other investment
1001 Liberty Avenue companies in the
Pittsburgh, PA Fund Complex
PRESIDENT
</TABLE>

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the
Birthdate: October 22, 1930 Federated Fund Complex; President, Executive Vice Trust and
Federated Investors Tower President and Treasurer of some of the Funds in the 1 other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated companies in the
Pittsburgh, PA Investors, Inc.; Vice President, Federated Advisers, Fund Complex
EXECUTIVE VICE PRESIDENT 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.

John W. McGonigle Executive Vice President and Secretary of the $0 $0 for the
Birthdate: October 26, 1938 Federated Fund Complex; Executive Vice President, Trust and
Federated Investors Tower Secretary, and Director, Federated Investors, Inc.; 56 other investment
1001 Liberty Avenue Trustee, Federated Advisers, Federated Management, companies in the
Pittsburgh, PA and Federated Research; Director, Federated Research Fund Complex
EXECUTIVE VICE PRESIDENT Corp. and Federated Global Research Corp.; Director,
and SECRETARY Federated Services Company; Director, Federated

Securities Corp.

Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birthdate: June 17, 1954 President - Funds Financial Services Division, Federated Trust and
Federated Investors Tower Investors, Inc.; Formerly: various management positions 56 other investment
1001 Liberty Avenue within Funds Financial Services Division of Federated companies in the
Pittsburgh, PA Investors, Inc. Fund Complex
TREASURER

Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the
Birthdate: May 17, 1923 Federated Fund Complex; Director or Trustee of some of Trust and
Federated Investors Tower the Funds in the Federated Fund Complex; Executive 6 other investment
1001 Liberty Avenue Vice President, Federated Investors, Inc.; Chairman and companies in the
Pittsburgh, PA Director, Federated Securities Corp. Fund Complex
VICE PRESIDENT

J. Thomas Madden Chief Investment Officer of this Fund and various other $0 $0 for the
Birthdate: October 22, 1945 Funds in the Federated Fund Complex; Executive Vice Trust and
Federated Investors Tower President, Federated Investment Counseling, Federated 12 other investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, Federated companies in the
Pittsburgh, PA Management, Federated Research, and Passport Fund Complex
CHIEF INVESTMENT OFFICER Research, Ltd.; Vice President, Federated Investors, Inc.;
Formerly: Executive Vice President and Senior Vice
President, Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Research Corp., Federated
Advisers, Federated Management, Federated Research,

and Passport Research, Ltd.

Thomas M. Franks Vice President, Federated Investment Counseling, $0 $0 for the
Birthdate: December 15, 1954 Federated Advisers, Federated Global Research Corp., Trust and no
Federated Investors Tower Federated Management, Federated Research, Federated other investment
1001 Liberty Avenue Research Corp. and Passport Research, Ltd. companies in the
Pittsburgh, PA Fund Complex
SENIOR PORTFOLIO MANAGER/
VICE PRESIDENT

</TABLE>

## Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President
and Trustee of the Trust.

+ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not earn any fees for serving the Fund Complex since these fees
are reported as of the end of the last calendar year.

INVESTMENT MANAGER

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

The Manager oversees the Sub-Manager, Northern Trust Quantitative Advisors,
Inc., a subsidiary of Northern Trust Corporation, which conducts investment
research and makes investment decisions for the Fund. The directors of the Sub-
Manager are James M. Snyder, Perry R. Pero, Sheila A. Penrose, John R. Goodwin,
Stephen N. Potter, and Jeffrey H. Wessel. The executive officers of the Sub-
Manager are James M. Snyder, Chief Executive Officer, Jeffrey H. Wessel,
President and John R. Goodwin, Chief Investment Officer.

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. The Manager receives an annual fee from the Fund for
performing its responsibilities under the Management Contract.

The Manager and the Sub-Manager shall not be liable to the Trust, the Fund, or
any Fund shareholder for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it, except
acts or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the Trust.

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

BROKERAGE TRANSACTIONS

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

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

Investment decisions for the Fund are made independently from those of other
accounts managed by the Manager. When the Fund and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Manager to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

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

Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds

------------------ -----------------------------
<S> <C>

0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

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

CUSTODIAN

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

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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

INDEPENDENT AUDITORS

Ernst & Young LLP is the independent auditor for the Fund.

FEES PAID BY THE FUND FOR SERVICES

For the Year ended
October 31,

1998 1997 1996

<S> <C> <C> <C>
Management Fee Earned............. $5,328,240 $3,606,538 $2,312,405
Management Fee Reduction.......... $ 414,314 $ 573,407 $ 490,571
Brokerage Commissions............. $ 102,687 $ 37,996 $ 48,476

12b-1 Fee.........................
Institutional Service Shares.. $ 302,680
Class C Shares................ $ 55,890
Shareholder Services Fee..........
Institutional Shares.......... $ 0
Institutional Service Shares.. $ 832,370
Class C Shares................ $ 18,630
</TABLE>

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

If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.

HOW DOES THE FUND MEASURE PERFORMANCE?

================================================================================

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

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

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

Average Annual Total Returns and Yield

Total returns given for the one-, five- and since inception periods ended
October 31, 1998.
Yield given for the 30-day period ended October 31, 1998.

- -----------------------------------------------------------------------------------
Institutional Institutional Class C Shares
Shares Service Shares

- -----------------------------------------------------------------------------------
Total Return

- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year: 21.56% 21.21% N/A
Five Year: 20.88% 20.51% N/A
Since Inception: 17.18%* 20.25%* 18.57%*
- -----------------------------------------------------------------------------------
Yield

- -----------------------------------------------------------------------------------
1.25% 0.98% 0.33%
- -----------------------------------------------------------------------------------
</TABLE>

*Institutional Shares inception date was July 11, 1990.
Institutional Service Shares inception date was September 7, 1993.

Class C Shares inception date was November 10, 1997.

TOTAL RETURN

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

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

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

YIELD

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

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

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

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

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

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

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

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

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

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

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 net asset value over a specified period of time.

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

Standard & Poor's Daily Stock Price Index of 500 Common Stocks (S&P 500).
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 S &
P 500 assumes reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in the S & P figures.

WHO IS FEDERATED INVESTORS, INC.?

================================================================================

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

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

FEDERATED FUNDS OVERVIEW

Municipal funds. In the municipal sector, as of December 31, 1997, Federated
managed 11 bond funds with approximately $2.1 billion in assets and 22 money
market funds with approximately $10.9 billion in total assets. In 1976,
Federated introduced one of the first municipal bond mutual funds in the
industry and is now one of the largest institutional buyers of municipal
securities. The Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of
Americans.

Equity funds. In the equity sector, Federated has more than 27 years'
experience. As of

December 31, 1997, Federated managed 29 equity funds totaling approximately
$11.7 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

Corporate bond funds. In the corporate bond sector, as of December 31, 1997,
Federated managed 11 money market funds and 16 bond funds with assets
approximating $17.1 billion and $5.6 billion, respectively. Federated's
corporate bond decision making--based on intensive, diligent credit analysis--
is backed by over 22 years of experience in the corporate bond sector. In 1972,
Federated introduced one of the first high-yield bond funds in the industry. In
1983, Federated was one of the first fund managers to participate in the asset-
backed securities market, a market totaling more than $200 billion.

Government funds. In the government sector, as of December 31, 1997, Federated
manages 9 mortgage-backed, 6 government/ agency and 18 government money market
mutual funds, with assets approximating $5.9 billion, $1.5 billion and $35
billion, respectively. Federated trades approximately $400 million in U.S.
government and mortgage-backed securities daily and places approximately $23
billion in repurchase agreements each day. Federated introduced the first U.S.
government fund to invest in U.S. government bond securities in 1969. Federated
has been a major force in the short- and intermediate-term government markets
since 1982 and currently manages approximately $36 billion in government funds
within these maturity ranges.

Money market funds. In the money market sector, Federated gained prominence in
the mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds, a
principal means used by money managers today to value money market fund shares.
Other innovations include the first institutional tax-free money market fund.
As of December 31, 1997, Federated managed more than $63.1 billion in assets
across 51 money market funds, including 18 government, 11 prime and 22
municipal with assets approximating $35 billion, $17.1 billion and $10.9
billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income - William D. Dawson, III; and global equities and
fixed income - Henry A. Frantzen. The Chief Investment Officers are Executive

Vice Presidents of the Federated advisory companies.

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 $4 trillion to the more than
6,700 funds available, according to the Investment Company Institute.

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

FEDERATED CLIENTS OVERVIEW

Institutional Clients. Federated meets the needs of approximately 900
institutional clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of purposes, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisers. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.

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

ADDRESSES

================================================================================

<TABLE>

<S> <C>

Federated Max-Cap Fund
Institutional Shares

Institutional Service Shares Federated Investors Funds
Class C Shares 5800 Corporate Drive

Pittsburgh, PA 15237-7000

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

Distributor

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

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

Investment Manager

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

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

Sub-Manager 50 South LaSalle Street
Northern Trust Quantitative Advisors, Inc. Chicago, IL 60675

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

Custodian

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

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600

Boston, MA 02266-8600

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

Independent Auditors

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

- --------------------------------------------------------------------------------
</TABLE>

Federated Max-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 4
What do Shares Cost? 5
How is the Fund Sold? 5
How to Purchase Shares 5
How to Redeem Shares 7
Account and Share Information 8
Who Manages the Fund? 9
Financial Information 10
</TABLE>

DECEMBER 31, 1998

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in the large capitalization common
stocks comprising the Index.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Shares as of the calendar
year-end for each of the last seven years.

The `y' axis reflects the "% Total Return" beginning with 0% and increasing
in increments of 10% up to 40%.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.

The Fund' s Institutional Shares total return from January 1, 1998 to September
30, 1998 was 5.81%.

Average Annual Total Return

Institutional Shares S&P 500

- ----------------------------------------------------------------
<S> <C> <C>
1 Year 32.69% 33.36%
- ----------------------------------------------------------------
5 Years 19.79% 20.27%
- ----------------------------------------------------------------
Life of Fund/1/ 17.15% 18.54%
- ----------------------------------------------------------------
</TABLE>

1 Since inception date of July 11, 1990.

The table shows the Fund's Institutional Shares average annual total returns
averaged over a period of years relative to the Standard & Poor's 500 Index, a
broad-based market index, for the calendar periods ending December 31, 1997.

What are the Fund's Fees and Expenses?

FEDERATED MAX-CAP FUND

FEES AND EXPENSES

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

<TABLE>

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

Annual Fund Operating Expenses (before waivers)/1/

Expenses That are Deducted From Fund Assets (as a percentage of average net assets)

Management Fee/2/......................................................................................................... 0.30%
Distribution (12b-1) Fee.................................................................................................. None
Shareholder Services Fee/3/............................................................................................... 0.25%
Other Expenses............................................................................................................ 0.03%
Total Annual Fund Operating Expenses...................................................................................... 0.58%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Although not contractually obligated to do so, the adviser and shareholder
service provider waived certain amounts. These are shown below along with the
net expenses the Fund actually paid for the fiscal year ended October 31,
1998.

<TABLE>

<S> <C>
Waiver of Fund Expenses................................................................................................. 0.27%
Total Actual Annual Fund Operating Expenses (after waivers)............................................................. 0.31%

</TABLE>

2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund (after the voluntary waiver) was 0.28% for the year ended October 31,
1998.

3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund (after the voluntary reduction) was 0.00% for the year ended October
31, 1998.

EXAMPLE

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

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

1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Shares $59 $186 $324 $726

- -----------------------------------------------------------------
</TABLE>

What are the Fund's Investment Strategies?

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in Which the Fund Invests?

Common Stocks

Stock Index Futures

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

SECTOR RISK

What do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form, it is
processed at the next determined net asset value (NAV) plus any applicable sales
charge (public offering price).

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

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

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

How is the Fund Sold?

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

The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to institutions acting on behalf of their customers
or to individuals directly or through investment professionals. The Distributor
and its affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and

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

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

In order to maximize the Fund's ability to track the Index, investors are
urged to transmit purchase requests prior to 2:00 p.m. (Eastern time).

DIRECTLY FROM THE FUND

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

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

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

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

By Check

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

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

BY AUTOMATED CLEARINGHOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). However, in order
to maximize the Fund's ability to track the Index, investors are urged to
contact their investment professional prior to 2:00 p.m. (Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions. If you call before
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) you
will receive a redemption amount based on that day's NAV. However, in order to
maximize the Fund's ability to track the Index, investors are urged to telephone
the Fund prior to 2:00 p.m. (Eastern time).

By Mail

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

You will receive a redemption amount based on the next calculated NAV after
the Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

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

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;

. your redemption will be sent to an address of record that was changed within
the last 30 days; or

. a redemption is payable to someone other than the shareholder(s) of record.

PAYMENT METHODS FOR REDEMPTIONS

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;
. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

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

Fund distributions are expected to be both dividends and capital gains.
Redemptions are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Who Manages the Fund?

The Manager receives an annual management fee equal to 0.30% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub-Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non-financial institution clients invest. In total, the Sub-Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

YEAR 2000 READINESS

Financial Information

FINANCIAL HIGHLIGHTS

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

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

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 35.

Year Ended October 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.70 $ 15.49 $ 14.74 $ 12.02 $ 12.24
- --------------------------------------
Income from Investment Operations:

- --------------------------------------
Net investment income 0.31 0.31 0.34 0.38 0.32
- --------------------------------------
Net realized and unrealized gain on

investments and futures contracts 3.83 4.47 2.80 2.70 0.10
- -------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.14 4.78 3.14 3.08 0.42
- -------------------------------------------------------------------------------------------------------------------
Less Distributions:

- --------------------------------------
Distributions from net investment

income (0.31) (0.33) (0.36) (0.34) (0.30)
- --------------------------------------
Distributions from net realized gain

on investments and futures contracts (0.62) (0.24) (2.03) (0.02) (0.34)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.93) (0.57) (2.39) (0.36) (0.64)
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.91 $ 19.70 $ 15.49 $ 14.74 $ 12.02
- -------------------------------------------------------------------------------------------------------------------
Total Return/1/ 21.56% 31.51% 23.71% 26.00% 3.59%
- -------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:

- -------------------------------------------------------------------------------------------------------------------
Expenses 0.31% 0.31% 0.31% 0.31% 0.32%
- -------------------------------------------------------------------------------------------------------------------
Net investment income 1.40% 1.70% 2.29% 2.91% 2.70%
- -------------------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement/2/ 0.27% 0.30% 0.31% 0.33% 0.07%
- -------------------------------------------------------------------------------------------------------------------
Supplemental Data:

- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000

omitted) $1,445,175 $1,142,081 $900,131 $679,237 $443,815
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover 3% 16% 3% 57% 2%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

OCTOBER 31, 1998

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--98.1%
Basic Industry--4.0%

8,700 ASARCO, Inc. $ 186,506
--------------------------------------------------------------
49,800 Air Products & Chemicals, Inc. 1,879,950
--------------------------------------------------------------
48,700 Alcan Aluminum, Ltd. 1,232,719
--------------------------------------------------------------
41,992 Allegheny Teledyne, Inc. 863,461
--------------------------------------------------------------
40,200 Aluminum Co. of America 3,185,850
--------------------------------------------------------------
128,882 Archer-Daniels-Midland Co. 2,150,718
--------------------------------------------------------------
23,200 /2/Armco, Inc. 110,200
--------------------------------------------------------------
25,200 Avery Dennison Corp. 1,044,225
--------------------------------------------------------------
6,500 Ball Corp. 274,219
--------------------------------------------------------------
79,900 Barrick Gold Corp. 1,707,863
--------------------------------------------------------------
49,300 Battle Mountain Gold Co. 268,069
--------------------------------------------------------------
11,400 Bemis Co., Inc. 423,225
--------------------------------------------------------------
27,900 /2/Bethlehem Steel Corp. 251,100
--------------------------------------------------------------
12,100 Boise Cascade Corp. 338,800
--------------------------------------------------------------
20,600 Champion International Corp. 657,913
--------------------------------------------------------------
49,900 Corning, Inc. 1,811,994
--------------------------------------------------------------
26,800 Crown Cork & Seal Co., Inc. 854,250
--------------------------------------------------------------
20,050 Cyprus Amax Minerals 249,372
--------------------------------------------------------------
48,200 Dow Chemical Co. 4,512,725
--------------------------------------------------------------
243,400 Du Pont (E.I.) de Nemours & Co. 13,995,500
--------------------------------------------------------------
17,025 Eastman Chemical Co. 1,000,219
--------------------------------------------------------------
27,680 Ecolab, Inc. 826,940
--------------------------------------------------------------
30,962 Engelhard Corp. 650,202
--------------------------------------------------------------
47,400 Fort James Corp. 1,910,813
--------------------------------------------------------------
38,000 Freeport-McMoRan Copper & Gold, Inc., Class B 467,875
--------------------------------------------------------------
20,100 Georgia-Pacific Corp. 1,040,175
--------------------------------------------------------------
15,900 Goodrich (B.F.) Co. 572,400
--------------------------------------------------------------
15,900 /2/Grace (W.R.) & Co. 276,263
--------------------------------------------------------------
12,800 Great Lakes Chemical Corp. 532,800
--------------------------------------------------------------
20,700 Hercules, Inc. 689,569
--------------------------------------------------------------
45,300 Homestake Mining Co. 537,938
--------------------------------------------------------------
35,800 Inco Ltd. 382,613
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Basic Industry--continued

66,076 International Paper Co. $ 3,068,404
--------------------------------------------------------------
23,500 Louisiana-Pacific Corp. 417,125
--------------------------------------------------------------
22,500 Mead Corp. 711,563
--------------------------------------------------------------
9,300 Millipore Corp. 229,013
--------------------------------------------------------------
129,200 Monsanto Co. 5,248,750
--------------------------------------------------------------
28,000 Morton International, Inc. 696,500
--------------------------------------------------------------
14,300 Nalco Chemical Co. 442,406
--------------------------------------------------------------
35,957 Newmont Mining Corp. 764,086
--------------------------------------------------------------
18,800 Nucor Corporation 851,875
--------------------------------------------------------------
11,500 Owens Corning 417,594
--------------------------------------------------------------
33,400 /2/Owens-Illinois, Inc. 1,020,788
--------------------------------------------------------------
38,100 PPG Industries, Inc. 2,178,844
--------------------------------------------------------------
26,733 Pall Corp. 675,008
--------------------------------------------------------------
12,600 Phelps Dodge Corp. 726,075
--------------------------------------------------------------
51,920 Pioneer Hi-Bred International 1,453,760
--------------------------------------------------------------
53,800 Placer Dome, Inc. 847,350
--------------------------------------------------------------
6,200 Potlatch Corp. 226,300
--------------------------------------------------------------
33,800 Praxair, Inc. 1,360,450
--------------------------------------------------------------
15,500 Reynolds Metals Co. 929,031
--------------------------------------------------------------
38,100 Rohm & Haas Co. 1,285,875
--------------------------------------------------------------
17,700 /2/Sealed Air Corp. 627,244
--------------------------------------------------------------
37,100 Sherwin-Williams Co. 934,456
--------------------------------------------------------------
21,500 Sigma-Aldrich Corp. 664,484
--------------------------------------------------------------
4,300 Springs Industries, Inc., Class A 152,113
--------------------------------------------------------------
22,608 Stone Container Corp. 216,189
--------------------------------------------------------------
12,100 Temple-Inland, Inc. 587,606
--------------------------------------------------------------
13,100 Tupperware Corp. 203,869
--------------------------------------------------------------
18,920 USX-U.S. Steel Group, Inc. 439,890
--------------------------------------------------------------
14,900 Union Camp Corp. 640,700
--------------------------------------------------------------
29,100 Union Carbide Corp. 1,120,350
--------------------------------------------------------------
21,850 Westvaco Corp. 538,056
--------------------------------------------------------------
42,800 Weyerhaeuser Co. 2,003,575
--------------------------------------------------------------
23,800 Willamette Industries, Inc. 737,800
--------------------------------------------------------------
20,750 Worthington Industries, Inc. 281,422
-------------------------------------------------------------------------------------------
TOTAL 77,585,017

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

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Consumer Durables--2.8%

20,400 Black & Decker Corp. $ 1,054,425
--------------------------------------------------------------
5,300 Briggs & Stratton Corp. 249,100
--------------------------------------------------------------
21,400 Brunswick Corp. 415,963
--------------------------------------------------------------
12,700 Centex Corp. 425,450
--------------------------------------------------------------
139,070 Chrysler Corp. 6,692,744
--------------------------------------------------------------
16,900 Cooper Tire & Rubber Co. 280,963
--------------------------------------------------------------
35,445 Dana Corp. 1,482,044
--------------------------------------------------------------
69,400 Eastman Kodak Co. 5,378,500
--------------------------------------------------------------
15,400 Eaton Corp. 1,042,388
--------------------------------------------------------------
7,800 Fleetwood Enterprises, Inc. 251,550
--------------------------------------------------------------
260,600 Ford Motor Co. 14,137,550
--------------------------------------------------------------
140,700 General Motors Corp. 8,872,894
--------------------------------------------------------------
38,350 Genuine Parts Co. 1,208,025
--------------------------------------------------------------
33,800 Goodyear Tire & Rubber Co. 1,820,975
--------------------------------------------------------------
28,500 Hasbro, Inc. 999,281
--------------------------------------------------------------
8,352 Jostens, Inc. 188,442
--------------------------------------------------------------
8,400 Kaufman & Broad Homes Corp. 239,925
--------------------------------------------------------------
62,925 Mattel, Inc. 2,257,434
--------------------------------------------------------------
19,700 Maytag Corp. 973,919
--------------------------------------------------------------
35,000 Newell Co. 1,540,000
--------------------------------------------------------------
9,600 Polaroid Corp. 255,000
--------------------------------------------------------------
9,200 Pulte Corp. 236,900
--------------------------------------------------------------
32,100 Rubbermaid, Inc. 1,065,319
--------------------------------------------------------------
1 /2/SPX Corp. 15
--------------------------------------------------------------
13,100 Snap-On Tools Corp. 464,231
--------------------------------------------------------------
19,100 Stanley Works 573,000
--------------------------------------------------------------
26,200 TRW, Inc. 1,491,763
--------------------------------------------------------------
16,300 Whirlpool Corp. 835,375
-------------------------------------------------------------------------------------------
TOTAL 54,433,175

-------------------------------------------------------------------------------------------
Consumer Non-Durables--10.1%

12,200 Alberto-Culver Co., Class B 324,063
--------------------------------------------------------------
15,600 American Greetings Corp., Class A 625,950
--------------------------------------------------------------
103,700 Anheuser-Busch Cos., Inc. 6,163,669
--------------------------------------------------------------
56,600 Avon Products, Inc. 2,246,313
--------------------------------------------------------------
61,800 BestFoods 3,368,100
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Consumer Non-Durable--continued

14,800 Brown-Forman Corp., Class B $ 1,005,475
--------------------------------------------------------------
96,600 Campbell Soup Co. 5,149,988
--------------------------------------------------------------
22,300 Clorox Co. 2,436,275
--------------------------------------------------------------
87,000 Coca Cola Enterprises, Inc. 3,137,438
--------------------------------------------------------------
530,200 Coca-Cola Co. 35,854,775
--------------------------------------------------------------
63,600 Colgate-Palmolive Co. 5,620,650
--------------------------------------------------------------
104,900 ConAgra, Inc. 3,192,894
--------------------------------------------------------------
7,900 Coors Adolph Co., Class B 395,000
--------------------------------------------------------------
37,200 Fortune Brands, Inc. 1,229,925
--------------------------------------------------------------
15,700 /2/Fruit of the Loom, Inc., Class A 239,425
--------------------------------------------------------------
33,300 General Mills, Inc. 2,447,550
--------------------------------------------------------------
241,500 Gillette Co. 10,852,406
--------------------------------------------------------------
77,900 Heinz (H.J.) Co. 4,527,938
--------------------------------------------------------------
30,800 Hershey Foods Corp. 2,088,625
--------------------------------------------------------------
23,100 International Flavors & Fragrances, Inc. 864,806
--------------------------------------------------------------
87,500 Kellogg Co. 2,887,500
--------------------------------------------------------------
117,748 Kimberly-Clark Corp. 5,681,341
--------------------------------------------------------------
14,300 Liz Claiborne, Inc. 420,063
--------------------------------------------------------------
61,900 Nike, Inc., Class B 2,704,256
--------------------------------------------------------------
316,800 PepsiCo, Inc. 10,692,000
--------------------------------------------------------------
523,100 Philip Morris Cos., Inc. 26,743,488
--------------------------------------------------------------
288,400 Procter & Gamble Co. 25,631,550
--------------------------------------------------------------
29,300 Quaker Oats Co. 1,730,531
--------------------------------------------------------------
69,900 RJR Nabisco Holdings Corp. 1,996,519
--------------------------------------------------------------
67,100 Ralston Purina Co. 2,239,463
--------------------------------------------------------------
12,100 /2/Reebok International Ltd. 201,163
--------------------------------------------------------------
7,800 Russell Corp. 191,588
--------------------------------------------------------------
100,500 Sara Lee Corp. 5,998,594
--------------------------------------------------------------
74,500 Seagram Co. Ltd. 2,449,188
--------------------------------------------------------------
39,900 UST, Inc. 1,356,600
--------------------------------------------------------------
137,700 Unilever N.V., ADR 10,361,925
--------------------------------------------------------------
26,200 VF Corp. 1,095,488
--------------------------------------------------------------
28,900 /2/Venator Group, Inc. 243,844
--------------------------------------------------------------
25,000 Wrigley (Wm.), Jr. Co. 2,023,438
-------------------------------------------------------------------------------------------
TOTAL 196,419,804

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

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Energy Minerals--6.9%

19,700 Amerada-Hess Corp. $ 1,088,425
--------------------------------------------------------------
205,200 Amoco Corp. 11,516,850
--------------------------------------------------------------
25,600 Anadarko Petroleum Corp. 867,200
--------------------------------------------------------------
21,200 Apache Corp. 600,225
--------------------------------------------------------------
16,400 Ashland, Inc. 789,250
--------------------------------------------------------------
69,100 Atlantic Richfield Co. 4,759,263
--------------------------------------------------------------
68,290 Baker Hughes, Inc. 1,506,648
--------------------------------------------------------------
38,165 Burlington Resources, Inc. 1,571,921
--------------------------------------------------------------
140,700 Chevron Corp. 11,467,050
--------------------------------------------------------------
524,400 Exxon Corp. 37,363,500
--------------------------------------------------------------
94,400 Halliburton Co. 3,392,500
--------------------------------------------------------------
10,800 Helmerich & Payne, Inc. 257,175
--------------------------------------------------------------
10,200 Kerr-McGee Corp. 406,725
--------------------------------------------------------------
168,100 Mobil Corp. 12,723,069
--------------------------------------------------------------
75,900 Occidental Petroleum Corp. 1,508,513
--------------------------------------------------------------
22,700 /2/Oryx Energy Co. 317,800
--------------------------------------------------------------
10,200 Pennzoil Co. 365,925
--------------------------------------------------------------
55,600 Phillips Petroleum Co. 2,404,700
--------------------------------------------------------------
18,600 /2/Rowan Companies, Inc. 270,863
--------------------------------------------------------------
461,200 Royal Dutch Petroleum Co., ADR 22,714,100
--------------------------------------------------------------
117,000 Schlumberger Ltd. 6,142,500
--------------------------------------------------------------
20,137 Sun Co., Inc. 690,951
--------------------------------------------------------------
115,200 Texaco, Inc. 6,832,800
--------------------------------------------------------------
62,500 USX Marathon Group 2,042,969
--------------------------------------------------------------
54,394 Union Pacific Resources Group, Inc. 707,122
--------------------------------------------------------------
51,900 Unocal Corp. 1,761,356
-------------------------------------------------------------------------------------------
TOTAL 134,069,400

-------------------------------------------------------------------------------------------
Finance--15.7%

36,350 AON Corp. 2,253,700
--------------------------------------------------------------
178,210 Allstate Corp. 7,674,168
--------------------------------------------------------------
98,200 American Express Co. 8,678,425
--------------------------------------------------------------
54,430 American General Corp. 3,728,455
--------------------------------------------------------------
225,833 American International Group, Inc. 19,252,263
--------------------------------------------------------------
74,466 Associates First Capital Corp., Class A 5,249,853
--------------------------------------------------------------
61,600 BB&T Corp. 2,198,350
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Finance--continued

251,886 Bank One Corp. $ 12,310,914
--------------------------------------------------------------
160,700 Bank of New York Co., Inc. 5,072,094
--------------------------------------------------------------
373,692 BankAmerica Corp. 21,463,934
--------------------------------------------------------------
63,300 BankBoston Corp. 2,330,231
--------------------------------------------------------------
20,600 Bankers Trust New York Corp. 1,293,938
--------------------------------------------------------------
24,500 Bear Stearns Cos., Inc. 874,344
--------------------------------------------------------------
22,900 Block (H&R), Inc. 1,026,206
--------------------------------------------------------------
45,700 CIGNA Corp. 3,333,244
--------------------------------------------------------------
14,200 Capital One Financial Corp. 1,444,850
--------------------------------------------------------------
184,240 Chase Manhattan Corp. 10,467,135
--------------------------------------------------------------
35,600 Chubb Corp. 2,189,400
--------------------------------------------------------------
36,000 Cincinnati Financial Corp. 1,343,250
--------------------------------------------------------------
491,650 Citigroup, Inc. 23,138,278
--------------------------------------------------------------
33,450 Comerica, Inc. 2,157,525
--------------------------------------------------------------
67,161 Conseco, Inc. 2,329,647
--------------------------------------------------------------
23,900 Countrywide Credit Industries, Inc. 1,032,181
--------------------------------------------------------------
145,900 Federal Home Loan Mortgage Corp. 8,389,250
--------------------------------------------------------------
223,000 Federal National Mortgage Association 15,791,188
--------------------------------------------------------------
57,600 Fifth Third Bancorp 3,816,000
--------------------------------------------------------------
208,398 First Union Corp. 12,087,084
--------------------------------------------------------------
122,120 Fleet Financial Group, Inc. 4,877,168
--------------------------------------------------------------
54,400 Franklin Resources, Inc. 2,057,000
--------------------------------------------------------------
16,300 General RE Corp. 3,580,906
--------------------------------------------------------------
12,400 Golden West Financial Corp. 1,124,525
--------------------------------------------------------------
50,200 Hartford Financial Services Group, Inc. 2,666,875
--------------------------------------------------------------
105,859 Household International, Inc. 3,870,470
--------------------------------------------------------------
45,500 Huntington Bancshares, Inc. 1,308,125
--------------------------------------------------------------
38,000 J.P. Morgan & Co., Inc. 3,581,500
--------------------------------------------------------------
22,837 Jefferson-Pilot Corp. 1,387,348
--------------------------------------------------------------
94,600 KeyCorp 2,867,563
--------------------------------------------------------------
25,300 Lehman Brothers Holdings, Inc. 959,819
--------------------------------------------------------------
21,600 Lincoln National Corp. 1,638,900
--------------------------------------------------------------
21,300 MBIA Insurance Corporation 1,301,963
--------------------------------------------------------------
161,727 MBNA Corp. 3,689,397
--------------------------------------------------------------
24,500 MGIC Investment Corp. 955,500
--------------------------------------------------------------
55,000 Marsh & McLennan Cos., Inc. 3,052,500
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Finance--continued

56,100 Mellon Bank Corp. $ 3,373,013
--------------------------------------------------------------
32,700 Mercantile Bancorporation, Inc. 1,493,981
--------------------------------------------------------------
74,900 Merrill Lynch & Co., Inc. 4,437,825
--------------------------------------------------------------
125,957 Morgan Stanley, Dean Witter & Co. 8,155,716
--------------------------------------------------------------
70,900 National City Corp. 4,559,756
--------------------------------------------------------------
164,700 Norwest Corp. 6,124,781
--------------------------------------------------------------
64,800 PNC Bank Corp. 3,240,000
--------------------------------------------------------------
15,600 Progressive Corp., Ohio 2,297,100
--------------------------------------------------------------
29,100 Provident Cos., Inc. 845,719
--------------------------------------------------------------
20,400 Providian Financial Corp. 1,619,250
--------------------------------------------------------------
46,000 Regions Financial Corp. 1,702,000
--------------------------------------------------------------
23,200 Republic New York Corp. 970,050
--------------------------------------------------------------
30,300 SAFECO Corp. 1,312,369
--------------------------------------------------------------
36,000 SLM Holding Corp. 1,442,250
--------------------------------------------------------------
57,450 Schwab (Charles) Corp. 2,754,009
--------------------------------------------------------------
50,752 St. Paul Cos., Inc. 1,681,160
--------------------------------------------------------------
34,700 State Street Corp. 2,164,413
--------------------------------------------------------------
37,400 Summit Bancorp 1,418,863
--------------------------------------------------------------
42,050 SunAmerica, Inc. 2,964,525
--------------------------------------------------------------
44,900 SunTrust Banks, Inc. 3,128,969
--------------------------------------------------------------
56,250 Synovus Financial Corp. 1,304,297
--------------------------------------------------------------
30,000 Torchmark Corp. 1,312,500
--------------------------------------------------------------
13,500 Transamerica Corp. 1,404,000
--------------------------------------------------------------
159,765 U.S. Bancorp, Inc. 5,831,423
--------------------------------------------------------------
29,700 UNUM Corp. 1,319,794
--------------------------------------------------------------
27,300 Union Planters Corp. 1,267,744
--------------------------------------------------------------
44,400 Wachovia Corp. 4,034,850
--------------------------------------------------------------
127,476 Washington Mutual, Inc. 4,772,383
--------------------------------------------------------------
18,266 Wells Fargo & Co. 6,758,420
-------------------------------------------------------------------------------------------
TOTAL 303,536,626

-------------------------------------------------------------------------------------------
Health Care--12.5%

-------------------------------------------------------------------------------------------
331,200 Abbott Laboratories 15,545,700
--------------------------------------------------------------
31,055 Aetna Services, Inc. 2,317,479
--------------------------------------------------------------
14,000 Allergan, Inc. 874,125
--------------------------------------------------------------
18,600 /2/Alza Corp. 890,475
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Health Care--continued

283,000 American Home Products Corp. $ 13,796,250
--------------------------------------------------------------
54,600 /2/Amgen, Inc. 4,289,513
--------------------------------------------------------------
12,200 Bard (C.R.), Inc. 520,788
--------------------------------------------------------------
11,800 Bausch & Lomb, Inc. 491,913
--------------------------------------------------------------
61,400 Baxter International, Inc. 3,680,163
--------------------------------------------------------------
53,200 Becton, Dickinson & Co. 2,241,050
--------------------------------------------------------------
24,000 Biomet, Inc. 814,500
--------------------------------------------------------------
42,100 /2/Boston Scientific Corp. 2,291,819
--------------------------------------------------------------
213,900 Bristol-Myers Squibb Co. 23,649,319
--------------------------------------------------------------
28,700 Cardinal Health, Inc. 2,713,944
--------------------------------------------------------------
138,807 Columbia/HCA Healthcare Corp. 2,914,947
--------------------------------------------------------------
32,400 Guidant Corp. 2,478,600
--------------------------------------------------------------
92,700 HBO & Co. 2,433,375
--------------------------------------------------------------
23,150 /2/HCR Manor Care, Inc. 752,375
--------------------------------------------------------------
90,900 /2/HEALTHSOUTH Corp. 1,102,163
--------------------------------------------------------------
35,900 /2/Humana, Inc. 679,856
--------------------------------------------------------------
35,700 IMS Health, Inc. 2,374,050
--------------------------------------------------------------
289,200 Johnson & Johnson 23,569,800
--------------------------------------------------------------
536 /2/Ligand Pharmaceuticals, Inc., Warrants 2,881
--------------------------------------------------------------
236,900 Lilly (Eli) & Co. 19,174,094
--------------------------------------------------------------
100,900 Medtronic, Inc. 6,558,500
--------------------------------------------------------------
256,100 Merck & Co., Inc. 34,637,525
--------------------------------------------------------------
281,000 Pfizer, Inc. 30,154,813
--------------------------------------------------------------
109,255 Pharmacia & Upjohn, Inc. 5,783,687
--------------------------------------------------------------
157,900 Schering Plough Corp. 16,243,963
--------------------------------------------------------------
5,700 Shared Medical Systems Corp. 284,288
--------------------------------------------------------------
18,141 /2/St. Jude Medical, Inc. 512,483
--------------------------------------------------------------
66,300 /2/Tenet Healthcare Corp. 1,852,256
--------------------------------------------------------------
42,000 United Healthcare Corp. 1,829,625
--------------------------------------------------------------
176,500 Warner-Lambert Co. 13,833,188
-------------------------------------------------------------------------------------------
TOTAL 241,289,507

-------------------------------------------------------------------------------------------
Producer Manufacturing--6.7%

6,000 Aeroquip-Vickers, Inc. 189,000
--------------------------------------------------------------
120,700 Allied-Signal, Inc. 4,699,756
--------------------------------------------------------------
8,700 Armstrong World Industries, Inc. 539,400
--------------------------------------------------------------
16,100 Case Corp. 354,200
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

78,400 Caterpillar, Inc. $ 3,528,000
--------------------------------------------------------------
25,000 Cooper Industries, Inc. 1,103,125
--------------------------------------------------------------
14,775 Crane Co. 425,705
--------------------------------------------------------------
8,200 Cummins Engine Co., Inc. 279,825
--------------------------------------------------------------
52,700 Deere & Co. 1,864,263
--------------------------------------------------------------
47,700 Dover Corp. 1,514,475
--------------------------------------------------------------
94,700 Emerson Electric Co. 6,250,200
--------------------------------------------------------------
7,300 /2/FMC Corp. 372,756
--------------------------------------------------------------
699,700 General Electric Co. 61,223,750
--------------------------------------------------------------
10,278 Harnischfeger Industries, Inc. 96,999
--------------------------------------------------------------
27,100 Honeywell, Inc. 2,164,613
--------------------------------------------------------------
25,400 ITT Industries, Inc. 908,050
--------------------------------------------------------------
53,800 Illinois Tool Works, Inc. 3,449,925
--------------------------------------------------------------
35,500 Ingersoll-Rand Co. 1,792,750
--------------------------------------------------------------
18,200 Johnson Controls, Inc. 1,023,750
--------------------------------------------------------------
24,700 Loews Corp. 2,320,256
--------------------------------------------------------------
73,200 Masco Corp. 2,063,325
--------------------------------------------------------------
12,900 McDermott International, Inc. 378,131
--------------------------------------------------------------
8,600 Milacron Inc. 166,625
--------------------------------------------------------------
86,900 Minnesota Mining & Manufacturing Co. 6,952,000
--------------------------------------------------------------
1,748 NACCO Industries, Inc., Class A 160,816
--------------------------------------------------------------
9,200 National Service Industries, Inc. 330,050
--------------------------------------------------------------
15,570 /2/Navistar International Corp. 325,024
--------------------------------------------------------------
16,680 PACCAR, Inc. 727,665
--------------------------------------------------------------
23,800 Parker-Hannifin Corp. 850,850
--------------------------------------------------------------
59,000 Pitney Bowes, Inc. 3,248,688
--------------------------------------------------------------
18,200 Raychem Corp. 556,238
--------------------------------------------------------------
36,500 Tenneco, Inc. 1,108,688
--------------------------------------------------------------
35,200 Textron, Inc. 2,618,000
--------------------------------------------------------------
35,700 /2/Thermo Electron Corp. 711,769
--------------------------------------------------------------
12,200 Thomas & Betts Corp. 545,188
--------------------------------------------------------------
13,500 Timken Co. 240,469
--------------------------------------------------------------
138,521 Tyco International Ltd. 8,579,644
--------------------------------------------------------------
70,700 Xerox Corp. 6,849,063
-------------------------------------------------------------------------------------------
TOTAL 130,513,031

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

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Retail Trade--5.7%

52,900 Albertsons, Inc. $ 2,939,256
--------------------------------------------------------------
59,000 American Stores Co. 1,921,188
--------------------------------------------------------------
32,600 /2/AutoZone, Inc. 857,788
--------------------------------------------------------------
83,700 CVS Corp. 3,824,044
--------------------------------------------------------------
21,500 Circuit City Stores, Inc. 778,031
--------------------------------------------------------------
23,100 /2/Consolidated Stores Corp. 379,706
--------------------------------------------------------------
46,550 /2/Costco Cos., Inc. 2,641,713
--------------------------------------------------------------
94,400 Dayton-Hudson Corp. 4,000,200
--------------------------------------------------------------
23,800 Dillards, Inc., Class A 739,288
--------------------------------------------------------------
39,750 Dollar General Corp. 949,031
--------------------------------------------------------------
45,300 Federated Department Stores, Inc. 1,741,219
--------------------------------------------------------------
84,500 Gap (The), Inc. 5,080,563
--------------------------------------------------------------
8,200 Great Atlantic & Pacific Tea Co., Inc. 192,700
--------------------------------------------------------------
15,200 Harcourt General, Inc. 740,050
--------------------------------------------------------------
316,000 Home Depot, Inc. 13,746,000
--------------------------------------------------------------
105,900 /2/K Mart Corp. 1,495,838
--------------------------------------------------------------
34,000 /2/Kohl's Corp. 1,625,625
--------------------------------------------------------------
55,200 /2/Kroger Co., Inc. 3,063,600
--------------------------------------------------------------
48,964 Limited, Inc. 1,254,703
--------------------------------------------------------------
8,300 Longs Drug Stores Corp. 324,219
--------------------------------------------------------------
75,700 Lowe's Cos., Inc. 2,550,144
--------------------------------------------------------------
49,700 May Department Stores Co. 3,031,700
--------------------------------------------------------------
33,100 /2/Meyer (Fred), Inc. 1,764,644
--------------------------------------------------------------
32,000 Nordstrom, Inc. 874,000
--------------------------------------------------------------
54,400 Penney (J.C.) Co., Inc. 2,584,000
--------------------------------------------------------------
13,600 Pep Boys-Manny Moe & Jack 212,500
--------------------------------------------------------------
55,600 Rite Aid Corp. 2,206,625
--------------------------------------------------------------
84,400 Sears, Roebuck & Co. 3,792,725
--------------------------------------------------------------
61,800 /2/Staples, Inc. 2,016,225
--------------------------------------------------------------
68,200 TJX Cos., Inc. 1,291,538
--------------------------------------------------------------
21,630 Tandy Corp. 1,072,037
--------------------------------------------------------------
59,300 /2/Toys 'R' Us, Inc. 1,160,056
--------------------------------------------------------------
480,800 Wal-Mart Stores, Inc. 33,175,200
--------------------------------------------------------------
107,000 Walgreen Co. 5,209,563
--------------------------------------------------------------
31,900 Winn-Dixie Stores, Inc. 1,082,606
-------------------------------------------------------------------------------------------
TOTAL 110,318,325

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

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued
Services--4.7%

37,800 /2/AES Corp. $ 1,547,438
--------------------------------------------------------------
37,335 Browning-Ferris Industries, Inc. 1,323,059
--------------------------------------------------------------
154,000 CBS Corp. 4,302,375
--------------------------------------------------------------
184,529 /2/Cendant Corp. 2,110,550
--------------------------------------------------------------
53,400 /2/Clear Channel Communications, Inc. 2,433,038
--------------------------------------------------------------
29,900 Darden Restaurants, Inc. 493,350
--------------------------------------------------------------
17,400 Deluxe Corp. 563,325
--------------------------------------------------------------
440,600 Disney (Walt) Co. 11,868,663
--------------------------------------------------------------
29,800 Donnelley (R.R.) & Sons Co. 1,285,125
--------------------------------------------------------------
20,200 Dow Jones & Co. 925,413
--------------------------------------------------------------
36,500 Dun & Bradstreet Corp. 1,035,688
--------------------------------------------------------------
31,800 Equifax, Inc. 1,230,263
--------------------------------------------------------------
17,000 Fluor Corp. 659,813
--------------------------------------------------------------
8,700 Foster Wheeler Corp. 138,113
--------------------------------------------------------------
61,200 Gannett Co., Inc. 3,786,750
--------------------------------------------------------------
21,200 Grainger (W.W.), Inc. 976,525
--------------------------------------------------------------
21,650 /2/Harrah's Entertainment, Inc. 305,806
--------------------------------------------------------------
56,000 Hilton Hotels Corp. 1,123,500
--------------------------------------------------------------
28,900 Ikon Office Solutions, Inc. 272,744
--------------------------------------------------------------
29,250 Interpublic Group Cos., Inc. 1,711,125
--------------------------------------------------------------
15,800 /2/King World Productions, Inc. 414,750
--------------------------------------------------------------
17,000 Knight-Ridder, Inc. 865,938
--------------------------------------------------------------
70,500 Laidlaw, Inc. 665,344
--------------------------------------------------------------
53,600 Marriott International, Inc., Class A 1,440,500
--------------------------------------------------------------
147,200 McDonald's Corp. 9,844,000
--------------------------------------------------------------
21,400 McGraw-Hill Cos., Inc. 1,924,663
--------------------------------------------------------------
11,300 Meredith Corp. 418,100
--------------------------------------------------------------
38,500 /2/Mirage Resorts, Inc. 652,094
--------------------------------------------------------------
19,017 Moore Corp. Ltd. 215,130
--------------------------------------------------------------
41,200 New York Times Co., Class A 1,163,900
--------------------------------------------------------------
36,500 Omnicom Group, Inc. 1,804,469
--------------------------------------------------------------
35,100 Paychex, Inc. 1,746,225
--------------------------------------------------------------
55,300 Service Corp. International 1,970,063
--------------------------------------------------------------
25,800 Super Valu Stores, Inc. 619,200
--------------------------------------------------------------
72,600 Sysco Corp. 1,955,663
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Services--continued

128,840 Time Warner, Inc. $ 11,957,963
--------------------------------------------------------------
19,000 Times Mirror Co., Class A 1,053,313
--------------------------------------------------------------
26,200 Tribune Co. 1,509,775
--------------------------------------------------------------
32,830 /2/Tricon Global Restaurants, Inc. 1,428,105
--------------------------------------------------------------
76,968 /2/Viacom, Inc., Class B 4,608,459
--------------------------------------------------------------
122,928 Waste Management, Inc. 5,547,126
--------------------------------------------------------------
28,300 Wand's International, Inc. 594,300
-------------------------------------------------------------------------------------------
TOTAL 90,491,743

-------------------------------------------------------------------------------------------
Technology--16.4%

77,200 /2/3Com Corp. 2,784,025
--------------------------------------------------------------
46,980 AMP, Inc. 1,929,116
--------------------------------------------------------------
14,500 Adobe System, Inc. 538,313
--------------------------------------------------------------
30,400 /2/Advanced Micro Devices, Inc. 685,900
--------------------------------------------------------------
18,962 /2/Andrew Corp. 310,503
--------------------------------------------------------------
29,000 /2/Apple Computer, Inc. 1,076,625
--------------------------------------------------------------
78,800 /2/Applied Materials, Inc. 2,733,375
--------------------------------------------------------------
46,600 /2/Ascend Communications, Inc. 2,248,450
--------------------------------------------------------------
10,000 Autodesk, Inc. 311,875
--------------------------------------------------------------
64,700 Automatic Data Processing, Inc. 5,034,469
--------------------------------------------------------------
44,400 /2/BMC Software, Inc. 2,133,975
--------------------------------------------------------------
217,408 Boeing Co. 8,152,800
--------------------------------------------------------------
35,400 /2/Cabletron Systems, Inc. 402,675
--------------------------------------------------------------
15,600 /2/Ceridian Corp. 895,050
--------------------------------------------------------------
334,400 /2/Cisco Systems, Inc. 21,067,200
--------------------------------------------------------------
359,361 Compaq Computer Corp. 11,364,792
--------------------------------------------------------------
120,662 Computer Associates International, Inc. 4,751,066
--------------------------------------------------------------
34,000 /2/Computer Sciences Corp. 1,793,500
--------------------------------------------------------------
10,400 /2/Data General Corp. 176,800
--------------------------------------------------------------
272,300 /2/Dell Computer Corp. 17,835,650
--------------------------------------------------------------
9,700 EG & G, Inc. 243,713
--------------------------------------------------------------
107,400 /2/EMC Corp. Mass 6,913,875
--------------------------------------------------------------
105,800 Electronic Data Systems Corp. 4,304,738
--------------------------------------------------------------
96,100 First Data Corp. 2,546,650
--------------------------------------------------------------
33,500 /2/Gateway 2000, Inc. 1,869,719
--------------------------------------------------------------
27,240 General Dynamics Corp. 1,612,268
--------------------------------------------------------------
32,400 /2/General Instrument Corp. 832,275
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Technology--continued

17,100 Harris Corp. $ 599,569
--------------------------------------------------------------
223,500 Hewlett-Packard Co. 13,451,906
--------------------------------------------------------------
361,300 Intel Corp. 32,223,444
--------------------------------------------------------------
200,700 International Business Machines Corp. 29,791,406
--------------------------------------------------------------
18,700 /2/KLA-Tencor Corp. 689,563
--------------------------------------------------------------
30,400 /2/LSI Logic Corp. 459,800
--------------------------------------------------------------
42,088 Lockheed Martin Corp. 4,687,551
--------------------------------------------------------------
282,834 Lucent Technologies, Inc. 22,679,751
--------------------------------------------------------------
15,700 Mallinckrodt, Inc. 447,450
--------------------------------------------------------------
45,800 Micron Technology, Inc. 1,740,400
--------------------------------------------------------------
529,900 /2/Microsoft Corp. 56,103,163
--------------------------------------------------------------
128,600 Motorola, Inc. 6,687,200
--------------------------------------------------------------
35,200 /2/National Semiconductor Corp. 446,600
--------------------------------------------------------------
140,260 Northern Telecom Ltd. 6,004,881
--------------------------------------------------------------
14,800 Northrop Grumman Corp. 1,180,300
--------------------------------------------------------------
76,000 /2/Novell, Inc. 1,130,500
--------------------------------------------------------------
209,375 /2/Oracle Corp. 6,189,648
--------------------------------------------------------------
58,500 /2/Parametric Technology Corp. 972,563
--------------------------------------------------------------
49,600 /2/Peoplesoft, Inc. 1,050,900
--------------------------------------------------------------
10,600 Perkin-Elmer Corp. 893,713
--------------------------------------------------------------
72,900 Raytheon Co., Class B 4,232,756
--------------------------------------------------------------
41,100 Rockwell International Corp. 1,687,669
--------------------------------------------------------------
17,000 Scientific-Atlanta, Inc. 253,938
--------------------------------------------------------------
52,000 /2/Seagate Technology, Inc. 1,371,500
--------------------------------------------------------------
40,300 /2/Silicon Graphics, Inc. 453,375
--------------------------------------------------------------
81,500 /2/Sun Microsystems, Inc. 4,747,375
--------------------------------------------------------------
10,800 Tektronix, Inc. 193,050
--------------------------------------------------------------
41,700 /2/Tellabs, Inc. 2,293,500
--------------------------------------------------------------
83,900 Texas Instruments, Inc. 5,364,356
--------------------------------------------------------------
54,700 /2/Unisys Corp. 1,456,388
--------------------------------------------------------------
49,000 United Technologies Corp. 4,667,250
-------------------------------------------------------------------------------------------
TOTAL 318,700,862

-------------------------------------------------------------------------------------------
Transportation--1.0%

39,200 /2/AMR Corp. 2,626,400
--------------------------------------------------------------
101,733 Burlington Northern Santa Fe 3,141,006
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Transportation--continued

47,000 CSX Corp. $ 1,844,750
--------------------------------------------------------------
16,300 Delta Air Lines, Inc. 1,720,669
--------------------------------------------------------------
31,740 /2/FDX Corp. 1,668,334
--------------------------------------------------------------
81,500 Norfolk Southern Corp. 2,684,406
--------------------------------------------------------------
16,400 Ryder Systems, Inc. 403,850
--------------------------------------------------------------
72,250 Southwest Airlines Co. 1,530,797
--------------------------------------------------------------
20,200 /2/U.S. Airways Group, Inc. 1,142,563
--------------------------------------------------------------
53,200 Union Pacific Corp. 2,533,650
-------------------------------------------------------------------------------------------
TOTAL 19,296,425

-------------------------------------------------------------------------------------------
Utilities--11.6%

388,478 AT&T Corp. 24,182,756
--------------------------------------------------------------
123,400 /2/Airtouch Communications, Inc. 6,910,400
--------------------------------------------------------------
59,000 Alltel Corp. 2,761,938
--------------------------------------------------------------
29,400 Ameren Corp. 1,174,163
--------------------------------------------------------------
41,100 American Electric Power Co., Inc. 2,011,331
--------------------------------------------------------------
237,100 Ameritech Corp. 12,788,581
--------------------------------------------------------------
31,950 Baltimore Gas & Electric Co. 1,002,431
--------------------------------------------------------------
334,084 Bell Atlantic Corp. 17,748,213
--------------------------------------------------------------
211,600 BellSouth Corp. 16,888,325
--------------------------------------------------------------
32,500 Carolina Power & Light Co. 1,490,938
--------------------------------------------------------------
45,500 Central & SouthWest Corp. 1,265,469
--------------------------------------------------------------
33,840 Cinergy Corp. 1,167,480
--------------------------------------------------------------
45,700 Coastal Corp. 1,610,925
--------------------------------------------------------------
17,850 Columbia Energy Group 1,033,069
--------------------------------------------------------------
79,450 Comcast Corp., Class A 3,922,844
--------------------------------------------------------------
50,300 Consolidated Edison Co. 2,521,288
--------------------------------------------------------------
20,500 Consolidated Natural Gas Co. 1,082,656
--------------------------------------------------------------
31,100 DTE Energy Co. 1,325,638
--------------------------------------------------------------
42,250 Dominion Resources, Inc. 1,951,422
--------------------------------------------------------------
77,672 Duke Energy Corp. 5,024,408
--------------------------------------------------------------
4,800 Eastern Enterprises 197,100
--------------------------------------------------------------
76,100 Edison International 2,007,138
--------------------------------------------------------------
70,900 Enron Corp. 3,739,975
--------------------------------------------------------------
53,000 Entergy Corp. 1,523,750
--------------------------------------------------------------
39,000 FPL Group, Inc. 2,439,938
--------------------------------------------------------------
51,000 FirstEnergy Corp. 1,530,000
--------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Utilities--continued

36,900 Frontier Corp. $ 1,109,306
--------------------------------------------------------------
27,500 GPU, Inc. 1,185,938
--------------------------------------------------------------
207,300 GTE Corp. 12,165,919
--------------------------------------------------------------
63,651 Houston Industries, Inc. 1,977,157
--------------------------------------------------------------
381,997 /2/MCI Worldcom, Inc. 21,105,334
--------------------------------------------------------------
131,100 /2/MediaOne Group, Inc. 5,547,169
--------------------------------------------------------------
61,400 /2/NEXTEL Communications, Inc., Class A 1,112,875
--------------------------------------------------------------
10,400 NICOR, Inc. 440,700
--------------------------------------------------------------
40,300 Niagara Mohawk Power Corp. 589,388
--------------------------------------------------------------
32,600 Northern States Power Co. 880,200
--------------------------------------------------------------
6,600 ONEOK, Inc. 226,050
--------------------------------------------------------------
82,200 P G & E Corp. 2,501,963
--------------------------------------------------------------
32,491 P P & L Resources, Inc. 881,318
--------------------------------------------------------------
63,600 Pacificorp 1,212,375
--------------------------------------------------------------
47,700 Peco Energy Co. 1,845,394
--------------------------------------------------------------
7,600 Peoples Energy Corp. 280,250
--------------------------------------------------------------
49,900 Public Service Enterprises Group, Inc. 1,896,200
--------------------------------------------------------------
420,746 SBC Communications, Inc. 19,485,799
--------------------------------------------------------------
51,818 Sempra Energy 1,347,269
--------------------------------------------------------------
23,600 Sonat, Inc. 715,375
--------------------------------------------------------------
150,100 Southern Co. 4,230,944
--------------------------------------------------------------
92,500 Sprint Corp. 7,099,375
--------------------------------------------------------------
112,600 /2/Tele-Communications, Inc., Class A 4,743,275
--------------------------------------------------------------
60,125 Texas Utilities Co. 2,630,415
--------------------------------------------------------------
107,855 U.S. West, Inc. 6,188,181
--------------------------------------------------------------
46,700 Unicom Corp. 1,760,006
--------------------------------------------------------------
91,400 Williams Cos., Inc. (The) 2,507,788
-------------------------------------------------------------------------------------------
TOTAL 224,968,139

-------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $1,194,767,223) 1,901,622,054
-------------------------------------------------------------------------------------------

Principal

Amount Value

- ---------------------------------------------------------------------------------------------------------
/3/SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.3%

33,425,000 Westdeutsche Landesbank Girozentrale, 5.42%, dated

10/30/1998, due 11/2/1998 (at amortized cost) 33,425,000
-------------------------------------------------------------------------------------------
/5/Total Investments (identified cost $1,233,618,271) $1,940,507,399
-------------------------------------------------------------------------------------------
</TABLE>

1 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 total market value of open
Index futures contracts is $40,616,100 at October 31, 1998, which represents
2.1% of net assets. Taking into consideration these open Index futures
contracts, the Fund's effective total exposure to the Index is 100.2%.

2 Non-income producing security.

3 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.

Note: The categories of investments are shown as a percentage of net assets
($1,938,718,957) at October 31, 1998.

The following acronym(s) are used throughout this portfolio:

ADR--American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1998

<TABLE>

<S> <C> <C>
Assets:

- -----------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $1,233,618,271 and tax cost

$1,233,803,476) $1,940,507,399
- -----------------------------------------------------------------------------------------
Income receivable 1,929,741

- -----------------------------------------------------------------------------------------
Receivable for shares sold 8,833,315

- -----------------------------------------------------------------------------------------
Receivable for daily variation margin 317,550

- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,951,588,005

- ---------------------------------------------------------------------------------------------------------------------
Liabilities:

- -----------------------------------------------------------------------------------------
Payable for investments purchased $1,179,707

- -----------------------------------------------------------------------------------------
Payable for shares redeemed 9,260,716

- -----------------------------------------------------------------------------------------
Payable to Bank 2,132,708

- -----------------------------------------------------------------------------------------
Accrued expenses 295,917

- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 12,869,048

- ---------------------------------------------------------------------------------------------------------------------
Net Assets for 84,679,467 shares outstanding $1,938,718,957
- -----------------------------------------------------------------------------------------
Net Assets Consist of:

- -----------------------------------------------------------------------------------------
Paid in capital $1,216,212,206

- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and futures

contracts 709,526,138

- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments and futures contracts 11,951,208
- -----------------------------------------------------------------------------------------
Undistributed net investment income 1,029,405

- ---------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $1,938,718,957

- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:

- -----------------------------------------------------------------------------------------
Institutional Shares:

- -----------------------------------------------------------------------------------------
$1,445,175,075 (divide) 63,086,344 shares outstanding $22.91
- ---------------------------------------------------------------------------------------------------------------------
Institutional Service Shares:

- -----------------------------------------------------------------------------------------
$477,759,740 (divide) 20,901,469 shares outstanding $22.86
- ---------------------------------------------------------------------------------------------------------------------
Class C Shares:

- -----------------------------------------------------------------------------------------
$15,784,142 (divide) 691,654 shares outstanding $22.82
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1998

<TABLE>

<S> <C> <C> <C>
Investment Income:

- -------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $144,101) $ 25,799,402
- -------------------------------------------------------------------------------
Interest 4,536,016

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 30,335,418

- ------------------------------------------------------------------------------------------------------------------------------
Expenses:

- -------------------------------------------------------------------------------
Investment advisory fee $ 5,328,240
- -------------------------------------------------------------------------------
Custodian fees 107,961

- -------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 257,800
- -------------------------------------------------------------------------------
Directors'/Trustees' fees 15,275

- -------------------------------------------------------------------------------
Auditing fees 22,693

- -------------------------------------------------------------------------------
Legal fees 8,703

- -------------------------------------------------------------------------------
Portfolio accounting fees 169,234

- -------------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 1,135,050

- -------------------------------------------------------------------------------
Distribution services fee--Class C Shares 55,890

- -------------------------------------------------------------------------------
Shareholder services fee--Institutional Shares 3,475,695

- -------------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 945,875

- -------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 18,630

- -------------------------------------------------------------------------------
Share registration costs 3,422

- -------------------------------------------------------------------------------
Printing and postage 48,275

- -------------------------------------------------------------------------------
Insurance premiums 11,000

- -------------------------------------------------------------------------------
Miscellaneous 22,189

- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 11,625,932

- ------------------------------------------------------------------------------------------------------------------------------
Waivers:

- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ (414,314)
- -------------------------------------------------------------------------------
Waiver of distribution services fee Institutional Service Shares (832,370)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee Institutional Shares (3,475,695)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee Institutional Service Shares (113,505)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL WAIVERS (4,835,884)

- ------------------------------------------------------------------------------------------------------------------------------
Net expenses 6,790,048

- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 23,545,370

- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments and Futures Contracts:

- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and futures contracts 15,258,606
- ------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets

and futures contracts 284,412,168

- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 299,670,774
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $323,216,144
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:

- -------------------------------------------------------------------------------
Operations:

- -------------------------------------------------------------------------------
Net investment income $ 23,545,370 $ 20,091,885
- -------------------------------------------------------------------------------
Net realized gain on investments and futures contracts ($18,621,157 and

$45,104,576, respectively, as computed for federal tax purposes) 15,258,606 47,684,197
- -------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and futures contracts 284,412,168 237,223,689
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 323,216,144 304,999,771
- -------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:

- -------------------------------------------------------------------------------
Distributions from net investment income

- -------------------------------------------------------------------------------
Institutional Shares (19,446,188) (19,400,997)
- -------------------------------------------------------------------------------
Institutional Service Shares (4,226,227) (2,132,811)
- -------------------------------------------------------------------------------
Class C Shares (43,855)

- -------------------------------------------------------------------------------
Distributions from net realized gains on investments and futures contracts

- -------------------------------------------------------------------------------
Institutional Shares (36,852,857) (13,509,884)
- -------------------------------------------------------------------------------
Institutional Service Shares (8,247,035) (1,138,590)
- -------------------------------------------------------------------------------
Class C Shares (554)

- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (68,816,716) (36,182,282)
- -------------------------------------------------------------------------------------------------------------------------
Share Transactions:

- -------------------------------------------------------------------------------
Proceeds from sale of shares 1,232,374,399 751,612,116
- -------------------------------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of

distributions declared 40,899,081 17,547,453
- -------------------------------------------------------------------------------
Cost of shares redeemed (977,021,217) (608,777,760)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 296,252,263 160,381,809
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS 550,651,691 429,199,298
- -------------------------------------------------------------------------------------------------------------------------
Net Assets:

- -------------------------------------------------------------------------------
Beginning of period 1,388,067,266 958,867,968
- -------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $1,029,405 and

$1,160,137, respectively) $1,938,718,957 $1,388,067,266
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1998

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. 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

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

Investment Income, Expenses and Distributions

Increase/(Decrease)

- ---------------------------------------------------------------------
Undistributed Accumulated Paid in
Net Investment Income Net Realized Gain Capital

- ---------------------------------------------------------------------
<S> <C> <C>
$40,168 $(1,293,585) $1,253,417

- ---------------------------------------------------------------------
</TABLE>

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

Federal Taxes

When-Issued and Delayed Delivery Transactions

Futures Contracts

The Fund purchases stock index futures contracts to manage cash flows, 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, 1998, the Fund had realized gains of
$12,845,024 on future contracts.

Contracts

Expiration to Deliver/ Unrealized
Date Receive Position Appreciation

- ---------------------------------------------------------------
<S> <C> <C> <C>
December 1998 147 S&P 500 Long $2,637,010
Index Futures

</TABLE>

Use of Estimates

Other

Investment transactions are accounted for on the trade date.

SHARES OF BENEFICIAL INTEREST

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Institutional Shares: Shares Amount Shares Amount

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 37,421,180 $ 818,155,777 30,235,597 $ 544,279,687

- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 1,421,571 29,500,992 873,354 14,693,792
- ---------------------------------------------------------------------------------------------------------------
Shares redeemed (33,733,666) (751,275,289) (31,244,017) (559,167,698)
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE

TRANSACTIONS 5,109,085 $ 96,381,480 (135,066) $ (194,219)
- ---------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------
Shares sold 18,076,229 $ 397,272,246 11,212,771 $ 207,332,429
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 546,583 11,354,168 165,190 2,853,661
- ---------------------------------------------------------------------------------------------------------------
Shares redeemed (10,230,460) (223,926,039) (2,667,078) (49,610,062)
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE

SHARE TRANSACTIONS 8,392,352 $ 184,700,375 8,710,883 $ 160,576,028
- ---------------------------------------------------------------------------------------------------------------

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Class C Shares: Shares Amount Shares Amount

- ---------------------------------------------------------------------------------------------------------------
Shares sold 771,237 $ 16,946,376 -- --
- ---------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of

distributions declared 1,948 43,921 -- --
- ---------------------------------------------------------------------------------------------------------------
Shares redeemed (81,531) (1,819,889) -- --
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS 691,654 $ 15,170,408 -- --
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 14,193,091 $ 296,252,263 8,575,817 $ 160,381,809
- ---------------------------------------------------------------------------------------------------------------
</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.

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 and Class C Shares. The Plan provides that the
Fund may incur distribution expenses according to the following schedule
annually, to compensate FSC. FSC may voluntarily choose to waive any portion of
its fee. FSC can modify or terminate this voluntary waiver at any time at its
sole discretion.

Percentage of
Average Daily Net

Share Class Name Assets of Class
<S> <C>

- ----------------------------------------------------------------
Institutional Service Shares 0.30%

- ----------------------------------------------------------------
Class C Shares 0.75%

- ----------------------------------------------------------------
</TABLE>

Transfer and Dividend Disbursing Agent Fees and Expenses

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 of the 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, 1998, were as follows:

<TABLE>

<S> <C>

- ----------------------------------------------------------------
Purchases $316,843,502

- ----------------------------------------------------------------
Sales $ 51,459,513
- ----------------------------------------------------------------
</TABLE>

YEAR 2000 (UNAUDITED)

Report of Ernst & Young LLP, Independent Auditors

TO THE TRUSTEES AND SHAREHOLDERS OF FEDERATED INDEX TRUST:

Ernst & Young LLP

Boston, Massachusetts
December 21, 1998

Federated

WORLD-CLASS INVESTMENT MANGER(SM)

Federated
Max-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SHARES

P R O S P E C T U S

Federated(SM)

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061
Cusip 31420E106

0032104A-IS (12/98)

Federated is a registered mark [RECYCLED

of Federated Investors, Inc. PAPER

1998 (C) Federated Investors, Inc. LOGO] DECEMBER 31, 1998

Federated Max-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SERVICE SHARES

Contents

<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 2
What are the Fund's Investment Strategies? 3
What are the Principal Securities in Which the Fund Invests? 3
What are the Specific Risks of Investing in the Fund? 3
What do Shares Cost? 4
How is the Fund Sold? 4
How to Purchase Shares 5
How to Redeem Shares 6
Account and Share Information 7
Who Manages the Fund? 8
Financial Information 9
December 31, 1998

</TABLE>

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in the large capitalization common
stocks comprising the Index.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Service Shares as of the
calendar year-end for each
of the last four years.

The `y' axis reflects the "% Total Return" beginning with 0% and increasing
in increments of 10% up to 40%.

The `x' axis represents calculation periods from the earliest calendar year
end of the Institutional Service Shares' start of business through the calendar
year ended December 31, 1997. The light gray shaded chart features four distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Institutional Service Shares for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1997 are: 0.94%, 36.30%, 22.26% and 32.32%,
respectively.

The bar chart shows the variability of the Fund's Institutional Service Shares
total returns on a calendar year-end basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.

The Fund's Institutional Service Shares total return from January 1, 1998 to
September 30, 1998 was 5.55%.

Within the period shown in the chart, the Fund's Institutional Service Shares
highest quarterly return was 17.21% (quarter ended June 30, 1997). Its lowest
quarterly return was (3.84%) (quarter ended March 31, 1994).

Average Annual Total Return

- -----------------------------------------
Institutional
Service Shares S&P 500

- -----------------------------------------
1 Year 32.32% 33.36%
5 Years -- 20.27%
Life of Fund1 20.87% 23.11%

1 Since inception date of September 7, 1993.

The table shows the Fund's Institutional Service Shares average annual total
returns averaged over a period of years relative to the Standard & Poor's 500
Index, a broad-based market index, for the calendar periods ending December
31, 1997.

What are the Fund's Fees and Expenses?

FEDERATED MAX-CAP FUND

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's

Institutional Service Shares.

Shareholder Fees

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases

(as a percentage of offering price)...................................... None
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds, as applicable)........ None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price)............ None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None

Annual Fund Operating Expenses (before waivers)1

Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)

Management Fee2.......................................................... 0.30%
Distribution (12b-1) Fee3................................................ 0.30%
Shareholder Services Fee4................................................ 0.25%
Other Expenses........................................................... 0.03%
Total Annual Fund Operating Expenses..................................... 0.88%
- --------------------------------------------------------------------------------
1 Although not contractually obligated to do so, the adviser, distributor, and
shareholder service provider waived certain amounts. These are shown below
along with the net expenses the Fund actually paid for the fiscal year ended
October 31, 1998.

Waiver of Fund Expenses............................................... 0.27%

Total Actual Annual Fund Operating Expenses (after waivers)........... 0.61%

3 The distribution (12b-1) fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The distribution (12b-1) fee paid
by the Fund (after the voluntary reduction) was 0.08% for the year ended
October 31, 1998.

4 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid
by the Fund (after the voluntary reduction) was 0.22% for the year ended
October 31, 1998.

Example

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

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

1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------
Institutional Service Shares $90 $281 $488 $1,084
- -----------------------------------------------------------------

What are the Fund's Investment Strategies?

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in Which the Fund Invests?

Common Stocks

Stock Index Futures

What are the Specific Risks of Investing in the Fund?

Stock Market Risks

Sector Risk

What do Shares Cost?

The Fund does not charge a front-end sales charge. NAV is determined at the
end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is
open. The required minimum initial investment for Fund Shares is $25,000. There
is no required minimum subsequent investment amount.

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

How is the Fund Sold?

The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Class C Shares, each representing interests in a single portfolio of
securities.

This prospectus relates only to Institutional Service Shares. Each share class
has different sales charges and other expenses, which affect their performance.
Contact your investment professional or call 1-800-341-7400 for more information
concerning the other classes.

RULE 12B-1 PLAN

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

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and

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

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

In order to maximize the Fund's ability to track the Index, investors are
urged to transmit purchase requests prior to 2:00 p.m. (Eastern time).

DIRECTLY FROM THE FUND

. Establish your account with the Fund by submitting a completed New Account

Form; and

. Send your payment to the Fund by Federal Reserve wire or check.

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

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

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

By Check

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

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

BY AUTOMATED CLEARINGHOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

By Mail

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

You will receive a redemption amount based on the next calculated NAV after
the Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

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

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within

the last 30 days; or

. a redemption is payable to someone other than the shareholder(s) of record.

PAYMENT METHODS FOR REDEMPTIONS

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;
. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments. If you purchase
Shares just before a Fund declares a dividend or capital gain distribution, you
will pay the full price for the Shares and then receive a portion of the price
back in the form of a taxable distribution, whether or not you reinvest the
distribution in Shares. Therefore, you should consider the tax implications of
purchasing Shares shortly before the Fund declares a dividend or capital gain.
Contact your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains.
Redemptions are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Who Manages the Fund?

The Manager receives an annual management fee equal to 0.30% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub-Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non-financial institution clients invest. In total, the Sub-Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

Year 2000 Readiness

Financial Information

FINANCIAL HIGHLIGHTS

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

Financial HighlightsInstitutional Service Shares

(For a share outstanding throughout each period)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 34.

Year Ended October 31 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>

Net Asset Value, Beginning

of Period $19.66 $15.47 $14.72 $ 12.02 $ 12.24
Income from Investment Operations:
Net investment income 0.25 0.26 0.30 0.33 0.28/1/
Net realized and unrealized
gain on investments and
futures contracts 3.82 4.45 2.79 2.69 0.11
- ---------------------------------------------------------------------------------------
Total from investment

operations 4.07 4.71 3.09 3.02 0.39
- ---------------------------------------------------------------------------------------
Less Distributions:
Distributions from net

investment income (0.25) (0.28) (0.31) (0.30) (0.27)
Distributions from net
realized gain on investments

and futures contracts (0.62) (0.24) (2.03) (0.02) (0.34)
- ---------------------------------------------------------------------------------------
Total distributions (0.87) (0.52) (2.34) (0.32) (0.61)
- ---------------------------------------------------------------------------------------
Net Asset Value, End

of Period $22.86 $19.66 $15.47 $ 14.72 $ 12.02
- ---------------------------------------------------------------------------------------
Total Return/2/ 21.21% 31.07% 23.39% 25.52% 3.30%
- ---------------------------------------------------------------------------------------

Ratios to Average Net Assets:

- ---------------------------------------------------------------------------------------
Expenses 0.61% 0.62% 0.61% 0.61% 0.62%
- ---------------------------------------------------------------------------------------
Net investment income 1.09% 1.36% 1.97% 2.55% 2.35%
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement/3/ 0.27% 0.30% 0.31% 0.33% 0.26%
- ---------------------------------------------------------------------------------------
Supplemental Data:

- ---------------------------------------------------------------------------------------
Net assets, end of period

(000 omitted) $477,760 $245,986 $58,741 $35,195 $ 8,617
- ---------------------------------------------------------------------------------------
Portfolio turnover 3% 16% 3% 57% 2%
- ---------------------------------------------------------------------------------------
</TABLE>

1 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.

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

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

October 31, 1998

Shares Value

- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

/1/COMMON STOCKS--98.1%
Basic Industry--4.0%

8,700 ASARCO, Inc. $ 186,506
49,800 Air Products & Chemicals, Inc. 1,879,950
48,700 Alcan Aluminum, Ltd. 1,232,719
41,992 Allegheny Teledyne, Inc. 863,461
40,200 Aluminum Co. of America 3,185,850
128,882 Archer-Daniels-Midland Co. 2,150,718
23,200 2 Armco, Inc. 110,200
25,200 Avery Dennison Corp. 1,044,225
6,500 Ball Corp. 274,219
79,900 Barrick Gold Corp. 1,707,863
49,300 Battle Mountain Gold Co. 268,069
11,400 Bemis Co., Inc. 423,225
27,900 2 Bethlehem Steel Corp. 251,100
12,100 Boise Cascade Corp. 338,800
20,600 Champion International Corp. 657,913
49,900 Corning, Inc. 1,811,994
26,800 Crown Cork & Seal Co., Inc. 854,250
20,050 Cyprus Amax Minerals 249,372
48,200 Dow Chemical Co. 4,512,725
243,400 Du Pont (E.I.) de Nemours & Co. 13,995,500
17,025 Eastman Chemical Co. 1,000,219
27,680 Ecolab, Inc. 826,940
30,962 Engelhard Corp. 650,202
47,400 Fort James Corp. 1,910,813
38,000 Freeport-McMoRan Copper & Gold, Inc., Class B 467,875
20,100 Georgia-Pacific Corp. 1,040,175
15,900 Goodrich (B.F.) Co. 572,400
15,900 2 Grace (W.R.) & Co. 276,263
12,800 Great Lakes Chemical Corp. 532,800
20,700 Hercules, Inc. 689,569
45,300 Homestake Mining Co. 537,938
35,800 Inco Ltd. 382,613
66,076 International Paper Co. 3,068,404
23,500 Louisiana-Pacific Corp. 417,125
22,500 Mead Corp. 711,563
9,300 Millipore Corp. 229,013
129,200 Monsanto Co. 5,248,750
28,000 Morton International, Inc. 696,500
14,300 Nalco Chemical Co. 442,406
35,957 Newmont Mining Corp. 764,086
18,800 Nucor Corporation 851,875
11,500 Owens Corning 417,594
33,400 2 Owens-Illinois, Inc. 1,020,788
38,100 PPG Industries, Inc. 2,178,844
26,733 Pall Corp. 675,008
12,600 Phelps Dodge Corp. 726,075
51,920 Pioneer Hi-Bred International 1,453,760
53,800 Placer Dome, Inc. 847,350
6,200 Potlatch Corp. 226,300
33,800 Praxair, Inc. 1,360,450
15,500 Reynolds Metals Co. 929,031
38,100 Rohm & Haas Co. 1,285,875
17,700 2 Sealed Air Corp. 627,244
37,100 Sherwin-Williams Co. 934,456
21,500 Sigma-Aldrich Corp. 664,484
4,300 Springs Industries, Inc., Class A 152,113
22,608 Stone Container Corp. 216,189
12,100 Temple-Inland, Inc. 587,606
13,100 Tupperware Corp. 203,869
18,920 USX-U.S. Steel Group, Inc. 439,890
14,900 Union Camp Corp. 640,700
29,100 Union Carbide Corp. 1,120,350
21,850 Westvaco Corp. 538,056
42,800 Weyerhaeuser Co. 2,003,575
23,800 Willamette Industries, Inc. 737,800
20,750 Worthington Industries, Inc. 281,422
Total 77,585,017

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Consumer Durables--2.8%

20,400 Black & Decker Corp. 1,054,425
5,300 Briggs & Stratton Corp. 249,100
21,400 Brunswick Corp. 415,963
12,700 Centex Corp. 425,450
139,070 Chrysler Corp. 6,692,744
16,900 Cooper Tire & Rubber Co. 280,963
35,445 Dana Corp. 1,482,044
69,400 Eastman Kodak Co. 5,378,500
15,400 Eaton Corp. 1,042,388
7,800 Fleetwood Enterprises, Inc. 251,550
260,600 Ford Motor Co. 14,137,550
140,700 General Motors Corp. 8,872,894
38,350 Genuine Parts Co. 1,208,025
33,800 Goodyear Tire & Rubber Co. 1,820,975
28,500 Hasbro, Inc. 999,281
8,352 Jostens, Inc. 188,442
8,400 Kaufman & Broad Homes Corp. 239,925
62,925 Mattel, Inc. 2,257,434
19,700 Maytag Corp. 973,919
35,000 Newell Co. 1,540,000
9,600 Polaroid Corp. 255,000
9,200 Pulte Corp. 236,900
32,100 Rubbermaid, Inc. 1,065,319
1 2 SPX Corp. 15
13,100 Snap-On Tools Corp. 464,231
19,100 Stanley Works 573,000
26,200 TRW, Inc. 1,491,763
16,300 Whirlpool Corp. 835,375
Total 54,433,175

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Consumer Non-Durables--10.1%

12,200 Alberto-Culver Co., Class B 324,063
15,600 American Greetings Corp., Class A 625,950
103,700 Anheuser-Busch Cos., Inc. 6,163,669
56,600 Avon Products, Inc. 2,246,313
61,800 BestFoods 3,368,100
14,800 Brown-Forman Corp., Class B 1,005,475
96,600 Campbell Soup Co. 5,149,988
22,300 Clorox Co. 2,436,275
87,000 Coca Cola Enterprises, Inc. 3,137,438
530,200 Coca-Cola Co. 35,854,775
63,600 Colgate-Palmolive Co. 5,620,650
104,900 ConAgra, Inc. 3,192,894
7,900 Coors Adolph Co., Class B 395,000
37,200 Fortune Brands, Inc. 1,229,925
15,700 2 Fruit of the Loom, Inc., Class A 239,425
33,300 General Mills, Inc. 2,447,550
241,500 Gillette Co. 10,852,406
77,900 Heinz (H.J.) Co. 4,527,938
30,800 Hershey Foods Corp. 2,088,625
23,100 International Flavors & Fragrances, Inc. 864,806
87,500 Kellogg Co. 2,887,500
117,748 Kimberly-Clark Corp. 5,681,341
14,300 Liz Claiborne, Inc. 420,063
61,900 Nike, Inc., Class B 2,704,256
316,800 PepsiCo, Inc. 10,692,000
523,100 Philip Morris Cos., Inc. 26,743,488
288,400 Procter & Gamble Co. 25,631,550
29,300 Quaker Oats Co. 1,730,531
69,900 RJR Nabisco Holdings Corp. 1,996,519
67,100 Ralston Purina Co. 2,239,463
12,100 2 Reebok International Ltd. 201,163
7,800 Russell Corp. 191,588
100,500 Sara Lee Corp. 5,998,594
74,500 Seagram Co. Ltd. 2,449,188
39,900 UST, Inc. 1,356,600
137,700 Unilever N.V., ADR 10,361,925
26,200 V.F. Corp. 1,095,488
28,900 2 Venator Group, Inc. 243,844
25,000 Wrigley (Wm.), Jr. Co. 2,023,438
Total 196,419,804

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Energy Minerals--6.9%

19,700 Amerada-Hess Corp. 1,088,425
205,200 Amoco Corp. 11,516,850
25,600 Anadarko Petroleum Corp. 867,200
21,200 Apache Corp. 600,225
16,400 Ashland, Inc. 789,250
69,100 Atlantic Richfield Co. 4,759,263
68,290 Baker Hughes, Inc. 1,506,648
38,165 Burlington Resources, Inc. 1,571,921
140,700 Chevron Corp. 11,467,050
524,400 Exxon Corp. 37,363,500
94,400 Halliburton Co. 3,392,500
10,800 Helmerich & Payne, Inc. 257,175
10,200 Kerr-McGee Corp. 406,725
168,100 Mobil Corp. 12,723,069
75,900 Occidental Petroleum Corp. 1,508,513
22,700 2 Oryx Energy Co. 317,800
10,200 Pennzoil Co. 365,925
55,600 Phillips Petroleum Co. 2,404,700
18,600 2 Rowan Companies, Inc. 270,863
461,200 Royal Dutch Petroleum Co., ADR 22,714,100
117,000 Schlumberger Ltd. 6,142,500
20,137 Sun Co., Inc. 690,951
115,200 Texaco, Inc. 6,832,800
62,500 USXMarathon Group 2,042,969
54,394 Union Pacific Resources Group, Inc. 707,122
51,900 Unocal Corp. 1,761,356
Total 134,069,400

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Finance--15.7%

36,350 AON Corp. 2,253,700
178,210 Allstate Corp. 7,674,168
98,200 American Express Co. 8,678,425
54,430 American General Corp. 3,728,455
225,833 American International Group, Inc. 19,252,263
74,466 Associates First Capital Corp., Class A 5,249,853
61,600 BB&T Corp. 2,198,350
251,886 Bank One Corp. 12,310,914
160,700 Bank of New York Co., Inc. 5,072,094
373,692 BankAmerica Corp. 21,463,934
63,300 BankBoston Corp. 2,330,231
20,600 Bankers Trust New York Corp. 1,293,938
24,500 Bear Stearns Cos., Inc. 874,344
22,900 Block (H&R), Inc. 1,026,206
45,700 CIGNA Corp. 3,333,244
14,200 Capital One Financial Corp. 1,444,850
184,240 Chase Manhattan Corp. 10,467,135
35,600 Chubb Corp. 2,189,400
36,000 Cincinnati Financial Corp. 1,343,250
491,650 Citigroup, Inc. 23,138,278
33,450 Comerica, Inc. 2,157,525
67,161 Conseco, Inc. 2,329,647
23,900 Countrywide Credit Industries, Inc. 1,032,181
145,900 Federal Home Loan Mortgage Corp. 8,389,250
223,000 Federal National Mortgage Association 15,791,188
57,600 Fifth Third Bancorp 3,816,000
208,398 First Union Corp. 12,087,084
122,120 Fleet Financial Group, Inc. 4,877,168
54,400 Franklin Resources, Inc. 2,057,000
16,300 General RE Corp. 3,580,906
12,400 Golden West Financial Corp. 1,124,525
50,200 Hartford Financial Services Group, Inc. 2,666,875
105,859 Household International, Inc. 3,870,470
45,500 Huntington Bancshares, Inc. 1,308,125
38,000 J.P. Morgan & Co., Inc. 3,581,500
22,837 Jefferson-Pilot Corp. 1,387,348
94,600 KeyCorp 2,867,563
25,300 Lehman Brothers Holdings, Inc. 959,819
21,600 Lincoln National Corp. 1,638,900
21,300 MBIA Insurance Corporation 1,301,963
161,727 MBNA Corp. 3,689,397
24,500 MGIC Investment Corp. 955,500
55,000 Marsh & McLennan Cos., Inc. 3,052,500
56,100 Mellon Bank Corp. 3,373,013
32,700 Mercantile Bancorporation, Inc. 1,493,981
74,900 Merrill Lynch & Co., Inc. 4,437,825
125,957 Morgan Stanley, Dean Witter & Co. 8,155,716
70,900 National City Corp. 4,559,756
164,700 Norwest Corp. 6,124,781
64,800 PNC Bank Corp. 3,240,000
15,600 Progressive Corp., Ohio 2,297,100
29,100 Provident Cos., Inc. 845,719
20,400 Providian Financial Corp. 1,619,250
46,000 Regions Financial Corp. 1,702,000
23,200 Republic New York Corp. 970,050
30,300 SAFECO Corp. 1,312,369
36,000 SLM Holding Corp. 1,442,250
57,450 Schwab (Charles) Corp. 2,754,009
50,752 St. Paul Cos., Inc. 1,681,160
34,700 State Street Corp. 2,164,413
37,400 Summit Bancorp 1,418,863
42,050 SunAmerica, Inc. 2,964,525
44,900 SunTrust Banks, Inc. 3,128,969
56,250 Synovus Financial Corp. 1,304,297
30,000 Torchmark Corp. 1,312,500
13,500 Transamerica Corp. 1,404,000
159,765 U.S. Bancorp, Inc. 5,831,423
29,700 UNUM Corp. 1,319,794
27,300 Union Planters Corp. 1,267,744
44,400 Wachovia Corp. 4,034,850
127,476 Washington Mutual, Inc. 4,772,383
18,266 Wells Fargo & Co. 6,758,420
Total 303,536,626

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Health Care--12.5%

331,200 Abbott Laboratories 15,545,700
31,055 Aetna Services, Inc. 2,317,479
14,000 Allergan, Inc. 874,125
18,600 2 Alza Corp. 890,475
283,000 American Home Products Corp. 13,796,250
54,600 2 Amgen, Inc. 4,289,513
12,200 Bard (C.R.), Inc. 520,788
11,800 Bausch & Lomb, Inc. 491,913
61,400 Baxter International, Inc. 3,680,163
53,200 Becton, Dickinson & Co. 2,241,050
24,000 Biomet, Inc. 814,500
42,100 2 Boston Scientific Corp. 2,291,819
213,900 Bristol-Myers Squibb Co. 23,649,319
28,700 Cardinal Health, Inc. 2,713,944
138,807 Columbia/HCA Healthcare Corp. 2,914,947
32,400 Guidant Corp. 2,478,600
92,700 HBO & Co. 2,433,375
23,150 2 HCR Manor Care, Inc. 752,375
90,900 2 HEALTHSOUTH Corp. 1,102,163
35,900 2 Humana, Inc. 679,856
35,700 IMS Health, Inc. 2,374,050
289,200 Johnson & Johnson 23,569,800
536 2 Ligand Pharmaceuticals, Inc., Warrants 2,881
236,900 Lilly (Eli) & Co. 19,174,094
100,900 Medtronic, Inc. 6,558,500
256,100 Merck & Co., Inc. 34,637,525
281,000 Pfizer, Inc. 30,154,813
109,255 Pharmacia & Upjohn, Inc. 5,783,687
157,900 Schering Plough Corp. 16,243,963
5,700 Shared Medical Systems Corp. 284,288
18,141 2 St. Jude Medical, Inc. 512,483
66,300 2 Tenet Healthcare Corp. 1,852,256
42,000 United Healthcare Corp. 1,829,625
176,500 Warner-Lambert Co. 13,833,188
Total 241,289,507
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Producer Manufacturing--6.7%

6,000 Aeroquip-Vickers, Inc. 189,000
120,700 Allied-Signal, Inc. 4,699,756
8,700 Armstrong World

Industries, Inc. 539,400
16,100 Case Corp. 354,200
78,400 Caterpillar, Inc. 3,528,000
25,000 Cooper Industries, Inc. 1,103,125
14,775 Crane Co. 425,705
8,200 Cummins Engine Co., Inc. 279,825
52,700 Deere & Co. 1,864,263
47,700 Dover Corp. 1,514,475
94,700 Emerson Electric Co. 6,250,200
7,300 2 FMC Corp. 372,756
699,700 General Electric Co. 61,223,750
10,278 Harnischfeger Industries, Inc. 96,999
27,100 Honeywell, Inc. 2,164,613
25,400 ITT Industries, Inc. 908,050
53,800 Illinois Tool Works, Inc. 3,449,925
35,500 Ingersoll-Rand Co. 1,792,750
18,200 Johnson Controls, Inc. 1,023,750
24,700 Loews Corp. 2,320,256
73,200 Masco Corp. 2,063,325
12,900 McDermott International, Inc. 378,131
8,600 Milacron Inc. 166,625
86,900 Minnesota Mining & Manufacturing Co. 6,952,000
1,748 NACCO Industries, Inc., Class A 160,816
9,200 National Service Industries, Inc. 330,050
15,570 2 Navistar International Corp. 325,024
16,680 PACCAR, Inc. 727,665
23,800 Parker-Hannifin Corp. 850,850
59,000 Pitney Bowes, Inc. 3,248,688
18,200 Raychem Corp. 556,238
36,500 Tenneco, Inc. 1,108,688
35,200 Textron, Inc. 2,618,000
35,700 2 Thermo Electron Corp. 711,769
12,200 Thomas & Betts Corp. 545,188
13,500 Timken Co. 240,469
138,521 Tyco International Ltd. 8,579,644
70,700 Xerox Corp. 6,849,063
Total 130,513,031

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Retail Trade--5.7%

52,900 Albertsons, Inc. 2,939,256
59,000 American Stores Co. 1,921,188
32,600 2 AutoZone, Inc. 857,788
83,700 CVS Corp. 3,824,044
21,500 Circuit City Stores, Inc. 778,031
23,100 2 Consolidated Stores Corp. 379,706
46,550 2 Costco Cos., Inc. 2,641,713
94,400 Dayton-Hudson Corp. 4,000,200
23,800 Dillards, Inc., Class A 739,288
39,750 Dollar General Corp. 949,031
45,300 2 Federated Department Stores, Inc. 1,741,219
84,500 Gap (The), Inc. 5,080,563
8,200 Great Atlantic & Pacific Tea Co., Inc. 192,700
15,200 Harcourt General, Inc. 740,050
316,000 Home Depot, Inc. 13,746,000
105,900 2 K Mart Corp. 1,495,838
34,000 2 Kohl's Corp. 1,625,625
55,200 2 Kroger Co., Inc. 3,063,600
48,964 Limited, Inc. 1,254,703
8,300 Longs Drug Stores Corp. 324,219
75,700 Lowe's Cos., Inc. 2,550,144
49,700 May Department Stores Co. 3,031,700
33,100 2 Meyer (Fred), Inc. 1,764,644
32,000 Nordstrom, Inc. 874,000
54,400 Penney (J.C.) Co., Inc. 2,584,000
13,600 Pep Boys-Manny Moe & Jack 212,500
55,600 Rite Aid Corp. 2,206,625
84,400 Sears, Roebuck & Co. 3,792,725
61,800 2 Staples, Inc. 2,016,225
68,200 TJX Cos., Inc. 1,291,538
21,630 Tandy Corp. 1,072,037
59,300 2 Toys 'R' Us, Inc. 1,160,056
480,800 Wal-Mart Stores, Inc. 33,175,200
107,000 Walgreen Co. 5,209,563
31,900 Winn-Dixie Stores, Inc. 1,082,606
Total 110,318,325
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Services--4.7%

37,800 2 AES Corp. 1,547,438
37,335 Browning-Ferris Industries, Inc. 1,323,059
154,000 CBS Corp. 4,302,375
184,529 2 Cendant Corp. 2,110,550
53,400 2 Clear Channel Communications, Inc. 2,433,038
29,900 Darden Restaurants, Inc. 493,350
17,400 Deluxe Corp. 563,325
440,600 Disney (Walt) Co. 11,868,663
29,800 Donnelley (R.R.) & Sons Co. 1,285,125
20,200 Dow Jones & Co. 925,413
36,500 Dun & Bradstreet Corp. 1,035,688
31,800 Equifax, Inc. 1,230,263
17,000 Fluor Corp. 659,813
8,700 Foster Wheeler Corp. 138,113
61,200 Gannett Co., Inc. 3,786,750
21,200 Grainger (W.W.), Inc. 976,525
21,650 2 Harrah's Entertainment, Inc. 305,806
56,000 Hilton Hotels Corp. 1,123,500
28,900 Ikon Office Solutions, Inc. 272,744
29,250 Interpublic Group Cos., Inc. 1,711,125
15,800 2 King World Productions, Inc. 414,750
17,000 Knight-Ridder, Inc. 865,938
70,500 Laidlaw, Inc. 665,344
53,600 Marriott International, Inc., Class A 1,440,500
147,200 McDonald's Corp. 9,844,000
21,400 McGraw-Hill Cos., Inc. 1,924,663
11,300 Meredith Corp. 418,100
38,500 2 Mirage Resorts, Inc. 652,094
19,017 Moore Corp. Ltd. 215,130
41,200 New York Times Co., Class A 1,163,900
36,500 Omnicom Group, Inc. 1,804,469
35,100 Paychex, Inc. 1,746,225
55,300 Service Corp. International 1,970,063
25,800 Super Valu Stores, Inc. 619,200
72,600 Sysco Corp. 1,955,663
128,840 Time Warner, Inc. 11,957,963
19,000 Times Mirror Co., Class A 1,053,313
26,200 Tribune Co. 1,509,775
32,830 2 Tricon Global Restaurants, Inc. 1,428,105
76,968 2 Viacom, Inc., Class B 4,608,459
122,928 Waste Management, Inc. 5,547,126
28,300 Wendy's International, Inc. 594,300
Total 90,491,743

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Technology--16.4%

77,200 2 3Com Corp. 2,784,025
46,980 AMP, Inc. 1,929,116
14,500 Adobe System, Inc. 538,313
30,400 2 Advanced Micro Devices, Inc. 685,900
18,962 2 Andrew Corp. 310,503
29,000 2 Apple Computer, Inc. 1,076,625
78,800 2 Applied Materials, Inc. 2,733,375
46,600 2 Ascend Communications, Inc. 2,248,450
10,000 Autodesk, Inc. 311,875
64,700 Automatic Data Processing, Inc. 5,034,469
44,400 2 BMC Software, Inc. 2,133,975
217,408 Boeing Co. 8,152,800
35,400 2 Cabletron Systems, Inc. 402,675
15,600 2 Ceridian Corp. 895,050
334,400 2 Cisco Systems, Inc. 21,067,200
359,361 Compaq Computer Corp. 11,364,792
120,662 Computer Associates International, Inc. 4,751,066
34,000 2 Computer Sciences Corp. 1,793,500
10,400 2 Data General Corp. 176,800
272,300 2 Dell Computer Corp. 17,835,650
9,700 EG & G, Inc. 243,713
107,400 2 EMC Corp. Mass 6,913,875
105,800 Electronic Data Systems Corp. 4,304,738
96,100 First Data Corp. 2,546,650
33,500 2 Gateway 2000, Inc. 1,869,719
27,240 General Dynamics Corp. 1,612,268
32,400 2 General Instrument Corp. 832,275
17,100 Harris Corp. 599,569
223,500 Hewlett-Packard Co. 13,451,906
361,300 Intel Corp. 32,223,444
200,700 International Business Machines Corp. 29,791,406
18,700 2 KLA-Tencor Corp. 689,563
30,400 2 LSI Logic Corp. 459,800
42,088 Lockheed Martin Corp. 4,687,551
282,834 Lucent Technologies, Inc. 22,679,751
15,700 Mallinckrodt, Inc. 447,450
45,800 Micron Technology, Inc. 1,740,400
529,900 2 Microsoft Corp. 56,103,163
128,600 Motorola, Inc. 6,687,200
35,200 2 National Semiconductor Corp. 446,600
140,260 Northern Telecom Ltd. 6,004,881
14,800 Northrop Grumman Corp. 1,180,300
76,000 2 Novell, Inc. 1,130,500
209,375 2 Oracle Corp. 6,189,648
58,500 2 Parametric Technology Corp. 972,563
49,600 2 Peoplesoft, Inc. 1,050,900
10,600 Perkin-Elmer Corp. 893,713
72,900 Raytheon Co., Class B 4,232,756
41,100 Rockwell International Corp. 1,687,669
17,000 Scientific-Atlanta, Inc. 253,938
52,000 2 Seagate Technology, Inc. 1,371,500
40,300 2 Silicon Graphics, Inc. 453,375
81,500 2 Sun Microsystems, Inc. 4,747,375
10,800 Tektronix, Inc. 193,050
41,700 2 Tellabs, Inc. 2,293,500
83,900 Texas Instruments, Inc. 5,364,356
54,700 2 Unisys Corp. 1,456,388
49,000 United Technologies Corp. 4,667,250
Total 318,700,862

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Tranportation--1.0%

39,200 2 AMR Corp. 2,626,400
101,733 Burlington Northern Santa Fe 3,141,006
47,000 CSX Corp. 1,844,750
16,300 Delta Air Lines, Inc. 1,720,669
31,740 2 FDX Corp. 1,668,334
81,500 Norfolk Southern Corp. 2,684,406
16,400 Ryder Systems, Inc. 403,850
72,250 Southwest Airlines Co. 1,530,797
20,200 2 U.S. Airways Group, Inc. 1,142,563
53,200 Union Pacific Corp. 2,533,650
Total 19,296,425

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Utilities--11.6%

388,478 AT&T Corp. 24,182,756
123,400 2 Airtouch Communications, Inc. 6,910,400
59,000 Alltel Corp. 2,761,938
29,400 Ameren Corp. 1,174,163
41,100 American Electric Power Co., Inc. 2,011,331
237,100 Ameritech Corp. 12,788,581
31,950 Baltimore Gas & Electric Co. 1,002,431
334,084 Bell Atlantic Corp. 17,748,213
211,600 BellSouth Corp. 16,888,325
32,500 Carolina Power & Light Co. 1,490,938
45,500 Central & SouthWest Corp. 1,265,469
33,840 Cinergy Corp. 1,167,480
45,700 Coastal Corp. 1,610,925
17,850 Columbia Energy Group 1,033,069
79,450 Comcast Corp., Class A 3,922,844
50,300 Consolidated Edison Co. 2,521,288
20,500 Consolidated Natural Gas Co. 1,082,656
31,100 DTE Energy Co. 1,325,638
42,250 Dominion Resources, Inc. 1,951,422
77,672 Duke Energy Corp. 5,024,408
4,800 Eastern Enterprises 197,100
76,100 Edison International 2,007,138
70,900 Enron Corp. 3,739,975
53,000 Entergy Corp. 1,523,750
39,000 FPL Group, Inc. 2,439,938
51,000 FirstEnergy Corp. 1,530,000
36,900 Frontier Corp. 1,109,306
27,500 GPU, Inc. 1,185,938
207,300 GTE Corp. 12,165,919
63,651 Houston Industries, Inc. 1,977,157
381,997 2 MCI Worldcom, Inc. 21,105,334
131,100 2 MediaOne Group, Inc. 5,547,169
61,400 2 NEXTEL Communications, Inc., Class A 1,112,875
10,400 NICOR, Inc. 440,700
40,300 Niagara Mohawk Power Corp. 589,388
32,600 Northern States Power Co. 880,200
6,600 ONEOK, Inc. 226,050
82,200 P G & E Corp. 2,501,963
32,491 P P & L Resources, Inc. 881,318
63,600 Pacificorp 1,212,375
47,700 Peco Energy Co. 1,845,394
7,600 Peoples Energy Corp. 280,250
49,900 Public Service Enterprises Group, Inc. 1,896,200
420,746 SBC Communications, Inc. 19,485,799
51,818 Sempra Energy 1,347,269
23,600 Sonat, Inc. 715,375
150,100 Southern Co. 4,230,944
92,500 Sprint Corp. 7,099,375
112,600 2 Tele-Communications, Inc., Class A 4,743,275
60,125 Texas Utilities Co. 2,630,415
107,855 U.S. West, Inc. 6,188,181
46,700 Unicom Corp. 1,760,006
91,400 Williams Cos., Inc. (The) 2,507,788
Total 224,968,139

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Total Common Stocks (identified cost $1,194,767,223) 1,901,622,054
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Principal

Amount Value

- ------------------------------------------------------------------------------------------------------------------------------------
3 SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.3%

$ 5,500,000 United States Treasury Bill, 1/7/1999 (identified cost $5,426,048) $ 5,460,345
- ------------------------------------------------------------------------------------------------------------------------------------
4 REPURCHASE AGREEMENT--1.7%

33,425,000 Westdeutsche Landesbank Girozentrale, 5.42%, dated 10/30/1998, due 11/2/1998
(at amortized cost)

33,425,000

- ------------------------------------------------------------------------------------------------------------------------------------
5 Total Investments (identified cost $1,233,618,271) $1,940,507,399
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

2 Non-income producing security.

3 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.

Note: The categories of investments are shown as a percentage of net assets
($1,938,718,957) at October 31, 1998.

The following acronym(s) are used throughout this portfolio:

ADR --American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities
October 31, 1998

<S> <C> <C>
Assets:

- --------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $1,233,618,271

and tax cost $1,233,803,476) $1,940,507,399
- --------------------------------------------------------------------------------
Income receivable 1,929,741

- --------------------------------------------------------------------------------
Receivable for shares sold 8,833,315

- --------------------------------------------------------------------------------
Receivable for daily variation margin 317,550

- -------------------------------------------------------------------------------------------------------------------
Total assets 1,951,588,005

- -------------------------------------------------------------------------------------------------------------------
Liabilities:

- --------------------------------------------------------------------------------
Payable for investments purchased $ 1,179,707
- --------------------------------------------------------------------------------
Payable for shares redeemed 9,260,716

- --------------------------------------------------------------------------------
Payable to Bank 2,132,708

- --------------------------------------------------------------------------------
Accrued expenses 295,917

- -------------------------------------------------------------------------------------------------------------------
Total liabilities 12,869,048

- -------------------------------------------------------------------------------------------------------------------
Net Assets for 84,679,467 shares outstanding $1,938,718,957
- -------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:

- --------------------------------------------------------------------------------
Paid in capital $1,216,212,206

- --------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and

futures contracts 709,526,138

- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and futures contracts 11,951,208
- ---------------------------------------------------------------------------------
Undistributed net investment income 1,029,405

- -------------------------------------------------------------------------------------------------------------------
Total Net Assets $1,938,718,957

- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:

- --------------------------------------------------------------------------------
Institutional Shares:

- --------------------------------------------------------------------------------
$1,445,175,075 (divide) 63,086,344 shares outstanding $22.91
- -------------------------------------------------------------------------------------------------------------------
Institutional Service Shares:

- --------------------------------------------------------------------------------
$477,759,740 (divide) 20,901,469 shares outstanding $22.86
- -------------------------------------------------------------------------------------------------------------------
Class C Shares:

- --------------------------------------------------------------------------------
$15,784,142 (divide) 691,654 shares outstanding $22.82
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

Year Ended October 31, 1998

<S> <C> <C> <C>
Investment Income:

- -----------------------------------------------------------------
Dividends (net of foreign taxes withheld of $144,101) $ 25,799,402
- -----------------------------------------------------------------
Interest 4,536,016

- -----------------------------------------------------------------------------------------------------------------------------
Total income 30,335,418

- -----------------------------------------------------------------------------------------------------------------------------
Expenses: $ 5,328,240
- -----------------------------------------------------------------
Custodian fees 107,961

- -----------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 257,800
- -----------------------------------------------------------------
Directors'/Trustees' fees 15,275

- -----------------------------------------------------------------
Auditing fees 22,693

- -----------------------------------------------------------------
Legal fees 8,703

- -----------------------------------------------------------------
Portfolio accounting fees 169,234

- -----------------------------------------------------------------
Distribution services fee--Institutional

- -----------------------------------------------------------------
Service Shares 1,135,050

- -----------------------------------------------------------------
Distribution services fee--Class C Shares 55,890

- -----------------------------------------------------------------
Shareholder services fee--Institutional Shares 3,475,695

- -----------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 945,875

- -----------------------------------------------------------------
Shareholder services fee--Class C Shares 18,630

- -----------------------------------------------------------------
Share registration costs 3,422

- -----------------------------------------------------------------
Printing and postage 48,275

- -----------------------------------------------------------------
Insurance premiums 11,000

- -----------------------------------------------------------------
Miscellaneous 22,189

- -----------------------------------------------------------------------------------------------------------------------------
Total expenses 11,625,932

- -----------------------------------------------------------------------------------------------------------------------------
Waivers:

- -----------------------------------------------------------------
Waiver of investment advisory fee $ (414,314)
- -----------------------------------------------------------------
Waiver of distribution services fee--Institutional Service Shares (832,370)

- -----------------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (3,475,695)
- -----------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service Shares (113,505)

- -----------------------------------------------------------------------------------------------------------------------------
Total waivers (4,835,884)

- -----------------------------------------------------------------------------------------------------------------------------
Net expenses 6,790,048

- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 23,545,370

- -----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments and Futures Contracts:

- -----------------------------------------------------------------
Net realized gain on investments and futures contracts 15,258,606
- -----------------------------------------------------------------
Net change in unrealized appreciation of investments

and translation of assets and futures contracts 284,412,168
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 299,670,774
- -----------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $323,216,144
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<S> <C> <C>
Year Ended October 31 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets

- ------------------------------------------------------------------------------------
Operations:

- ------------------------------------------------------------------------------------
Net investment income $ 23,545,370 $ 20,091,885
- ------------------------------------------------------------------------------------
Net realized gain on investments and futures contracts ($18,621,157 and $45,104,576,

respectively, as computed for federal tax purposes) 15,258,606 47,684,197
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and futures contracts 284,412,168 237,223,689
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 323,216,144 304,999,771
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:

- ------------------------------------------------------------------------------------
Distributions from net investment income

- ------------------------------------------------------------------------------------
Institutional Shares (19,446,188) (19,400,997)
- ------------------------------------------------------------------------------------
Institutional Service Shares (4,226,227) (2,132,811)
- ------------------------------------------------------------------------------------
Class C Shares (43,855) --
- ------------------------------------------------------------------------------------
Distributions from net realized gains on investments and futures contracts

- ------------------------------------------------------------------------------------
Institutional Shares (36,852,857) (13,509,884)
- ------------------------------------------------------------------------------------
Institutional Service Shares (8,247,035) (1,138,590)
- ------------------------------------------------------------------------------------
Class C Shares (554)

- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (68,816,716) (36,182,282)
- ------------------------------------------------------------------------------------------------------------------------------
Share Transactions:

- ------------------------------------------------------------------------------------
Proceeds from sale of shares 1,232,374,399 751,612,116
- ------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of

distributions declared 40,899,081 17,547,453
- ------------------------------------------------------------------------------------
Cost of shares redeemed (977,021,217) (608,777,760)
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 296,252,263 160,381,809
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS 550,651,691 429,199,298
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets:

- ------------------------------------------------------------------------------------
Beginning of period 1,388,067,266 958,867,968
- ------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $1,029,405

and $1,160,137, respectively) $1,938,718,957 $1,388,067,266
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 1998

Organization

Significant Accounting Policies

Investment Valuations

Repurchase Agreements

Investment Income, Expenses and Distributions

Increase/(Decrease)

- --------------------------------------------------------------------------------
Accumulated

Undistributed Net Realized Paid in
Net Investment Income Gain Capital

- --------------------------------------------------------------------------------
$40,168 $(1,293,585) $1,253,417
- --------------------------------------------------------------------------------

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

Federal Taxes

When-Issued and Delayed Delivery Transactions

Futures Contracts

Contracts

Expiration to Deliver/ Unrealized
Date Receive Position Appreciation

- ---------------------------------------------------------
December 147 S&P 500

1998 Index Futures Long $2,637,010
- ---------------------------------------------------------

Use of Estimates

Other

Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

- ----------------------------------------------------------------------------------------------------
Year Ended October 31 1998 1997
- ----------------------------------------------------------------------------------------------------
Institutional Shares Shares Amount Shares Amount

- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 37,421,180 $ 818,155,777 30,235,597 $ 544,279,687
- ----------------------------------------
Shares issued to shareholders in payment

of distributions declared 1,421,571 29,500,992 873,354 14,693,792
- ----------------------------------------
Shares redeemed (33,733,666) (751,275,289) (31,244,017) (559,167,698)
- ----------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM INSTITUTIONAL

SHARE TRANSACTIONS 5,109,085 $ 96,381,480 (135,066) $ (194,219)
- ----------------------------------------------------------------------------------------------------

Year Ended October 31 1998 1997
Institutional Service Shares Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 18,076,229 $ 397,272,246 11,212,771 $207,332,429

- ----------------------------------------
Shares issued to shareholders in payment

of distributions declared 546,583 11,354,168 165,190 2,853,661
- ----------------------------------------
Shares redeemed (10,230,460) (223,926,039) (2,667,078) (49,610,062)
- ----------------------------------------------------------------------------------------------------
Net change resulting from Institutional

service share transactions 8,392,352 $ 184,700,375 8,710,883 $160,576,028
- ----------------------------------------------------------------------------------------------------

Year Ended October 31 1998 1997
- -----------------------------------------------------------------------------------------------------
Class C Shares Amount Shares Amount

- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 771,237 $ 16,946,376 -- --
- ----------------------------------------
Shares issued to shareholders in payment

of distributions declared 1,948 43,921 -- --
- ----------------------------------------
Shares redeemed (81,531) (1,819,889) -- --
- ----------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM

CLASS C SHARE TRANSACTIONS 691,654 $ 15,170,408 -- --
- ----------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM

SHARE TRANSACTIONS 14,193,091 $296,252,263 8,575,817 $160,381,809
- ----------------------------------------------------------------------------------------------------
</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.

Shareholder Services Fee

Distribution Services Fee

Percentage of
Average Daily Net

Share Class Name Assets of Class

- --------------------------------------------------------
Institutional Service Shares 0.30%

- --------------------------------------------------------
Class C Shares 0.75%

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

Transfer and Dividend Disbursing Agent Fees and Expenses

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 of the 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, 1998, were as follows:

- ---------------------------------------------------------
Purchases $316,843,502

- ---------------------------------------------------------
Sales $ 51,459,513
- ---------------------------------------------------------

Year 2000 (Unaudited)

Report of Ernst & Young LLP, Independent Auditors

TO THE TRUSTEES AND SHAREHOLDERS OF FEDERATED INDEX TRUST:

Ernst & Young LLP

Boston, Massachusetts

December 21, 1998

Federated

World-Class Investment Manager

Federated
Max-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SERVICE SHARES

PROSPECTUS

December 31, 1998

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Cusip 31420E403

0032104A-SS (12/98)

Federated is a registered mark
of Federated Investors, Inc.

1998 (copyright)Federated Investors, Inc.

DECEMBER 31, 1998

Federated Mid-Cap Fund

A Portfolio of Federated Index Trust

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

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 2
What are the Fund's Investment Strategies? 3
What are the Principal Securities in Which the

Fund Invests? 3
What are the Specific Risks of Investing in the Fund? 3
What do Shares Cost? 4
How is the Fund Sold? 4
How to Purchase Shares 5
How to Redeem Shares 6
Account and Share Information 7
Who Manages the Fund? 8
Financial Information 9
</TABLE>

DECEMBER 31, 1998

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in the medium capitalization common
stocks comprising the Standard & Poor's MidCap 400 Index (the "Index").

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

The value of the stocks in the Fund's portfolio will go up and down. These
fluctuations could be a sustained trend or a drastic movement. Fluctuations in
the Fund's portfolio may reflect changes in individual portfolio stocks or
general changes in stock valuations and will result in changes in the Fund's
share price. The Fund's investment manager (Manager) attempts to manage market
risk through diversification by limiting the amount the Fund invests in each
stock. Other risks of investing in the Fund include risks related to company
size, sector risk and liquidity risks.

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

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Federated Mid-Cap Fund as of the
calendar year-end for each of the last five years.

The `y' axis reflects the "% Total Return" beginning with -5% and
increasing in increments of 5% up to 35%.

The `x' axis represents calculation periods from the earliest calendar year
end of the Fund's start of business through the calendar year ended December 31,
1997. The light gray shaded chart features five distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund for each calendar year is stated directly
at the top of each respective bar, for the calendar years 1993 through 1997 are:
11.21%, -4.29%, 29.02%, 18.27% and 31.05%, respectively.

The bar chart shows the variability of the Fund's total returns on a calendar
year-end basis.

The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based on net asset value.
The Fund's total return from January 1, 1998 to September 30, 1998 was (7.54%).

Within the period shown in the chart, the Fund's highest quarterly return was
15.86% (quarter ended September 30, 1997). Its lowest quarterly return was
(3.95%) (quarter ended June 30, 1994).

Average Annual Total Return

Calendar Period Fund S&P 400

- --------------------------------------------------------------
<S> <C> <C>
1 Year 31.05% 32.22%

- --------------------------------------------------------------
5 Years 16.31% 17.80%
- --------------------------------------------------------------
Life of Fund1 17.63% 18.54%
- --------------------------------------------------------------
</TABLE>

1 Since inception date of November 5, 1992.

The table shows the Fund's average annual total returns averaged over a
period of years relative to the Standard & Poor's 400 Index, a broad-based
market index, for the calendar periods ending December 31, 1997.

Past performance does not necessarily predict future performance.
This information provides you with historical performance information so that
you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

What are the Fund's Fees and Expenses?

FEDERATED MID-CAP FUND

FEES AND EXPENSES

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

<TABLE>

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

Annual Fund Operating Expenses (before waivers)/1/

Expenses That are Deducted From Fund Assets (as a percentage of average net assets)

Management Fee/2/........................................................................................................... 0.40%
Distribution (12b-1) Fee.................................................................................................... None
Shareholder Services Fee/3/................................................................................................. 0.25%
Other Expenses.............................................................................................................. 0.24%
Total Annual Fund Operating Expenses........................................................................................ 0.89%
</TABLE>

1 Although not contractually obligated to do so, the adviser and shareholder
service provider waived certain amounts. These are shown below along with
the net expenses the Fund actually paid for the fiscal year ended October
31, 1998.

<TABLE>

<S> <C>
Waiver of Fund Expenses................................................................................................ 0.28%
Total Actual Annual Fund Operating Expenses (after waivers)............................................................ 0.61%

</TABLE>

2 The adviser voluntarily waived a portion of the management fee. The
adviser can terminate this voluntary waiver at any time. The management
fee paid by the Fund (after the voluntary waiver) was 0.34% for the year
ended October 31, 1998.

3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid
by the Fund (after the voluntary reduction) was 0.03% for the year ended
October 31, 1998.

EXAMPLE

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

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

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund $91 $284 $493 $1,096
- ------------------------------------------------------------------
</TABLE>

What are the Fund's Investment Strategies?

The Fund pursues its investment objective by investing in the stocks of the
Index in the same weights as the Index. This is called a "full replication"
strategy. Market capitalization is determined by multiplying the number of
outstanding shares by the current market price per share. As of September 30,
1998, the capitalization range of the Index was $189 million to $24.4 billion.
As of the same date, the weighted median market capitalization of the Fund was
$2.8 billion.

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in which the Fund Invests?

COMMON STOCKS

STOCK INDEX FUTURES

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price.

In addition, investing in small and, in many cases, medium capitalization
companies entails greater risk because these companies may have unproven track
records, limited product or service base, limited access to capital and may be
more likely to fail than larger, more established companies.

SECTOR RISK

LIQUIDITY RISKS

Equity securities that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunity making it more difficult
to sell or buy the securities at a favorable price or time. In response, the
fund may have to lower the price, sell other securities, or give up an
investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

What Do Shares Cost?

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

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

How is the Fund Sold?

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions acting on behalf of their customers or to
individuals directly or through investment professionals. The Distributor and
its affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and

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

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

DIRECTLY FROM THE FUND

. Establish your account with the Fund by submitting a completed New Account

Form; and

. Send your payment to the Fund by Federal Reserve wire or check.

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

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

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

By Check

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

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

BY AUTOMATED CLEARINGHOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

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

DIRECTLY FROM THE FUND

By Telephone

By Mail

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

You will receive a redemption amount based on the next calculated NAV after
the Fund receives your written request in proper form. Send requests by mail
to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

. Fund Name and Share Class, account number and account registration;

. amount to be redeemed; and

. signatures of all Shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;

. your redemption will be sent to an address of record that was changed within
the last thirty days; or

. a redemption is payable to someone other than the shareholder(s) of record.

PAYMENT METHODS FOR REDEMPTIONS

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;

. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains.
Redemptions are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Who Manages the Fund?

The Manager receives an annual management fee equal to 0.40% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub-Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non-financial institution clients invest. In total, the Sub-Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

YEAR 2000 READINESS

Financial Information

FINANCIAL HIGHLIGHTS

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

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 30.

Year Ended October 31 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.17 $ 13.75 $ 12.78 $ 11.02 $ 11.57
- -------------------------------------------
Income from Investment Operations:

- -------------------------------------------
Net investment income 0.20 0.18 0.18 0.22 0.21
- -------------------------------------------
Net realized and unrealized gain (loss) 0.74 4.00 1.73 1.93 (0.07)
on investments and futures contracts
- ----------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.94 4.18 1.91 2.15 0.14
- ----------------------------------------------------------------------------------------------------
Less Distributions:

- -------------------------------------------
Distributions from net investment income (0.20) (0.17) (0.20) (0.20) (0.19)
- -------------------------------------------
Distributions from net realized gain on

investments and futures contracts (1.38) (0.59) (0.74) (0.19) (0.50)
- ----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.58) (0.76) (0.94) (0.39) (0.69)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 16.53 $ 17.17 $ 13.75 $ 12.78 $ 11.02
- ----------------------------------------------------------------------------------------------------
Total Return/1/ 5.73% 31.83% 15.80% 20.12% 1.25%
- ----------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:

- ----------------------------------------------------------------------------------------------------
Expenses 0.61% 0.60% 0.60% 0.60% 0.54%
- ----------------------------------------------------------------------------------------------------
Net investment income 1.12% 1.19% 1.31% 1.89% 1.84%
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement/2/ 0.28% 0.31% 0.34% 0.41% 0.59%
- ----------------------------------------------------------------------------------------------------
Supplemental Data:

- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $83,630 $73,874 $59,948 $62,580 $44,012
- ----------------------------------------------------------------------------------------------------
Portfolio turnover 25% 19% 17% 26% 30%
- ----------------------------------------------------------------------------------------------------
</TABLE>

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

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

OCTOBER 31, 1998
<TABLE>

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C>

/1/COMMON STOCKS--89.3%
Basic Industry--5.6%

5,200 AK Steel Holding Corp. $ 90,025
--------------------------------------------------------------------------------------------
6,300 /2/Airgas, Inc. 72,450
--------------------------------------------------------------------------------------------
2,624 Albany International Corp., Class A 47,888
--------------------------------------------------------------------------------------------
4,075 Albemarle Corp. 77,680
--------------------------------------------------------------------------------------------
4,600 Bowater, Inc. 187,738
--------------------------------------------------------------------------------------------
5,500 /2/Burlington Industries, Inc. 50,875
--------------------------------------------------------------------------------------------
6,000 Cabot Corp. 168,375
--------------------------------------------------------------------------------------------
2,100 CalMat Co. 49,219
--------------------------------------------------------------------------------------------
3,500 Calgon Carbon Corp. 24,719
--------------------------------------------------------------------------------------------
2,000 Carpenter Technology Corp. 70,125
--------------------------------------------------------------------------------------------
1,900 Chesapeake Corp. 66,500
--------------------------------------------------------------------------------------------
1,000 Cleveland Cliffs, Inc. 39,688
--------------------------------------------------------------------------------------------
7,900 Consolidated Papers, Inc. 190,094
--------------------------------------------------------------------------------------------
6,500 Crompton and Knowles Corp. 104,406
--------------------------------------------------------------------------------------------
3,900 /2/Cytec Industries, Inc. 93,600
--------------------------------------------------------------------------------------------
2,000 Dexter Corp. 58,500
--------------------------------------------------------------------------------------------
4,300 Donaldson Co., Inc. 78,206
--------------------------------------------------------------------------------------------
7,300 Ethyl Corp. 40,150
--------------------------------------------------------------------------------------------
3,150 Ferro Corp. 80,325
--------------------------------------------------------------------------------------------
1,200 Fuller (H.B.) Co. 49,350
--------------------------------------------------------------------------------------------
2,700 Georgia Gulf Corp. 46,069
--------------------------------------------------------------------------------------------
8,100 Georgia-Pacific Corp. 179,719
--------------------------------------------------------------------------------------------
3,700 Glatfelter (P.H.) Co. 45,556
--------------------------------------------------------------------------------------------
4,400 Hanna (M.A.) Co. 64,625
--------------------------------------------------------------------------------------------
10,000 IMC Global, Inc. 260,000
--------------------------------------------------------------------------------------------
3,600 /2/Imation Corp. 63,675
--------------------------------------------------------------------------------------------
2,740 Inland Steel Industries, Inc. 50,005
--------------------------------------------------------------------------------------------
3,700 Lawter International, Inc. 28,213
--------------------------------------------------------------------------------------------
4,500 Longview Fibre Co. 54,000
--------------------------------------------------------------------------------------------
4,900 Lubrizol Corp. 136,588
--------------------------------------------------------------------------------------------
4,100 Martin Marietta Materials 201,156
--------------------------------------------------------------------------------------------
700 /2/Maxxam, Inc. 37,056
--------------------------------------------------------------------------------------------
2,000 Minerals Technologies, Inc. 91,125
--------------------------------------------------------------------------------------------
Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Basic Industry--continued

600 NCH, Corp. $ 41,100
--------------------------------------------------------------------------------------------
2,300 Oregon Steel Mills 28,175
--------------------------------------------------------------------------------------------
8,750 RPM, Inc. 147,109
--------------------------------------------------------------------------------------------
2,500 Rayonier, Inc. 97,969
--------------------------------------------------------------------------------------------
3,025 Schulman (A.), Inc. 60,122
--------------------------------------------------------------------------------------------
10,600 Solutia, Inc. 232,538
--------------------------------------------------------------------------------------------
8,973 Sonoco Products Co. 254,609
--------------------------------------------------------------------------------------------
3,400 Southdown, Inc. 185,088
--------------------------------------------------------------------------------------------
5,400 Unifi, Inc. 91,125
--------------------------------------------------------------------------------------------
3,000 Vulcan Materials Co. 355,875
--------------------------------------------------------------------------------------------
2,700 Wellman, Inc. 33,919
--------------------------------------------------------------------------------------------
5,000 /2/WestPoint Stevens, Inc. 142,188
--------------------------------------------------------------------------------------------
5,100 Witco Corp. 95,940
---------------------------------------------------------------------------------------------------------
TOTAL 4,663,457

---------------------------------------------------------------------------------------------------------
Consumer Durables--3.2%

2,200 Arvin Industries, Inc. 87,175
--------------------------------------------------------------------------------------------
2,000 Bandag, Inc. 70,750
--------------------------------------------------------------------------------------------
2,100 Borg-Warner Automotive, Inc. 98,438
--------------------------------------------------------------------------------------------
6,600 Callaway Golf Co. 71,775
--------------------------------------------------------------------------------------------
2,600 Carlisle Cos., Inc. 100,425
--------------------------------------------------------------------------------------------
10,476 Clayton Homes, Inc. 161,723
--------------------------------------------------------------------------------------------
5,300 /2/Electronic Arts, Inc. 217,963
--------------------------------------------------------------------------------------------
1,400 Enesco Group, Inc. 35,525
--------------------------------------------------------------------------------------------
4,700 Federal-Mogul Corp. 254,681
--------------------------------------------------------------------------------------------
13,400 Harley Davidson, Inc. 519,250
--------------------------------------------------------------------------------------------
9,900 International Game Technology 223,369
--------------------------------------------------------------------------------------------
17,300 Leggett and Platt, Inc. 404,388
--------------------------------------------------------------------------------------------
3,200 SPX Corp. 174,200
--------------------------------------------------------------------------------------------
10,800 Shaw Industries, Inc. 187,650
--------------------------------------------------------------------------------------------
2,400 Superior Industries International, Inc. 62,845
---------------------------------------------------------------------------------------------------------
TOTAL 2,670,157

---------------------------------------------------------------------------------------------------------
Consumer Non-Durables--3.6%

1,700 Church and Dwight, Inc. 52,169
--------------------------------------------------------------------------------------------
3,500 Dean Foods Co. 164,063
--------------------------------------------------------------------------------------------
9,000 Dial Corp. 248,063
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Consumer Non-Durables--continued

5,300 Dole Food, Inc. $ 159,663
--------------------------------------------------------------------------------------------
2,400 Dreyers Grand Ice Cream, Inc. 31,500
--------------------------------------------------------------------------------------------
3,500 First Brands Corp. 132,125
--------------------------------------------------------------------------------------------
8,725 Flowers Industries, Inc. 178,863
--------------------------------------------------------------------------------------------
6,600 Hormel Foods Corp. 214,913
--------------------------------------------------------------------------------------------
8,100 IBP, Inc. 219,206
--------------------------------------------------------------------------------------------
1,600 International Multifoods Corp. 33,300
--------------------------------------------------------------------------------------------
6,400 Interstate Bakeries Corp. 160,400
--------------------------------------------------------------------------------------------
8,900 /2/Jones Apparel Group, Inc. 153,525
--------------------------------------------------------------------------------------------
2,600 Lance, Inc. 49,725
--------------------------------------------------------------------------------------------
6,400 McCormick & Co., Inc. 198,800
--------------------------------------------------------------------------------------------
2,600 Smucker (J.M.) Co., Class A 57,200
--------------------------------------------------------------------------------------------
20,300 Tyson Foods, Inc., Class A 466,900
--------------------------------------------------------------------------------------------
3,900 /2/UCAR International, Inc. 70,200
--------------------------------------------------------------------------------------------
3,100 Universal Corp. 115,669
--------------------------------------------------------------------------------------------
4,500 Universal Foods Corp. 97,594
--------------------------------------------------------------------------------------------
4,000 /2/Vlasic Foods International, Inc. 74,750
--------------------------------------------------------------------------------------------
5,600 Warnaco Group, Inc., Class A 143,145
---------------------------------------------------------------------------------------------------------
TOTAL 3,021,773

---------------------------------------------------------------------------------------------------------
Energy Minerals--3.5%

6,300 /2/BJ Services Co. 128,756
--------------------------------------------------------------------------------------------
12,400 ENSCO International, Inc. 166,625
--------------------------------------------------------------------------------------------
15,200 /2/Global Marine, Inc. 188,100
--------------------------------------------------------------------------------------------
6,900 Lyondell Chemical Co. 116,438
--------------------------------------------------------------------------------------------
3,900 Murphy Oil Corp. 161,119
--------------------------------------------------------------------------------------------
8,800 /2/Nabors Industries, Inc. 162,800
--------------------------------------------------------------------------------------------
5,000 Noble Affiliates, Inc. 163,750
--------------------------------------------------------------------------------------------
11,500 /2/Noble Drilling Corp. 197,656
--------------------------------------------------------------------------------------------
8,818 /2/Ocean Energy, Inc. 110,225
--------------------------------------------------------------------------------------------
6,700 /2/Parker Drilling Co. 33,081
--------------------------------------------------------------------------------------------
8,800 Pioneer Natural Resources, Inc. 132,550
--------------------------------------------------------------------------------------------
3,200 Quaker State Corp. 45,200
--------------------------------------------------------------------------------------------
11,000 Ranger Oil Ltd. 70,125
--------------------------------------------------------------------------------------------
4,200 /2/Smith International, Inc. 150,938
--------------------------------------------------------------------------------------------
13,700 Tosco Corp. 384,456
--------------------------------------------------------------------------------------------
8,800 Transocean Offshore, Inc. 325,050
--------------------------------------------------------------------------------------------
Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Energy Minerals--continued

7,950 Ultramar Diamond Shamrock Corp. $ 214,153
--------------------------------------------------------------------------------------------
4,900 Valero Energy Corp. 122,500
--------------------------------------------------------------------------------------------
5,700 /2/Varco International, Inc. 61,625
---------------------------------------------------------------------------------------------------------
TOTAL 2,935,147

---------------------------------------------------------------------------------------------------------
Finance--13.1%

6,100 Ambac Financial Group, Inc. 354,944
--------------------------------------------------------------------------------------------
23,450 Aflac, Inc. 894,031
--------------------------------------------------------------------------------------------
5,550 Associated Banc Corp. 194,944
--------------------------------------------------------------------------------------------
3,600 CCB Financial Corp. 189,450
--------------------------------------------------------------------------------------------
11,767 Charter One Financial, Inc. 322,857
--------------------------------------------------------------------------------------------
4,100 City National Corp. 140,169
--------------------------------------------------------------------------------------------
13,350 Comdisco, Inc. 206,091
--------------------------------------------------------------------------------------------
9,900 Crestar Financial Corp. 652,163
--------------------------------------------------------------------------------------------
10,000 Dime Bancorp, Inc. 238,125
--------------------------------------------------------------------------------------------
8,387 Edwards (AG), Inc. 289,876
--------------------------------------------------------------------------------------------
5,000 Finova Group, Inc. 243,750
--------------------------------------------------------------------------------------------
16,525 First Security Corp. 337,730
--------------------------------------------------------------------------------------------
11,200 First Tennessee National Corp. 354,900
--------------------------------------------------------------------------------------------
4,500 First Virginia Bank, Inc. 205,313
--------------------------------------------------------------------------------------------
12,800 Firstar Corp. 726,400
--------------------------------------------------------------------------------------------
4,300 GATX Corp. 148,350
--------------------------------------------------------------------------------------------
8,500 Greenpoint Financial Corp. 278,906
--------------------------------------------------------------------------------------------
2,600 HSB Group, Inc. 104,975
--------------------------------------------------------------------------------------------
13,700 Hibernia Corp., Class A 228,619
--------------------------------------------------------------------------------------------
9,300 Marshall & Ilsley Corp. 453,375
--------------------------------------------------------------------------------------------
6,250 Mercantile Bankshares Corp. 203,906
--------------------------------------------------------------------------------------------
12,550 North Fork Bancorp, Inc. 249,431
--------------------------------------------------------------------------------------------
9,385 Old Kent Financial Corp. 394,757
--------------------------------------------------------------------------------------------
12,000 Old Republic International Corp. 228,000
--------------------------------------------------------------------------------------------
7,100 Pacific Century Financial Corp. 144,663
--------------------------------------------------------------------------------------------
12,350 PaineWebber Group, Inc. 412,953
--------------------------------------------------------------------------------------------
2,700 PMI Group, Inc. 136,181
--------------------------------------------------------------------------------------------
3,200 /2/Policy Management System Corp. 145,400
--------------------------------------------------------------------------------------------
5,400 Protective Life Corp. 200,138
--------------------------------------------------------------------------------------------
3,800 Provident Financial Group, Inc. 146,419
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Finance--continued

8,000 Reliastar Financial Corp. $ 350,500
--------------------------------------------------------------------------------------------
14,400 SouthTrust Corp. 525,600
--------------------------------------------------------------------------------------------
12,700 Sovereign Bancorp, Inc. 166,688
--------------------------------------------------------------------------------------------
10,500 T. Rowe Price Associates 373,406
--------------------------------------------------------------------------------------------
7,800 TCF Financial Corp. 183,788
--------------------------------------------------------------------------------------------
2,900 Wilmington Trust Corp. 159,681
--------------------------------------------------------------------------------------------
6,600 Zions Bancorp 350,208
---------------------------------------------------------------------------------------------------------
TOTAL 10,936,687

---------------------------------------------------------------------------------------------------------
Health Care--9.1%

2,500 /2/Acuson Corp. 37,656
--------------------------------------------------------------------------------------------
2,700 /2/Agouron Pharmaceuticals, Inc. 104,625
--------------------------------------------------------------------------------------------
9,900 Allegiance Corp. 368,156
--------------------------------------------------------------------------------------------
4,500 /2/Apria Healthcare Group, Inc. 18,281
--------------------------------------------------------------------------------------------
4,406 Bergen Brunswig Corp., Class A 215,068
--------------------------------------------------------------------------------------------
9,100 /2/Beverly Enterprises, Inc. 61,425
--------------------------------------------------------------------------------------------
6,500 /2/Biogen, Inc. 451,750
--------------------------------------------------------------------------------------------
4,000 Carter Wallace, Inc. 71,000
--------------------------------------------------------------------------------------------
6,200 /2/Centocor, Inc. 275,900
--------------------------------------------------------------------------------------------
15,624 /2/Chiron Corp. 351,540
--------------------------------------------------------------------------------------------
4,100 /2/Concentra Managed Care, Inc. 42,025
--------------------------------------------------------------------------------------------
5,100 /2/Covance, Inc. 142,163
--------------------------------------------------------------------------------------------
4,600 Dentsply International, Inc. 118,450
--------------------------------------------------------------------------------------------
7,100 /2/Forest Labratories, Inc., Class A 296,869
--------------------------------------------------------------------------------------------
10,740 /2/Foundation Health Systems, Inc., Class A 126,195
--------------------------------------------------------------------------------------------
6,900 /2/Genzyme Corp. 290,231
--------------------------------------------------------------------------------------------
22,025 /2/Health Management Association, Class A 392,320
--------------------------------------------------------------------------------------------
6,500 ICN Pharmaceuticals, Inc. 151,938
--------------------------------------------------------------------------------------------
10,500 Ivax Corp. 99,750
--------------------------------------------------------------------------------------------
5,100 /2/Lincare Holdings, Inc. 203,681
--------------------------------------------------------------------------------------------
8,300 McKesson Corp. 639,100
--------------------------------------------------------------------------------------------
6,900 /2/Medaphis Corp. 22,425
--------------------------------------------------------------------------------------------
10,800 Mylan Laboratories, Inc. 371,925
--------------------------------------------------------------------------------------------
5,400 /2/NovaCare, Inc. 22,275
--------------------------------------------------------------------------------------------
7,800 Omnicare, Inc. 269,588
--------------------------------------------------------------------------------------------
7,100 /2/Oxford Health Plans, Inc. 83,869
--------------------------------------------------------------------------------------------
6,100 /2/PSS World Medical, Inc. 134,963
--------------------------------------------------------------------------------------------
Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Health Care--continued

3,998 /2/PacifiCare Health Systems, Inc., Class B $ 314,843
--------------------------------------------------------------------------------------------
6,500 /2/Perrigo Co. 51,594
--------------------------------------------------------------------------------------------
6,600 /2/Quintiles Transnational Corp. 298,650
--------------------------------------------------------------------------------------------
6,600 /2/Quorum Health Group, Inc. 95,700
--------------------------------------------------------------------------------------------
6,000 /2/Steris Corp. 138,000
--------------------------------------------------------------------------------------------
8,500 Stryker Corp. 356,469
--------------------------------------------------------------------------------------------
8,900 /2/Sybron International Corp. 220,275
--------------------------------------------------------------------------------------------
7,100 /2/Total Renal Care Holdings, Inc. 173,950
--------------------------------------------------------------------------------------------
3,500 /2/Trigon Healthcare, Inc. 131,250
--------------------------------------------------------------------------------------------
7,800 /2/Watson Pharmaceuticals, Inc. 433,870
---------------------------------------------------------------------------------------------------------
TOTAL 7,577,769

---------------------------------------------------------------------------------------------------------
Producer Manufacturing--6.5%

5,200 AGCO Corp. 49,400
--------------------------------------------------------------------------------------------
5,400 American Financial Group, Inc. 189,338
--------------------------------------------------------------------------------------------
8,400 /2/American Power Conversion Corp. 356,475
--------------------------------------------------------------------------------------------
6,300 /2/American Standard Cos. 201,206
--------------------------------------------------------------------------------------------
2,900 Ametek, Inc. 61,444
--------------------------------------------------------------------------------------------
11,700 Danaher Corp. 467,269
--------------------------------------------------------------------------------------------
6,093 Diebold, Inc. 190,025
--------------------------------------------------------------------------------------------
4,000 Federal Signal Corp. 96,250
--------------------------------------------------------------------------------------------
3,500 Flowserve Corp. 63,000
--------------------------------------------------------------------------------------------
5,400 HON Industries, Inc. 114,413
--------------------------------------------------------------------------------------------
4,000 Harsco Corp. 131,000
--------------------------------------------------------------------------------------------
5,780 Hubbell, Inc., Class B 230,478
--------------------------------------------------------------------------------------------
2,900 Kaydon Corp. 101,863
--------------------------------------------------------------------------------------------
2,600 Kennametal, Inc. 53,950
--------------------------------------------------------------------------------------------
3,749 Lancaster Colony Corp. 112,470
--------------------------------------------------------------------------------------------
5,900 /2/Lear Corp. 189,538
--------------------------------------------------------------------------------------------
5,800 /2/Lexmark Intl. Group, Class A 405,638
--------------------------------------------------------------------------------------------
2,800 /2/Magnetek, Inc. 35,525
--------------------------------------------------------------------------------------------
5,250 Mark IV Industries, Inc. 80,719
--------------------------------------------------------------------------------------------
6,100 Meritor Automotive, Inc. 113,994
--------------------------------------------------------------------------------------------
7,600 Miller Herman, Inc. 167,675
--------------------------------------------------------------------------------------------
2,600 Modine Manufacturing Co. 85,150
--------------------------------------------------------------------------------------------
1,400 Nordson Corp. 62,738
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

4,200 Olin Corp. $ 116,288
--------------------------------------------------------------------------------------------
3,400 Pentair, Inc. 127,925
--------------------------------------------------------------------------------------------
3,600 Pittston Brink's Group 107,100
--------------------------------------------------------------------------------------------
2,150 Precision Castparts Corp. 94,600
--------------------------------------------------------------------------------------------
2,700 Stewart & Stevenson Services 36,956
--------------------------------------------------------------------------------------------
1,900 Tecumseh Products Co., Class A 98,800
--------------------------------------------------------------------------------------------
3,300 Teleflex, Inc. 127,669
--------------------------------------------------------------------------------------------
3,850 Trinity Industries, Inc. 142,931
--------------------------------------------------------------------------------------------
14,350 /2/U.S. Filter Corp. 304,041
--------------------------------------------------------------------------------------------
2,525 /2/U.S. Office Products Co. 19,411
--------------------------------------------------------------------------------------------
8,700 Viad Corp. 238,706
--------------------------------------------------------------------------------------------
2,400 Watts Industries, Inc., Class A 44,100
--------------------------------------------------------------------------------------------
5,067 Wausau-Mosinee Paper Corp. 88,356
--------------------------------------------------------------------------------------------
8,900 Whitman Corp. 190,794
--------------------------------------------------------------------------------------------
3,600 York International Corp. 135,441
--------------------------------------------------------------------------------------------
TOTAL 5,432,676

--------------------------------------------------------------------------------------------
Retail Trade--5.1%

4,800 /2/Abercrombie & Fitch Co., Class A 190,500
--------------------------------------------------------------------------------------------
3,300 /2/BJ's Wholesale Club, Inc. 118,594
--------------------------------------------------------------------------------------------
6,000 /2/Barnes & Noble, Inc. 195,750
--------------------------------------------------------------------------------------------
12,200 /2/Bed Bath & Beyond, Inc. 336,263
--------------------------------------------------------------------------------------------
8,800 /2/Best Buy Co., Inc. 422,400
--------------------------------------------------------------------------------------------
6,800 /2/Borders Group, Inc. 172,550
--------------------------------------------------------------------------------------------
4,450 Claire's Stores, Inc. 75,372
--------------------------------------------------------------------------------------------
8,000 /2/CompUSA, Inc. 111,000
--------------------------------------------------------------------------------------------
5,200 /2/Dollar Tree Stores, Inc. 200,525
--------------------------------------------------------------------------------------------
15,100 Family Dollar Stores, Inc. 273,688
--------------------------------------------------------------------------------------------
3,300 Fastenal Co. 119,213
--------------------------------------------------------------------------------------------
6,700 /2/General Nutrition Cos., Inc. 97,569
--------------------------------------------------------------------------------------------
3,700 Hannaford Brothers Co. 162,106
--------------------------------------------------------------------------------------------
5,150 Heilig-Meyers Co. 39,591
--------------------------------------------------------------------------------------------
2,700 /2/Lands' End, Inc. 46,069
--------------------------------------------------------------------------------------------
3,000 /2/Micro Warehouse, Inc. 65,438
--------------------------------------------------------------------------------------------
3,200 /2/Nine West Group, Inc. 40,600
--------------------------------------------------------------------------------------------
21,525 /2/Office Depot, Inc. 538,125
--------------------------------------------------------------------------------------------
10,950 /2/Officemax, Inc. 99,919
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Retail Trade--continued

3,300 /2/Payless ShoeSource, Inc. $ 154,894
--------------------------------------------------------------------------------------------
5,400 Premark International, Inc. 171,113
--------------------------------------------------------------------------------------------
4,200 Ross Stores, Inc. 136,500
--------------------------------------------------------------------------------------------
4,100 Ruddick Corp. 79,694
--------------------------------------------------------------------------------------------
12,436 /2/Saks, Inc. 282,919
--------------------------------------------------------------------------------------------
3,100 Tiffany & Co. 100,169
---------------------------------------------------------------------------------------------------------
TOTAL 4,230,561

---------------------------------------------------------------------------------------------------------
Services--7.8%

5,000 /2/ACNielsen Corp. 133,750
--------------------------------------------------------------------------------------------
15,400 /2/Allied Waste Industries, Inc. 333,025
--------------------------------------------------------------------------------------------
2,550 Banta Corp. 63,431
--------------------------------------------------------------------------------------------
11,000 Belo (A.H.) Corp., Series A 200,063
--------------------------------------------------------------------------------------------
3,700 Bob Evans Farms, Inc. 72,844
--------------------------------------------------------------------------------------------
5,775 /2/Brinker International, Inc. 139,683
--------------------------------------------------------------------------------------------
4,000 /2/Buffets, Inc. 43,250
--------------------------------------------------------------------------------------------
2,837 /2/Chris Craft Industries, Inc. 126,424
--------------------------------------------------------------------------------------------
8,600 Cintas Corp. 460,100
--------------------------------------------------------------------------------------------
8,300 /2/Circus Circus Enterprises, Inc. 92,856
--------------------------------------------------------------------------------------------
7,100 /2/Corrections Corp. America 136,675
--------------------------------------------------------------------------------------------
5,450 Cracker Barrel Old Country Store 141,019
--------------------------------------------------------------------------------------------
5,500 /2/First Health Group Corp. 126,844
--------------------------------------------------------------------------------------------
2,450 Granite Construction, Inc. 81,616
--------------------------------------------------------------------------------------------
3,600 /2/Gtech Holdings Corp. 86,400
--------------------------------------------------------------------------------------------
2,700 Houghton Mifflin Co. 105,300
--------------------------------------------------------------------------------------------
2,200 /2/Jacobs Engineering Group, Inc. 71,775
--------------------------------------------------------------------------------------------
3,375 Kelly Services, Inc., Class A 106,102
--------------------------------------------------------------------------------------------
3,900 Lee Enterprises, Inc. 106,031
--------------------------------------------------------------------------------------------
3,400 /2/Lone Star Steakhouse & Saloon 27,200
--------------------------------------------------------------------------------------------
7,100 Manpower, Inc. 171,288
--------------------------------------------------------------------------------------------
2,300 Media General, Inc., Class A 102,925
--------------------------------------------------------------------------------------------
9,700 /2/Modis Professional Services, Inc. 170,963
--------------------------------------------------------------------------------------------
6,100 /2/NOVA Corp. 176,138
--------------------------------------------------------------------------------------------
4,400 Ogden Corp. 118,250
--------------------------------------------------------------------------------------------
7,100 Olsten Corp. 65,231
--------------------------------------------------------------------------------------------
4,300 /2/Outback Steakhouse, Inc. 148,888
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
1 COMMON STOCKS--continued

Services--continued

7,615 /2/Promus Hotel Corp. $ 242,728
--------------------------------------------------------------------------------------------
6,800 Reynolds & Reynolds Co., Class A 122,400
--------------------------------------------------------------------------------------------
8,050 /2/Robert Half International, Inc. 323,006
--------------------------------------------------------------------------------------------
2,900 Rollins, Inc. 50,025
--------------------------------------------------------------------------------------------
1,800 Sbarro, Inc. 42,300
--------------------------------------------------------------------------------------------
1,400 /2/Scholastic Corp. 55,213
--------------------------------------------------------------------------------------------
6,500 Sensormatic Electronics Corp. 36,563
--------------------------------------------------------------------------------------------
5,000 Sothebys Holdings, Inc., Class A 108,125
--------------------------------------------------------------------------------------------
2,500 Standard Register 71,719
--------------------------------------------------------------------------------------------
7,800 /2/Starbucks Corp. 338,325
--------------------------------------------------------------------------------------------
8,600 Stewart Enterprises, Inc., Class A 198,338
--------------------------------------------------------------------------------------------
5,900 /2/Synopsys, Inc. 266,975
--------------------------------------------------------------------------------------------
4,000 /2/U.S. Foodservice, Inc. 190,000
--------------------------------------------------------------------------------------------
6,100 Unisource Worldwide, Inc. 56,044
--------------------------------------------------------------------------------------------
3,800 Wallace Computer, Inc. 83,125
--------------------------------------------------------------------------------------------
900 Washington Post Co., Class B 477,900
--------------------------------------------------------------------------------------------
8,566 /2/Weatherford International, Inc. 232,888
---------------------------------------------------------------------------------------------------------
TOTAL 6,503,745

---------------------------------------------------------------------------------------------------------
Technology--17.3%

--------------------------------------------------------------------------------------------
11,800 /2/ADC Telecommunications, Inc. 271,400
--------------------------------------------------------------------------------------------
8,500 /2/Altera Corp. 353,813
--------------------------------------------------------------------------------------------
19,300 /2/America Online, Inc. 2,452,306
--------------------------------------------------------------------------------------------
14,266 /2/Analog Devices, Inc. 283,537
--------------------------------------------------------------------------------------------
8,350 /2/Arrow Electronics, Inc. 182,134
--------------------------------------------------------------------------------------------
8,700 /2/Atmel Corp. 100,594
--------------------------------------------------------------------------------------------
3,400 Avnet, Inc. 169,150
--------------------------------------------------------------------------------------------
2,500 Beckman Coulter, Inc. 117,500
--------------------------------------------------------------------------------------------
18,600 /2/Cadence Design Systems, Inc. 397,575
--------------------------------------------------------------------------------------------
5,000 /2/Cambridge Technology Partners, Inc. 110,625
--------------------------------------------------------------------------------------------
5,600 /2/Cirrus Logic, Inc. 54,425
--------------------------------------------------------------------------------------------
3,700 /2/Citrix Systems Inc. 262,238
--------------------------------------------------------------------------------------------
16,000 /2/Compuware Corp. 867,000
--------------------------------------------------------------------------------------------
3,800 /2/Comverse Technology, Inc. 174,800
--------------------------------------------------------------------------------------------
3,200 Cordant Technologies, Inc. 130,200
--------------------------------------------------------------------------------------------
8,000 /2/Cypress Semiconductor Corp. 89,000
--------------------------------------------------------------------------------------------
7,150 /2/FIserv, Inc. 332,475
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Technology--continued

8,900 /2/FORE Systems, Inc. $ 139,063
--------------------------------------------------------------------------------------------
3,600 GenCorp, Inc. 79,650
--------------------------------------------------------------------------------------------
5,900 Hillenbrand Industries, Inc. 349,206
--------------------------------------------------------------------------------------------
2,600 /2/Information Resources, Inc. 20,638
--------------------------------------------------------------------------------------------
14,800 /2/Informix Corp. 75,388
--------------------------------------------------------------------------------------------
7,200 /2/Integrated Device Technology, Inc. 49,950
--------------------------------------------------------------------------------------------
5,200 /2/Intuit, Inc. 262,600
--------------------------------------------------------------------------------------------
6,100 /2/Keane, Inc. 202,825
--------------------------------------------------------------------------------------------
6,700 Linear Technology Corp. 399,488
--------------------------------------------------------------------------------------------
4,000 /2/Litton Industries, Inc. 261,000
--------------------------------------------------------------------------------------------
11,500 /2/Maxim Integrated Products, Inc. 410,406
--------------------------------------------------------------------------------------------
5,700 /2/Mentor Graphics Corp. 45,956
--------------------------------------------------------------------------------------------
4,500 /2/Microchip Technology, Inc. 121,781
--------------------------------------------------------------------------------------------
13,768 Molex, Inc. 491,346
--------------------------------------------------------------------------------------------
8,900 /2/NCR Corp. 299,263
--------------------------------------------------------------------------------------------
11,450 /2/Network Associates, Inc. 486,625
--------------------------------------------------------------------------------------------
3,100 Newport News Shipbuilding, Inc. 81,569
--------------------------------------------------------------------------------------------
1,800 OEA, Inc. 20,138
--------------------------------------------------------------------------------------------
7,500 /2/Platinum Technology, Inc. 123,281
--------------------------------------------------------------------------------------------
6,100 /2/Qualcomm, Inc. 339,313
--------------------------------------------------------------------------------------------
14,900 /2/Quantum Corp. 261,681
--------------------------------------------------------------------------------------------
5,300 /2/SCI Systems, Inc. 209,350
--------------------------------------------------------------------------------------------
900 /2/Sequa Corp., Class A 57,600
--------------------------------------------------------------------------------------------
3,800 /2/Sequent Computer System, Inc. 37,525
--------------------------------------------------------------------------------------------
7,700 /2/Siebel Systems, Inc. 157,369
--------------------------------------------------------------------------------------------
10,300 /2/Solectron Corp. 589,675
--------------------------------------------------------------------------------------------
8,037 /2/Sterling Commerce, Inc. 283,304
--------------------------------------------------------------------------------------------
7,000 /2/Sterling Software, Inc. 183,313
--------------------------------------------------------------------------------------------
8,860 /2/Storage Technology Corp. 296,256
--------------------------------------------------------------------------------------------
3,200 /2/Structural Dynamics Research Corp. 46,000
--------------------------------------------------------------------------------------------
9,100 /2/SunGuard Data Systems, Inc. 307,125
--------------------------------------------------------------------------------------------
5,000 Sundstrand Corp. 234,688
--------------------------------------------------------------------------------------------
5,000 /2/Symantec Corp. 80,000
--------------------------------------------------------------------------------------------
5,175 Symbol Technologies, Inc. 231,581
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Technology--continued

4,300 /2/Tech Data Corp. $ 169,313
--------------------------------------------------------------------------------------------
7,400 /2/Teradyne, Inc. 240,500
--------------------------------------------------------------------------------------------
2,600 Varian Association, Inc. 101,725
--------------------------------------------------------------------------------------------
5,635 /2/Vishay Intertechnology, Inc. 85,229
--------------------------------------------------------------------------------------------
6,400 /2/Xilinx, Inc. 285,800
---------------------------------------------------------------------------------------------------------
TOTAL 14,466,292

---------------------------------------------------------------------------------------------------------
Transportation--1.4%

2,600 ASA Holdings Ltd. 93,275
--------------------------------------------------------------------------------------------
4,400 Airborne Freight Corp. 103,125
--------------------------------------------------------------------------------------------
2,300 /2/Alaska Air Group, Inc. 82,656
--------------------------------------------------------------------------------------------
3,900 Alexander and Baldwin, Inc. 79,219
--------------------------------------------------------------------------------------------
2,300 Arnold Industries, Inc. 29,325
--------------------------------------------------------------------------------------------
4,200 CNF Transportation, Inc. 127,050
--------------------------------------------------------------------------------------------
3,100 Hunt (J.B.) Transportation Services, Inc. 51,925
--------------------------------------------------------------------------------------------
9,600 Kansas City Southern Industries, Inc. 370,800
--------------------------------------------------------------------------------------------
3,200 Overseas Shipholding Group, Inc. 56,400
--------------------------------------------------------------------------------------------
5,100 Tidewater, Inc. 144,394
--------------------------------------------------------------------------------------------
4,500 /2/Wisconsin Central Transportation Corp. 68,063
---------------------------------------------------------------------------------------------------------
TOTAL 1,206,232

---------------------------------------------------------------------------------------------------------
Utilities--13.1%

5,000 AGL Resources, Inc. 104,688
--------------------------------------------------------------------------------------------
3,100 Aliant Communications, Inc. 87,478
--------------------------------------------------------------------------------------------
10,700 Allegheny Energy, Inc. 329,025
--------------------------------------------------------------------------------------------
7,000 American Water Works Co., Inc. 223,563
--------------------------------------------------------------------------------------------
1,900 Black Hills Corp. 49,044
--------------------------------------------------------------------------------------------
2,800 CMP Group, Inc. 51,625
--------------------------------------------------------------------------------------------
8,900 CMS Energy Corp. 392,156
--------------------------------------------------------------------------------------------
5,300 /2/CalEnergy Co., Inc. 145,088
--------------------------------------------------------------------------------------------
8,100 Century Telephone Enterprises, Inc. 460,181
--------------------------------------------------------------------------------------------
12,000 Cincinnati Bell, Inc. 311,250
--------------------------------------------------------------------------------------------
2,000 Cleco Corp. 67,625
--------------------------------------------------------------------------------------------
4,600 Comsat Corp. 181,413
--------------------------------------------------------------------------------------------
9,425 Conectiv, Inc. 215,597
--------------------------------------------------------------------------------------------
10,600 El Paso Energy Corp. 375,638
--------------------------------------------------------------------------------------------
5,600 Energy East Corp. 273,700
--------------------------------------------------------------------------------------------
8,500 Florida Progress Corp. 356,469
--------------------------------------------------------------------------------------------

Shares Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Utilities--continued

2,800 Hawaiian Electric Industries, Inc. $ 110,950
--------------------------------------------------------------------------------------------
3,300 Idacorp Inc. 103,125
--------------------------------------------------------------------------------------------
6,300 Illinova Corp. 159,469
--------------------------------------------------------------------------------------------
2,667 Indiana Energy, Inc. 59,667
--------------------------------------------------------------------------------------------
6,700 Interstate Energy Corp. 207,281
--------------------------------------------------------------------------------------------
3,900 Ipalco Enterprises, Inc. 178,913
--------------------------------------------------------------------------------------------
3,900 K N Energy, Inc. 193,781
--------------------------------------------------------------------------------------------
5,400 Kansas City Power and Light Co. 155,588
--------------------------------------------------------------------------------------------
13,900 Keyspan Energy Corp. 415,263
--------------------------------------------------------------------------------------------
11,400 LG&E Energy Corp. 300,675
--------------------------------------------------------------------------------------------
6,900 MCN Corp. 133,256
--------------------------------------------------------------------------------------------
8,322 MidAmerican Energy Holdings Co. 216,372
--------------------------------------------------------------------------------------------
3,000 Minnesota Power and Light Co. 125,813
--------------------------------------------------------------------------------------------
4,800 Montana Power Co. 207,900
--------------------------------------------------------------------------------------------
10,500 NIPSCO Industries, Inc. 314,344
--------------------------------------------------------------------------------------------
3,400 National Fuel Gas Co. 160,650
--------------------------------------------------------------------------------------------
4,500 Nevada Power Co. 113,625
--------------------------------------------------------------------------------------------
9,745 New Century Energies, Inc. 470,805
--------------------------------------------------------------------------------------------
5,500 New England Electric System 223,781
--------------------------------------------------------------------------------------------
11,400 Northeast Utilities Co. 178,125
--------------------------------------------------------------------------------------------
7,100 OGE Energy Corp. 188,594
--------------------------------------------------------------------------------------------
7,400 Pinnacle West Capital Corp. 324,213
--------------------------------------------------------------------------------------------
10,400 Potomac Electric Power Co. 272,350
--------------------------------------------------------------------------------------------
3,700 Public Service Co. New Mexico 81,631
--------------------------------------------------------------------------------------------
7,400 Puget Sound Energy, Inc. 199,800
--------------------------------------------------------------------------------------------
7,200 Questar Corp. 141,750
--------------------------------------------------------------------------------------------
9,662 SBC Communications, Inc. 447,471
--------------------------------------------------------------------------------------------
9,300 SCANA Corp. 314,456
--------------------------------------------------------------------------------------------
5,500 /2/Seagull Energy Corp. 65,656
--------------------------------------------------------------------------------------------
4,400 TCA Cable TV, Inc. 121,825
--------------------------------------------------------------------------------------------
11,600 TECO Energy, Inc. 320,450
--------------------------------------------------------------------------------------------
5,400 Telephone and Data System, Inc. 215,325
--------------------------------------------------------------------------------------------
4,700 Utilicorp United, Inc. 168,906
--------------------------------------------------------------------------------------------
3,300 /2/Vanguard Cellular Systems, Inc., Class A 75,900
--------------------------------------------------------------------------------------------
3,800 Washington Gas Light Co. 100,463
--------------------------------------------------------------------------------------------

Shares or
Principal

Amount Value

- ---------------------------------------------------------------------------------------------------------------------
/1/COMMON STOCKS--continued

Utilities--continued

9,900 Wisconsin Energy Corp. $ 303,188
---------------------------------------------------------------------------------------------------------
3,900 TOTAL 10,995,901
---------------------------------------------------------------------------------------------------------
5,400 TOTAL COMMON STOCKS (IDENTIFIED COST $59,818,816) 74,640,397
---------------------------------------------------------------------------------------------------------
/3/SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.6%

$ 500,000 United States Treasury Bill, 1/7/1999 (identified cost $495,708) 496,395
---------------------------------------------------------------------------------------------------------
/4/REPURCHASE AGREEMENT--9.6%

8,045,000 Westdeutsche Landesbank Girozentrale, 5.42%, dated 10/30/1998, due 11/2/1998

(at amortized cost) 8,045,000

---------------------------------------------------------------------------------------------------------
/5/ TOTAL INVESTMENTS (IDENTIFIED COST $68,359,524) $83,181,792
---------------------------------------------------------------------------------------------------------
</TABLE>

1 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 $8,578,200 at October
31, 1998, which represents 10.3% of net assets. Taking into consideration
these open Index futures contracts, the Fund's effective total exposure to
the Index is 99.5%.

2 Non-income producing security.

3 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.

5 The cost of investments for federal tax purposes amounts to $68,365,977. The
net unrealized appreciation of investments on a federal tax basis amounts to
$14,815,815 which is comprised of $21,439,331 appreciation and $6,623,516
depreciation at October 31, 1998.

Note: The categories of investments are shown as a percentage of net assets
($83,629,583) at October 31, 1998.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1998

<TABLE>

<S> <C> <C>
Assets:

Total investments in securities, at value (identified cost $68,359,524 and

tax cost $68,365,977) $83,181,792
- -------------------------------------------------------------------------------------------
Income receivable 76,976

- -------------------------------------------------------------------------------------------
Receivable for shares sold 291,698

- -------------------------------------------------------------------------------------------
Receivable for daily variation margin 162,975

- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $83,713,441

- ---------------------------------------------------------------------------------------------------------------------
Liabilities:

- -------------------------------------------------------------------------------------------
Payable for shares redeemed $48,399

- -------------------------------------------------------------------------------------------
Payable to bank 3,914

- -------------------------------------------------------------------------------------------
Accrued expenses 31,545

- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 83,858

- ---------------------------------------------------------------------------------------------------------------------
Net Assets for 5,058,637 shares outstanding $83,629,583
- ---------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:

- -------------------------------------------------------------------------------------------
Paid in capital $59,462,308

- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts 15,658,597
- -------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and futures contracts 8,456,514
- -------------------------------------------------------------------------------------------
Undistributed net investment income 52,164

- ---------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $83,629,583

- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:

- -------------------------------------------------------------------------------------------
$83,629,583 (divide) 5,058,637 shares outstanding $16.53
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1998

<TABLE>

<S> <C> <C> <C>
Investment Income:

- --------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $313) $ 889,338
- --------------------------------------------------------------------------
Interest 527,917

- -----------------------------------------------------------------------------------------------------------------
TOTAL INCOME 1,417,255

- -----------------------------------------------------------------------------------------------------------------
Expenses:

- --------------------------------------------------------------------------
Investment advisory fee $ 328,552
- --------------------------------------------------------------------------
Custodian fees 7,034

- --------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 59,794
- --------------------------------------------------------------------------
Directors'/Trustees' fees 4,524

- --------------------------------------------------------------------------
Auditing fees 15,000

- --------------------------------------------------------------------------
Legal fees 2,245

- --------------------------------------------------------------------------
Portfolio accounting fees 42,999

- --------------------------------------------------------------------------
Shareholder services fee 205,345

- --------------------------------------------------------------------------
Share registration costs 26,929

- --------------------------------------------------------------------------
Printing and postage 29,351

- --------------------------------------------------------------------------
Insurance premiums 2,641

- --------------------------------------------------------------------------
Miscellaneous 2,211

- -----------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 726,625

- -----------------------------------------------------------------------------------------------------------------
Waivers:

- --------------------------------------------------------------------------
Waiver of investment advisory fee $ (48,963)
- --------------------------------------------------------------------------
Waiver of shareholder services fee (180,704)

- -----------------------------------------------------------------------------------------------------------------
TOTAL WAIVERS (229,667)

- -----------------------------------------------------------------------------------------------------------------
Net expenses 496,958

- -----------------------------------------------------------------------------------------------------------------
Net investment income 920,297

- -----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments and Futures Contracts:

- --------------------------------------------------------------------------
Net realized gain on investments and futures contracts 8,082,541
- --------------------------------------------------------------------------
Net change in unrealized depreciation of investments (4,576,948)
and futures contracts

- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 3,505,593
- -----------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 4,425,890
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:

- --------------------------------------------------------------------------------------
Operations:

- --------------------------------------------------------------------------------------
Net investment income $ 920,297 $ 750,960
- --------------------------------------------------------------------------------------
Net realized gain on investments and futures contacts

($9,366,731 and $6,019,168, respectively, as computed for federal tax purposes) 8,082,541 6,609,158
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) of investments

and futures contracts (4,576,948) 9,715,619
- ---------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,425,890 17,075,737
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:

- --------------------------------------------------------------------------------------
Distributions from net investment income (969,014) (690,737)
- --------------------------------------------------------------------------------------
Distributions from net realized gains and futures contracts (6,088,545) (2,561,934)
- ---------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (7,057,559) (3,252,671)
- ---------------------------------------------------------------------------------------------------------------------
Share Transactions:

- --------------------------------------------------------------------------------------
Proceeds from sale of shares 81,315,222 42,261,338
- --------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of

distributions declared 4,352,710 1,989,434
- --------------------------------------------------------------------------------------
Cost of shares redeemed (73,280,883) (44,147,633)
- ---------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 12,387,049 103,139
- ---------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS 9,755,380 13,926,205
- ---------------------------------------------------------------------------------------------------------------------
Net Assets:

- --------------------------------------------------------------------------------------
Beginning of period 73,874,203 59,947,998
- ---------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $52,164 and $100,745,

respectively) $ 83,629,583 $ 73,874,203
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1998

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

Investment Valuations

Repurchase Agreements

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

Federal Taxes

When-Issued and Delayed Delivery Transactions

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, 1998, the Fund had outstanding futures contracts as set forth
below:

Contracts to

Expiration Deliver/ Unrealized
Date Receive Position Appreciation

- -------------------------------------------------------------------
<S> <C> <C> <C>

51 S&P 400

December 1998 Index Futures Long $836,329
- -------------------------------------------------------------------
</TABLE>

Use of Estimates

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>

Year Ended October 31 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 4,760,000 2,703,076

- ----------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 268,514 145,409
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed (4,273,514) (2,903,198)
- ----------------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 755,000 (54,713)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT ADVISORY 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
Northern Trust Quantitative Advisors, Inc. (the "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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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, 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 of the 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, 1998, were as follows:

<TABLE>

<S> <C>

- -----------------------------------------------------------------
Purchases $26,823,871

- -----------------------------------------------------------------
Sales $18,350,044

- -----------------------------------------------------------------
</TABLE>

YEAR 2000 (UNAUDITED)

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, 1998, 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 five years in the period then ended. 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.

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, 1998, 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 five years in the period then ended, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Boston, Massachusetts
December 21, 1998

Federated

WORLD-CLASS INVESTMENT MANGER(SM)

Federated
Mid-Cap
Fund

A Portfolio of Federated Index Trust

P R O S P E C T U S

Federated(SM)
Federated Mid-Cap Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Cusip 31420E205

2062304A (12/98)

Federated is a registered mark [RECYCLED

of Federated Investors, Inc. PAPER

1998 (C) Federated Investors, Inc. LOGO] DECEMBER 31, 1998

Statement of Additional Information December 31, 1998

Federated Mid-Cap Fund

[A Portfolio of Federated Index Trust]

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus of Federated Mid-Cap Fund (Fund), dated
December 31, 1998. Obtain the prospectus without charge by calling 1-800-341-
7400.

----------------------------------------------------------------------------
Table of Contents

----------------------------------------------------------------------------
How is the Fund Organized?
Securities in Which the Fund Invests

What Do Shares Cost?
How is the Fund Sold?

Exchanging Securities for Shares

Subaccounting Services
Redemption in Kind

Massachusetts Partnership Law

Account and Share Information
Tax Information
Who Manages and Provides

Services to the Fund?

How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?

Standard & Poor's
Addresses

[Federated Investors Logo]

Federated Securities Corp., Distributor,

subsidiary of Federated Investors, Inc.

CUSIP 31420E205

2062304B (12/98)

HOW IS THE FUND ORGANIZED?

===============================================================================
The Fund is a diversified portfolio of Federated Index Trust (Trust). The Trust
is an open-end, management investment company that was established under the
laws of the Commonwealth of Massachusetts on January 30, 1990. The Trust may
offer separate series of shares representing interests in separate portfolios of
securities. On December 5, 1994, the Trustees changed the name of the Fund from
Mid-Cap Fund to the Federated Mid-Cap Fund.

The Board of Trustees (Board) has established one class of shares of the Fund
(Shares).

SECURITIES IN WHICH THE FUND INVESTS

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

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

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

Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risk.

The Fund may trade in the following types of derivative contracts in an amount
not to exceed 20% of total net assets.

The Fund may:

Buy call options on the Index (in anticipation of an increase in the value of
the underlying asset).

Buy listed put options on the Index, stock index futures contracts, and
portfolio securities (in anticipation of a decrease in the value of the
underlying asset).

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

Buy or write options to close out existing options positions.

Foreign Securities are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S.

Special Transactions

Repurchase Agreements are subject to Credit Risk.

Securities lending activities are subject to Market Risk and Credit Risk.

INVESTMENT RISKS

The following risks relate to investments in equity securities.

Stock Market Risks

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

Risks Related to Company Size

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

. Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more
volatile its price.

. In addition, investing in small capitalization companies entails greater risk
because these companies may have unproven track records, limited product or
service base, limited access to capital and may be more likely to fail than
larger, more established companies.

Sector Risk

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

. Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may perform differently than other sectors or as the market as a
whole. The more significant a sector is in the composition of the Index, the
more the Fund's performance will be susceptible to any economic, business or
other developments which generally affect that sector.

Liquidity Risks

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

Equity securities that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunity making it more
difficult to sell or buy the securities at a favorable price or time. In
response, the Fund may have to lower the price, sell other securities, or give
up an investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

Risk of Foreign Investing

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

. Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

The following risks relate to investments in fixed income securities.

Market Risk

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

. Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

. Interest rate changes have a greater effect on fixed income securities with
longer durations.

Credit Risk

- -----------
. Credit risk is the possibility that an issuer will default (the issuer fails
to repay interest and principal when due). If an issuer defaults, the Fund
will lose money.

Call Risk

- ---------

Liquidity Risks

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

Risks Associated with Non-Investment Grade Securities

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

Risk of Foreign Investing

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

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

Concentration of Investments

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

Writing Covered Call Options

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

Investing in Illiquid Securities

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.

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 in the market in which
they are primarily traded (either a national securities exchange or the over-
the-counter market), 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, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

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

WHAT DO SHARES COST?

===============================================================================

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

HOW IS THE FUND SOLD?

===============================================================================

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

EXCHANGING SECURITIES FOR SHARES

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

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

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

===============================================================================

MASSACHUSETTS PARTNERSHIP LAW

===============================================================================

ACCOUNT AND SHARE INFORMATION

===============================================================================

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights.

As of December 8, 1998, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Charles Schwab & Co.
Inc., San Francisco, California, 12.95% of Shares; Covie Co., Covenant Trust
Company, Chicago, Illinois, 11.85% of Shares; Firnaticia, First National Bank of
Iowa City, Iowa City, Iowa, 5.00% of Shares; and Resources Trust Company, for
the exclusive benefit of various customers of IMS, Englewood, Colorado, 6.10% of
Shares.

TAX INFORMATION

===============================================================================

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

==============================================================================

BOARD OF TRUSTEES

As of December 8, 1998, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John F. Donahue##* Chief Executive Officer and Director or Trustee of the $ 0 $0 for the
Birthdate: July 28, 1924 Federated Fund Complex. Chairman and Director, Federated Trust and
Federated Investors Tower Investors, Inc.; Chairman and Trustee, Federated Advisers, 56 other investment
1001 Liberty Avenue Federated Management, and Federated Research; Chairman and companies
Pittsburgh, PA Director, Federated Research Corp., and Federated Global in the Fund
CHAIRMAN and TRUSTEE Research Corp.; Chairman, Passport Research, Ltd. Complex

Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: February 3, 1934 Director, Member of Executive Committee, Children's Trust and
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, Ernst & 56 other investment
Pittsburgh, PA Young LLP; Director, MED 3000 Group, Inc.; Director, companies
TRUSTEE Member of Executive Committee, University of Pittsburgh. in the Fund
Complex

Realtors ventures in Southwest Florida; formerly: President, Naples in the Fund
3255 Tamiami Trial North Naples, Property Management, Inc. and Northgate Village Complex

FL Development Corporation.

TRUSTEE

Retired: Director, United Refinery; Director, Forbes Fund;
Chairman, Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

J. Christopher Donahue##* President or Executive Vice President of the Federated $ 0 $0 for the
Birthdate: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Trust and
Federated Investors Tower in the Federated Fund Complex; President and Director, 18 other investment
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee, companies
Pittsburgh, PA Federated Advisers, Federated Management, and in the Fund
EXECUTIVE VICE PRESIDENT and Federated Research; President and Director, Federated Complex
TRUSTEE Research Corp. and Federated Global Research Corp.;
President, Passport Research Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated

Services Company.

James E. Dowd, Esq. Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Birthdate: May 18, 1922 Attorney-at-law; Director, The Emerging Germany Fund, Trust and
571 Hayward Mill Road Inc. 56 other investment
Concord, MA companies
TRUSTEE Retired: President, Boston Stock Exchange, Inc.; Regional in the Fund
Administrator, United States Securities and Complex
Exchange Commission.

Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical Trust and
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - 56 other investment
Suite 1111 Downtown; Hematologist, Oncologist, and Internist, companies
Pittsburgh, PA Presbyterian and Montefiore Hospitals; Member, in the Fund
TRUSTEE National Board of Trustees, Leukemia Society of Complex
America.

Edward L. Flaherty, Jr., Esq. # Director or Trustee of the Federated Fund Complex; $2,421.91 $122,362 for the
Birthdate: June 18, 1924 Attorney, of Counsel, Miller, Ament, Henny & Kochuba; Trust and
Miller, Ament, Henny & Kochuba Director, Eat'N Park Restaurants, Inc.; formerly: Counsel, 56 other investment
205 Ross Street Horizon Financial, F.A., Western Region; Partner, Meyer companies
Pittsburgh, PA and Flaherty. in the Fund Complex

TRUSTEE

Peter E. Madden Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: March 16, 1942 formerly: Representative, Commonwealth of Trust and
One Royal Palm Way Massachusetts General Court; President, State Street 56 other investment
100 Royal Palm Way Bank and Trust Company and State Street Corporation. companies
Palm Beach, FL in the Fund Complex
TRUSTEE Retired: Director, VISA USA and VISA International;
Chairman and Director, Massachusetts Bankers
Association; Director, Depository Trust Corporation.

John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
S.J.D. President, Law Professor, Duquesne University; Trust and
Birthdate: December 20, 1932 Consulting Partner, Mollica & Murray. 56 other investment
President, Duquesne University companies
Pittsburgh, PA Retired: Dean and Professor of Law, University of in the Fund
TRUSTEE Pittsburgh School of Law; Dean and Professor of Law, Complex
Villanova University School of Law.

Wesley W. Posvar Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: September 14, 1925 President, World Society of Ekistics, Athens; Professor, Trust and
1202 Cathedral of Learning International Politics; Management Consultant; Trustee, 56 other investment
University of Pittsburgh Carnegie Endowment for International Peace, RAND companies
Pittsburgh, PA Corporation, Online Computer Library Center, Inc., in the Fund
TRUSTEE National Defense University and U.S. Space Foundation; Complex
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.

Retired: Professor, United States Military Academy;
Professor, United States Air Force Academy.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust and
4905 Bayard Street 56 other investment
Pittsburgh, PA Retired: National Spokesperson, Aluminum Company of companies
TRUSTEE America; business owner. in the Fund
Complex

Glen R. Johnson Trustee, Federated Investors, Inc.; staff member, $ 0 $0 for the
Birthdate: May 2, 1929 Federated Securities Corp. Trust and
Federated Investors Tower 8 other investment
1001 Liberty Avenue companies
Pittsburgh, PA in the Fund
PRESIDENT Complex

Edward C. Gonzales Trustee or Director of some of the Funds in the $ 0 $0 for the
Birthdate: October 22, 1930 Federated Fund Complex; President, Executive Vice Trust and
Federated Investors Tower President and Treasurer of some of the Funds in the 1 other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated companies
Pittsburgh, PA Investors, Inc.; Vice President, Federated Advisers, in the Fund
EXECUTIVE VICE PRESIDENT Federated Management, Federated Research, Complex
Federated Research Corp., Federated Global Research
Corp. and Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.

John W. McGonigle Executive Vice President and Secretary of the $ 0 $0 for the
Birthdate: October 26, 1938 Federated Fund Complex; Executive Vice President, Trust and
Federated Investors Tower Secretary, and Director, Federated Investors, Inc.; 56 other investment
1001 Liberty Avenue Trustee, Federated Advisers, Federated Management, companies
Pittsburgh, PA and Federated Research; Director, Federated Research in the Fund
EXECUTIVE VICE PRESIDENT and Corp. and Federated Global Research Corp.; Director, Complex
SECRETARY Federated Services Company; Director, Federated
Securities Corp.

Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $ 0 $0 for the
Birthdate: June 17, 1954 President - Funds Financial Services Division, Federated Trust and
Federated Investors Tower Investors, Inc.; Formerly: various management positions 56 other investment
1001 Liberty Avenue within Funds Financial Services Division of Federated companies
Pittsburgh, PA Investors, Inc. in the Fund
TREASURER Complex

Richard B. Fisher President or Vice President of some of the Funds in the $ 0 $0 for the
Birthdate: May 17, 1923 Federated Fund Complex; Director or Trustee of some of Trust and
Federated Investors Tower the Funds in the Federated Fund Complex; Executive 6 other investment
1001 Liberty Avenue Vice President, Federated Investors, Inc.; Chairman and companies
Pittsburgh, PA Director, Federated Securities Corp. in the Fund
VICE PRESIDENT Complex

J. Thomas Madden Chief Investment Officer of this Fund and various other $ 0 $0 for the
Birthdate: October 22, 1945 Funds in the Federated Fund Complex; Executive Vice Trust and
Federated Investors Tower President, Federated Investment Counseling, Federated 12 other investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, Federated companies
Pittsburgh, PA Management, Federated Research, and Passport in the Fund
CHIEF INVESTMENT OFFICER Research, Ltd.; Vice President, Federated Investors, Inc.; Complex
Formerly: Executive Vice President and Senior Vice
President, Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Research Corp., Federated
Advisers, Federated Management, Federated
Research, and Passport Research, Ltd.

Thomas M. Franks Vice President, Federated Investment Counseling, $ 0 $0 for the
Birthdate: December 15, 1954 Federated Advisers, Federated Global Research Corp., Trust and
Federated Investors Tower Federated Management, Federated Research, no other investment
1001 Liberty Avenue Federated Research Corp. and Passport Research, Ltd. companies
Pittsburgh, PA in the Fund
SENIOR PORTFOLIO Complex
MANAGER/VICE PRESIDENT

</TABLE>

## Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President
and Trustee of the Trust.

+ Mr. Constantakis became a member of the Board of Trustees on February 23,
1998. He did not earn any fees for serving the Fund Complex since these fees are
reported as of the end of the last calendar year.

INVESTMENT MANAGER

The Manager oversees the Sub-Manager, Northern Trust Quantitative Advisors,
Inc., a subsidiary of Northern Trust Corporation, which conducts investment
research and makes investment decisions for the Fund. The directors of the Sub-
Manager are James M. Snyder, Perry R. Pero, Sheila A. Penrose, John R. Goodwin,
Stephen N. Potter and Jeffrey H. Wessel. The officers of the Sub-Manager are
James M. Snyder, Chief Executive Officer, Jeffrey H. Wessel, President and John
R. Goodwin, Chief Investment Officer.

BROKERAGE TRANSACTIONS

ADMINISTRATOR

Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds

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

0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million

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

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT AUDITORS

Ernst & Young LLP is the independent auditor for the Fund.

FEES PAID BY THE FUND FOR SERVICES

For the Year ended
October 31,

1998 1997 1996
<S> <C> <C> <C>
Management Fee Earned..... $328,552 $252,801 $225,754
Management Fee Reduction.. $ 48,963 $ 55,019 $ 79,194
Brokerage Commissions..... $ 19,694 $ 19,222 $ 23,672

Shareholder Services Fee.. $ 24,641

</TABLE>

HOW DOES THE FUND MEASURE PERFORMANCE?

===============================================================================
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Average Annual Total Returns and Yield
Total returns given for the one-, five- and

since inception periods ended October 31, 1998.
Yield given for the 30-day period ended October 31, 1998.

Total Return Yield

- ------------------------------------------------
<S> <C>
One Year: 5.73% 1.15%

Five Year: 14.44%
Since Inception

(November 5, 1992): 15.12%

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

</TABLE>

TOTAL RETURN

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

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

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

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

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

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

Standard & Poor's Daily Stock Price Index of 500 and 400 Common Stocks .
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 S &
P 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 the S & P figures.

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.

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.

WHO IS FEDERATED INVESTORS, INC.?

==============================================================================

FEDERATED FUNDS OVERVIEW

Equity funds. In the equity sector, Federated has more than 27 years'
experience. As of

Vice Presidents of the Federated advisory companies.

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

FEDERATED CLIENTS OVERVIEW

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.

ADDRESSES

===============================================================================
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

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

Investment Manager

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

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

Sub-Manager 50 South LaSalle Street
Northern Trust Quantitative Advisors, Inc. Chicago, IL 60675

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

Custodian

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

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600

Boston, MA 02266-8600

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

Independent Auditors

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

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

Statement of Additional Information December 31, 1998

Federated Mini-Cap Fund

[A Portfolio of Federated Index Trust]

Institutional Shares, Class C Shares

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Institutional Shares and Class C
Shares of Federated Mini-Cap Fund (Fund), dated December 31, 1998. Obtain the
prospectuses without charge by calling 1-800-341-7400.

-----------------------------------------------------------------------------
Table of Contents

How is the Fund Organized?
Securities in Which the Fund Invests

What Do Shares Cost?
How is the Fund Sold?

Exchanging Securities for Shares

Subaccounting Services
Redemption in Kind

Massachusetts Partnership Law

Account and Share Information
Tax Information
Who Manages and Provides

Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Investment Ratings

[Federated Investors Logo]

Federated Securities Corp., Distributor,

subsidiary of Federated Investors, Inc.

CUSIP 31420E601

CUSIP 31420E304

[Product Code] (12/98)

HOW IS THE FUND ORGANIZED?

================================================================================

The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Shares and Class C Shares (Shares). This SAI
relates to all of the above-mentioned Shares.

SECURITIES IN WHICH THE FUND INVESTS

================================================================================

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

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

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

Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risk.

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). Some
GSEs are supported by the full faith and credit of the United States. Other
GSEs receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Investors
regard agency securities as having low credit risk, but not as low as Treasury
securities.

The Fund may trade in the following types of derivative contracts in an amount
not to exceed 20% of total net assets.

The Fund may:

Buy call options on the Index, stock index futures contracts, and portfolio
securities (in anticipation of an increase in the value of the underlying
asset).

Buy listed put options on the Index, stock index futures contracts, and
portfolio securities (in anticipation of a decrease in the value of the
underlying asset).

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

Buy or write options to close out existing options positions.

Foreign Securities are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S.

Special Transactions

Repurchase Agreements are subject to Credit Risk.

Securities lending activities are subject to Market Risk and Credit Risk.

INVESTMENT RISKS

The following additional risks relate to investments in equity securities.

Stock Market Risks

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

Risks Related to Company Size

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

. Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more
volatile its price.

Sector Risk

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

Liquidity Risks

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

Equity securities that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunity making it more
difficult to sell or buy the securities at a favorable price or time. In
response, the fund may have to lower the price, sell other securities, or give
up an investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

Risk of Foreign Investing

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

. Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

The following risks relate to investments in fixed income securities.

Market Risk

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

. Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

. Interest rate changes have a greater effect on fixed income securities with
longer durations.

Credit Risk

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

. Credit risk is the possibility that an issuer will default (the issuer fails
to repay interest and principal when due). If an issuer defaults, the Fund
will lose money.

Call Risk

- ---------

Liquidity Risks

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

Risks Associated with Noninvestment Grade Securities

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

Risk of Foreign Investing

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

<PAGE>

INVESTMENT LIMITATIONS

Investing in Commodities

Selling Short and Buying on Margin

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

Issuing Senior Securities and Borrowing Money

Pledging Assets

Diversification of Investments

Concentration of Investments

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

Writing Covered Call Options

Investing in Put Options

Acquiring Securities

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.

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.

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 in the market in which
they are primarily traded (either a national securities exchange or the over-
the-counter market), 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 all other securities, at fair value as determined in good faith by the
Board.

WHAT DO SHARES COST?

================================================================================

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE (Class C Shares)

These reductions or eliminations are offered because no sales commissions have
been advanced to the investment professionals selling Shares; the shareholder
has already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales
efforts are associated with the original purchase of Shares.

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

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

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

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

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

HOW IS THE FUND SOLD?

================================================================================

RULE 12B-1 PLAN (Class C Shares)

For some classes of shares, the Fund may compensate the Distributor more or less
than its actual marketing expenses. In no event will the Fund pay for any
expenses of the Distributor that exceed the maximum Rule 12b-1 Plan fee.

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

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

When an investment professional's customer purchases shares, the investment
professional may receive an amount up to 1.00% of the NAV of C Shares.

EXCHANGING SECURITIES FOR SHARES

================================================================================

SUBACCOUNTING SERVICES

================================================================================

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

REDEMPTION IN KIND

================================================================================

MASSACHUSETTS PARTNERSHIP LAW

================================================================================

ACCOUNT AND SHARE INFORMATION

================================================================================

VOTING RIGHTS

As of December 8, 1998, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Charles Schwab & Co.,
Inc., San Francisco, California, 17.41% of Institutional Shares; Resources Trust
Company, for the exclusive benefit of various customers of IMS, Englewood,
Colorado, 5.16% of Institutional Shares; Merrill Lynch Pierce Fenner & Smith,
for the sole benefit of its customers, Jacksonville, Florida, 38.42% of Class C
Shares; A.G. Edwards & Sons Inc. C/F Noblesville, Indiana, 8.65% of Class C
Shares.

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

TAX INFORMATION

================================================================================

FEDERAL INCOME TAX

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

The Fund is entitled to a loss carry-forward, which may reduce the taxable
income or gain that the Fund would realize, and to which the shareholder would
be subject, in the future.

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

================================================================================

BOARD OF TRUSTEES

As of December 8, 1998, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Institutional Shares and Class C Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as

defined in the Investment Company Act of 1940. The following symbol (#) denotes

a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

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

TRUSTEE

TRUSTEE Fund Complex

Retired: Director, United Refinery; Director, Forbes Fund;
Chairman, Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

</TABLE>

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
J. Christopher Donahue##* President or Executive Vice President of the Federated $0 $0 for the
Birthdate: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Trust and
Federated Investors Tower in the Federated Fund Complex; President and Director, 18 other investment
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee, companies in the
Pittsburgh, PA Federated Advisers, Federated Management, and Fund Complex
EXECUTIVE VICE PRESIDENT Federated Research; President and Director, Federated
and TRUSTEE Research Corp. and Federated Global Research Corp.;

President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated

Services Company.

Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical Trust and
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - 56 other investment
Suite 1111 Downtown; Hematologist, Oncologist, and Internist, companies in the
Pittsburgh, PA Presbyterian and Montefiore Hospitals; Member, Fund Complex
TRUSTEE National Board of Trustees, Leukemia Society of
America.

TRUSTEE

</TABLE>

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
Wesley W. Posvar Director or Trustee of the Federated Fund Complex; $2,201.44 $111,222 for the
Birthdate: September 14, 1925 President, World Society of Ekistics, Athens; Professor, Trust and
1202 Cathedral of Learning International Politics; Management Consultant; Trustee, 56 other investment
University of Pittsburgh Carnegie Endowment for International Peace, RAND companies in the
Pittsburgh, PA Corporation, Online Computer Library Center, Inc., Fund Complex

TRUSTEE 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.
Retired: Professor, United States Military Academy;
Professor, United States Air Force Academy.

Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the
Birthdate: October 22, 1930 Federated Fund Complex; President, Executive Vice Trust and
Federated Investors Tower President and Treasurer of some of the Funds in the 1 other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated companies in the
Pittsburgh, PA Investors, Inc.; Vice President, Federated Advisers, Fund Complex
EXECUTIVE VICE PRESIDENT 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.

Securities Corp.

</TABLE>

Name Total
Birthdate Aggregate Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past 5 Years From Trust Fund Complex
- ------------------- ------------------------------------------------------------ ------------ -------------------
<S> <C> <C> <C>
J. Thomas Madden Chief Investment Officer of this Fund and various other $0 $0 for the
Birthdate: October 22, 1945 Funds in the Federated Fund Complex; Executive Vice Trust and
Federated Investors Tower President, Federated Investment Counseling, Federated 12 other investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, Federated companies in the
Pittsburgh, PA Management, Federated Research, and Passport Fund Complex
CHIEF INVESTMENT OFFICER Research, Ltd.; Vice President, Federated Investors, Inc.;
Formerly: Executive Vice President and Senior Vice
President, Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Research Corp., Federated
Advisers, Federated Management, Federated Research,

and Passport Research, Ltd.

Thomas M. Franks Vice President, Federated Investment Counseling, $0 $0 for the
Birthdate: December 15, 1954 Federated Advisers, Federated Global Research Corp., [Trust/Corporation]
Federated Investors Tower Federated Management, Federated Research, Federated and no other
1001 Liberty Avenue Research Corp. and Passport Research, Ltd. investment
Pittsburgh, PA companies in the
SENIOR PORTFOLIO MANAGER/ Fund Complex
VICE PRESIDENT

</TABLE>

## Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President
and Trustee of the Trust.

INVESTMENT MANAGER

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

The Manager oversees the Sub-Manager, Northern Trust Quantitative Advisors,
Inc., a subsidiary of Northern Trust Corporation, which conducts investment
research and makes investment decisions for the Fund. The directors of the Sub-
Manager are James M. Snyder, Barry G. Hastings, Perry R. Pero, Sheila A.
Penrose, John R. Goodwin, Stephen N. Potter and Jeffrey H. Wessel. The
executive officers of the Sub-Manager are James M. Snyder, Chief Executive
Officer and Jeffrey H. Wessel, President and John R. Goodwin, Chief Investment
Officer.

BROKERAGE TRANSACTIONS

Investment decisions for the Fund are made independently from those of other
accounts managed by the Manager. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Manager to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds

------------------ -----------------------------
<S> <C>

0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

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

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT AUDITORS

Ernst & Young LLP is the independent auditor for the Fund.

FEES PAID BY THE FUND FOR SERVICES

For the Year ended
October 31,

1998 1997 1996
<S> <C> <C> <C>
Management Fee Earned..... $676,597 $695,438 $736,307
Management Fee Reduction.. $ 0 $ 0 $ 22,506
Brokerage Commissions..... $ 83,725 $153,319 $146,470

12b-1 Fee.................
Class C Shares........ $ 2,347
Shareholder Services Fee..
Institutional Shares.. $162,008
Class C Shares........ $ 782
</TABLE>

HOW DOES THE FUND MEASURE PERFORMANCE?

================================================================================

Average Annual Total Returns and Yield

Total returns given for the one-, five- and since inception periods ended
October 31, 1998.
Yield given for the 30-day period ended October 31, 1998.

- --------------------------------------------------------------
Institutional Class C Shares
Shares

- --------------------------------------------------------------
Total Return

- --------------------------------------------------------------
<S> <C> <C>
One Year: (13.46)% N/A
Five Year: 7.95% N/A
Since Inception: 10.74%* (15.24)%*

- --------------------------------------------------------------
Yield

- --------------------------------------------------------------
0.96% 0.19%
- --------------------------------------------------------------
</TABLE>

*Institutional Shares inception date was August 11, 1992.
Class C Shares inception date was November 10, 1997.

TOTAL RETURN

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

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

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

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

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

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

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

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.

WHO IS FEDERATED INVESTORS, INC.?

================================================================================

FEDERATED FUNDS OVERVIEW

Equity funds. In the equity sector, Federated has more than 27 years'
experience. As of

Vice Presidents of the Federated advisory companies.

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

FEDERATED CLIENTS OVERVIEW

Institutional Clients. Federated meets the needs of

approximately 900 institutional clients nationwide by managing and servicing
separate accounts and mutual funds for a variety of purposes, including defined
benefit and defined contribution programs, cash management, and asset/liability
management. Institutional clients include corporations, pension funds, tax-
exempt entities, foundations/endowments, insurance companies, and investment and
financial advisers. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division, 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.

ADDRESSES

================================================================================

<TABLE>

<S> <C>

Federated Mini-Cap Fund
Institutional Shares, Class C Shares

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

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

Distributor

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

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

Investment Manager

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

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

Sub-Manager 50 South LaSalle Street
Northern Trust Quantitative Advisors, Inc. Chicago, IL 60675

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

Custodian

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

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600

Boston, MA 02266-8600

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

Independent Auditors

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

</TABLE>

Federated Mini-Cap Fund

A Portfolio of Federated Index Trust

CLASS C SHARES

A mutual fund seeking to provide investment results generally corresponding to
the aggregate price and dividend performance of publicly-traded common stocks
comprising the Russell 2000(R) Index (Index).

The Fund is neither affiliated with nor promoted, sponsored, or endorsed by the
Frank Russell Company. Frank Russell's only relationship to the Fund is the
licensing of the use of the Index. Frank Russell Company is the owner of the
trademarks and copyrights relating to the Index. The Russell 2000(R) Index is a
trademark/service mark of the Frank Russell Company. Russell(TM) 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.

CONTENTS
<TABLE>

<S> <C>
Risk/Return Summary 1

- -------------------------------------------------------------------------------
What are the Fund's Fees and Expenses? 3
- -------------------------------------------------------------------------------
What are the Fund's Investment Strategies? 4
- -------------------------------------------------------------------------------
What are the Principal Securities in Which the Fund Invests? 4
- -------------------------------------------------------------------------------
What are the Specific Risks of Investing in the Fund? 4
- -------------------------------------------------------------------------------
What do Shares Cost? 5

- -------------------------------------------------------------------------------
How is the Fund Sold? 6

- -------------------------------------------------------------------------------
How to Purchase Shares 6

- -------------------------------------------------------------------------------
How to Redeem and Exchange Shares 8
- -------------------------------------------------------------------------------
Account and Share Information 10

- -------------------------------------------------------------------------------
Who Manages the Fund? 11

- -------------------------------------------------------------------------------
Financial Information 12

- -------------------------------------------------------------------------------
</TABLE>

DECEMBER 31, 1998

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in small capitalization common
stocks comprising the Russell 2000 Index (the "Index").

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

The value of the stocks in the Fund's portfolio will go up and down. These
fluctuations could be a sustained trend or a drastic movement. Fluctuations in
the Fund's portfolio may reflect changes in individual portfolio stocks or
general changes in stock valuations and will result in changes in the Fund's
share price. The Fund's investment manager (manager) attempts to manage market
risk through diversification by limiting the amount the Fund invests in each
stock. Other risks of investing in the Fund include risks related to company
size, sector risks and liquidity risks.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Shares as of the calendar
year-end for each of the last five years.

The `y' axis reflects the "% Total Return" beginning with -5% and
increasing in increments of 5% up to 30%.

The `x' axis represents calculation periods from the earliest calendar year
end of the Institutional Shares' start of business through the calendar year
ended December 31, 1997. The light gray shaded chart features five distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Institutional Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1993 through 1997 are: 15.29%, -2.84%, 26.34%, 15.31% and 20.26%,
respectively.

The total returns shown here are for Institutional Shares which is another class
of shares offered by Federated Mini-Cap Fund. Institutional Shares are not
offered in this prospectus for the Fund's Class C Shares. The total returns for
Institutional Shares are disclosed here because Class C Shares have only been
offered since November 10, 1997. These total returns would be substantially
similar to the annual returns for Class C Shares over the same period and would
differ only to the extent that the two classes do not have the same expenses. It
is anticipated that expenses of Class C Shares will exceed those of the
Institutional Shares.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.

The Fund's Institutional Shares total return from January 1, 1998 to September
30, 1998 was (17.14%).

Within the period shown in the chart, the Fund's highest quarterly return was
15.83% (quarter ended June 30, 1997). Its lowest quarterly return was (5.62%)
(quarter ended March 31, 1997).

Average Annual Total Return

Calendar Period Institutional Russell
Shares 2000(R)

<S> <C> <C>
1 Year 20.36% 22.36%
5 Years 14.45% 16.41%
Life of Fund/1/ 15.71% 17.15%

</TABLE>

1 Since inception date of August 11, 1992

The table shows the Fund's Institutional Shares average annual total returns
averaged over a period of years relative to the Russell 2000(R) Index, a broad-
based market index, for the calendar periods ending December 31, 1997. Past
performance does not necessarily predict future performance. This information
provides you with historical performance information so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

What are the Fund's Fees and Expenses?

FEDERATED MINI-CAP FUND

FEES AND EXPENSES

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

Shareholder Fees

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

Annual Fund Operating Expenses

Expenses That are Deducted from Fund Assets (as a percentage of average net assets)

Management Fee 0.50%
Distribution (12b-1) Fee 0.75%
Shareholder Service Fee 0.25%
Other Expenses 0.22%
Total Actual Annual Fund Operating Expenses 1.72%
</TABLE>

EXAMPLE

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

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

Class C Shares 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>

Expenses assuming

redemption $275 $542 $933 $2,030
Expenses assuming no
redemption $175 $542 $933 $2,030
</TABLE>

What are the Fund's Investment Strategies?

The Fund pursues its investment objective by investing in the stocks of the
Index in the same weights as the Index. This is called a "full replication"
strategy. Market capitalization is determined by multiplying the number of
outstanding shares by the current market price per share. As of September 30,
1998, the capitalization range of the Index was $222 million to $1.4 billion. As
of the same date, the weighted median market capitalization of the Fund was $613
million.

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in Which the Fund Invests?

Common Stocks

Stock Index Futures

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

Risks Related to Company Size

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price.

In addition, investing in small capitalization companies entails greater risk
because these companies may have unproven track records, limited product or
service base, limited access to capital and may be more likely to fail than
larger, more established companies.

SECTOR RISK

LIQUIDITY RISKS

What do Shares Cost?

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

The Fund's current NAV and public offering price may be found in the mutual
fund section of local newspapers under "Federated" and the appropriate class
designation listing.

Minimum Initial/ Maximum Sales Charge
Subsequent Front-End Contingent Deferred

Shares Offered Investment Amounts/1/ Sales Charge Sales Charge/2/
<S> <C> <C> <C>
Class C $1,500/$100 None 1.00%

</TABLE>

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

2 See "Sales Charge When You Redeem".

SALES CHARGE WHEN YOU REDEEM

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

Class C Shares

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

You Will Not be Charged a CDSC When Redeeming Shares:
. purchased with reinvested dividends or capital gains;

. purchased within 120 days of redeeming Shares of an equal or lesser amount;
. that you exchanged into the same share class of another Federated Fund where

the shares were held for the applicable CDSC holding period (other than a
money market fund);

. purchased through investment professionals that did not receive advanced
sales payments; or

. if after you purchase Shares you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

. if the Fund redeems your Shares and closes your account for
. not meeting the minimum balance requirement;
. if your redemption is a required retirement plan distribution;
. upon the death of the last surviving shareholder(s)

To keep the sales charge as low as possible,
the Fund redeems your shares in the following order:

. Shares that are not subject to a CDSC;

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

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Class C Shares each
representing interests in a single portfolio of securities.

This prospectus relates only to Class C Shares. Each share class has different
sales charges and other expenses, which affect their performance. Contact your
investment professional or call 1-800- 341-7400 for more information concerning
the other class.

The Fund's Distributor, Federated Securities Corp. markets the Shares described
in this prospectus to institutions or individuals, directly or through
investment professionals. When the Distributor receives marketing fees, it may
pay some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

How to Purchase Shares

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before the end of

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

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

DIRECTLY FROM THE FUND

. Establish your account with the Fund by submitting a completed New Account

Form; and

. Send your payment to the Fund by Federal Reserve wire or check.

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

By Wire
Send your wire to:

State Street Bank and Trust Company

Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or
Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

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

By Check

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

Federated Shareholder Services Company

P.O. Box 8600
Boston, MA 02266-8600

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

Federated Shareholder Services Company

1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

THROUGH AN EXCHANGE

BY SYSTEMATIC INVESTMENT PROGRAM

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

BY AUTOMATED CLEARINGHOUSE (ACH)

RETIREMENT INVESTMENTS

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

By Mail

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

You will receive a redemption amount based on the next calculated NAV
after the Fund receives your written request in proper form. Send requests by
mail to:

Federated Shareholder Services Company

P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company

1099 Hingham Street
Rockland, MA 02370-3317

All requests must include:

registration into which you are exchanging.

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within

the last thirty days;

. a redemption is payable to someone other than the shareholder(s) of record;

. if exchanging (transferring) into another fund with a different shareholder
registration.

PAYMENT METHODS FOR REDEMPTIONS

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;
. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

EXCHANGE PRIVILEGES

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

. ensure that the account registrations are identical;

. meet any minimum initial investment requirements; and
. receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account And Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

Dividends are taxable as ordinary income; capital gains are taxable at different
rates depending upon the length of time the Fund holds its assets.
Fund distributions are expected to be both dividends and capital gains.

Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Who Manages the Fund?

The Manager receives an annual management fee equal to 0.50% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Manager delegates daily management of the Fund assets to the Sub-Manager,
who is paid by the Manager and not by the Fund, based on net assets under
management. The Sub-Manager develops, maintains and runs the computer program
designed to determine which securities are purchased and sold to replicate the
composition of the Index. The Sub-Manager has complete discretion, subject to
the Manager's oversight, to purchase and sell portfolio securities for the Fund.
The Sub- Manager's address is 50 South LaSalle Street, Chicago, IL 60675.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub-Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non-financial institution clients invest. In total, the Sub-Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

YEAR 2000 READINESS

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities,
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets. The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

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

Financial Highlights_Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 79.

Period Ended October 31 19981
<S> <C>
Net Asset Value, Beginning of Period $ 16.75

Income from Investment Operations:

Net investment income 0.004
Net realized and unrealized loss on investments and futures contracts (2.25)
TOTAL FROM INVESTMENT OPERATIONS (2.25)
Less Distributions:
Distributions from net investment income (0.04)
Distributions from net realized gain on investments and futures contracts (1.46)
TOTAL DISTRIBUTIONS (1.50)
Net Asset Value, End of Period $ 13.00
Total Return/2/ (14.47%)

Ratios to Average Net Assets:

Expenses 1.72%/3/
Net investment income 0.00%/3/

Supplemental Data:

Net assets, end of period (000 omitted) $ 1,101
Portfolio turnover 48%
</TABLE>

1 Reflects operations for the period from November 10, 1997 (date of initial
public investment) to October 31, 1998.

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

3 Computed on an annualized basis.

4 Amount of net investment income per share does not round to $0.01.

See Notes which are an integral part of the Financial Statements

INSERT FINANCIALS FROM 61346

Federated Mini-Cap Fund

A Portfolio of Federated Index Trust

CLASS C SHARES

DECEMBER 31, 1998

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

Investment Company Act File No. 811-6061

Cusip 31420E601

G01169-01 (12/98)

PORTFOLIO OF INVESTMENTS

OCTOBER 31, 1998

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>

/1/COMMON STOCKS--85.4%
Basic Industry--5.6%

6,000 AK Steel Holding Corp. $ 103,875
3,250 AMCOL International Corp. 32,906
4,900 ASARCO, Inc. 105,044
4,900 /2/AgriBioTech, Inc. 70,131
8,200 /2/Airgas, Inc. 94,300
2,224 Albany International Corp., Class A 40,588
2,535 Albemarle Corp. 48,323
600 Ameron, Inc. 21,863
4,100 Aptargroup, Inc. 109,675
11,900 /2/Armco, Inc. 56,525
3,600 BMC Industries, Inc. 25,875
800 /2/BWay Corp. 13,700
4,000 Ball Corp. 168,750
1,200 /2/Barnett, Inc. 16,800
30,200 Battle Mountain Gold Co. 164,213
17,006 /2/Bethlehem Steel Corp. 153,054
3,700 Birmingham Steel Corp. 19,194
2,800 Brady (W.H.) Co. 64,400
2,100 Brush Wellman, Inc. 35,700
4,800 /2/Building One Services Corp. 59,400
8,100 /2/Burlington Industries, Inc. 74,925
4,300 /2/Cadiz, Inc. 34,938
2,600 CalMat Co. 60,938
4,600 Calgon Carbon Corp. 32,488
3,000 Cambrex Corp. 76,688
3,300 Caraustar Industries, Inc. 78,375
1,100 /2/Carbide/Graphite Group, Inc. 13,750
2,700 Carpenter Technology Corp. 94,669
1,200 Centex Construction Products, Inc. 40,350
1,600 Century Aluminium Co. 15,800
1,100 Chemed Corp. 34,788
2,600 Chesapeake Corp. 91,000
1,400 /2/Chirex, Inc. 21,350
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Basic Industry--continued

1,400 Cleveland Cliffs, Inc. $ 55,563
8,000 /2/Collins & Aikman Corp. 55,500
1,600 Columbus McKinnon Corp. 26,400
3,000 /2/Cone Mills Corp. 12,000
4,700 Corn Products International, Inc. 133,950
1,200 Culp, Inc. 8,700
1,900 /2/Dan River, Inc., Class A 16,506
4,300 Dekalb Genetics Corp., Class B 393,988
1,600 Deltic Timber Corp. 39,100
3,000 Dexter Corp. 87,750
5,100 Donaldson Co., Inc. 92,756
3,600 /2/Earthshell Corp. 33,075
1,800 Elcor Corp. 52,200
2,000 /2/Embrace Systems Corp. 875
8,200 Ethyl Corp. 45,100
4,900 Ferro Corp. 124,950
1,800 Florida Rock Industries, Inc. 44,663
1,900 Foamex International, Inc. 20,781
1,800 Fuller (H.B.) Co. 74,025
2,400 Furon Co. 38,100
1,600 /2/Galey & Lord, Inc. 21,800
6,800 /2/Gaylord Container Corp. 20,400
1,200 General Chemical Group, Inc. 21,375
3,100 Geon Co. 67,231
4,100 Georgia Gulf Corp. 69,956
4,058 /2/Getchell Gold Corp. 71,015
1,200 /2/Giant Cement Holding, Inc. 25,050
3,300 Glatfelter (P.H.) Co. 40,631
1,900 Greif Brothers Corp., Class A 60,800
2,400 Guilford Mills, Inc. 30,000
5,800 Hanna (M.A.) Co. 85,188
7,200 /2/Hecla Mining Co. 32,400
5,300 /2/Imation Corp. 93,744
2,000 Imco Recycling, Inc. 27,625
6,484 Inland Steel Industries, Inc. 118,333
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Basic Industry--continued

2,100 /2/Ionics, Inc. $ 65,100
2,300 /2/Ivex Packaging Corp. 40,681
1,900 J&L Specialty Steel, Inc. 11,519
3,800 /2/Kaiser Aluminum Corp. 23,988
13,100 LTV Corp. 80,238
3,300 Lawter International, Inc. 25,163
1,150 Learonal 25,372
2,950 Lilly Industries, Inc., Class A 56,603
1,300 Lone Star Industries, Inc. 91,569
3,000 /2/Lone Star Technologies, Inc. 31,875
6,800 Longview Fibre Co. 81,600
2,100 /2/Lydall, Inc. 21,263
1,900 MacDermid, Inc. 69,588
600 /2/Maxxam, Inc. 31,763
1,100 /2/McWhorter Technologies, Inc. 22,413
3,400 Metal Management, Inc. 11,263
400 Mine Safety Appliances Co. 28,100
2,600 Minerals Technologies, Inc. 118,463
3,669 Mississippi Chemical Corp. 52,971
200 /2/Mycogen Corp. 5,588
200 NCH, Corp. 13,700
2,800 NL Industries, Inc. 39,725
2,700 /2/NS Group, Inc. 18,900
2,800 National Steel Corp., Class B 18,025
3,150 OM Group, Inc. 102,769
1,900 /2/Octel Corp. 27,431
2,900 Oregon Steel Mills 35,525
4,696 /2/Paxar Corp. 42,558
1,000 Penford Corp. 14,000
3,600 /2/Polymer Group, Inc. 31,725
3,800 Potlatch Corp. 138,700
600 Puerto Rican Cement Co., Inc. 25,800
1,700 /2/Quaker Fabric Corp. 11,688
1,900 Quanex Corp. 32,063
3,700 Rayonier, Inc. 144,994
1,100 Republic Group, Inc. 16,294
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Basic Industry--continued

1,400 Roanoke Electric Corp. $ 20,300
1,550 Rock-Tenn Co. 17,050
1,000 /2/Rogers Corp. 24,063
1,100 Rouge Industries, Inc., Class A 10,313
1,300 Schawk, Inc. 17,956
700 Schnitzer Steel Industries, Inc., Class A 10,850
4,600 Schulman (A.), Inc. 91,425
2,850 /2/Shorewood Packaging Corp. 45,600
1,600 /2/Silgan Holdings, Inc. 40,000
3,300 Southern Peru Copper Corp. 39,394
1,700 Spartech Corp. 30,600
1,600 Springs Industries, Inc., Class A 56,600
4,700 /2/Steel Dynamics, Inc. 64,038
900 Stepan Co. 22,725
2,400 /2/Stillwater Mining Co. 77,700
2,900 /2/Syntroleum Corp. 27,731
1,100 Tejon Ranch Co. 25,850
4,200 Terra Industries, Inc. 31,500
2,800 Texas Industries, Inc. 82,775
2,900 Titanium Metals Corp. 30,269
600 Tremont Corp. 22,163
2,000 Universal Forest Products, Inc. 32,250
2,200 /2/WHX Corp. 26,125
4,400 Wellman, Inc. 55,275
1,400 /2/Zoltek Cos., Inc. 21,000
-------------------------------------------------------------------------------------------
TOTAL 6,748,474

-------------------------------------------------------------------------------------------
Consumer Durables--3.7%

5,700 /2/Acclaim Entertainment, Inc. 45,600
1,900 /2/Action Performance Cos., Inc. 56,763
2,700 /2/Aftermarket Technology Co. 16,875
1,737 /2/American Homestar Corp. 28,443
3,700 Apogee Enterprises, Inc. 38,850
2,750 Arctic Cat, Inc. 25,438
3,000 Arvin Industries, Inc. 118,875
800 /2/Avatar Holdings, Inc. 14,500
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Consumer Durables--continued

1,800 Bandag, Inc. $ 63,675
2,000 Barnes Group, Inc. 52,500
1,700 Bassett Furniture Industries, Inc. 38,675
2,900 Borg-Warner Automotive, Inc. 135,938
2,100 Breed Technologies, Inc. 17,719
3,200 Briggs & Stratton Corp. 150,400
1,300 Bush Industries, Inc., Class A 21,206
3,200 CLARCOR, Inc. 54,000
1,800 /2/Castle & Cooke, Inc. 28,125
2,700 Cavalier Homes, Inc. 26,156
5,372 /2/Champion Enterprises, Inc. 106,769
2,300 Coachmen Industries, Inc. 53,188
1,200 /2/Coleman Co., Inc. 11,775
1,000 /2/Crossmann Communities, Inc. 22,750
4,654 D. R. Horton, Inc. 73,882
2,400 /2/Department 56, Inc. 74,850
2,100 Enesco Group, Inc. 53,288
1,400 Excel Industries, Inc. 19,863
2,200 Exide Corp. 18,975
6,000 /2/Fairfield Communities, Inc. 58,875
4,300 Fedders Corp. 20,963
1,150 /2/Fossil, Inc. 21,059
3,400 /2/GT Interactive Software 23,163
9,400 /2/Gentex Corp. 138,063
2,420 Harman International Industries, Inc. 97,859
2,300 /2/Hayes Lemmerz International, Inc. 61,669
1,100 /2/ITI Technologies, Inc. 31,763
4,900 Jostens, Inc. 110,556
1,417 K2, Inc. 15,587
5,100 Kaufman & Broad Homes Corp. 145,669
2,000 /2/Keystone Automotive Industries, Inc. 37,375
7,000 La-Z Boy Chair Co. 128,625
2,300 Libbey, Inc. 71,300
2,300 /2/Lo-Jack Corp. 25,300
2,400 M.D.C. Holdings, Inc. 42,150
900 /2/Marvel Enterprises, Inc. 5,175
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Consumer Durables--continued

4,800 Mascotech, Inc. $ 84,600
2,100 Matthews International Corp., Class A 58,013
400 /2/Meadowcraft, Inc. 2,900
700 /2/Media Arts Group, Inc. 8,925
1,200 Mikasa, Inc. 12,675
1,100 /2/Monaco Coach Corp. 33,413
1,200 Movado Group 22,650
2,341 Myers Industries, Inc. 56,184
1,200 /2/NVR, Inc. 40,800
900 National Presto Industries, Inc. 34,706
1,350 /2/National RV Holdings, Inc. 30,544
2,100 /2/O'Sullivan Industries Holdings, Inc. 22,969
4,100 /2/Oakley, Inc. 36,131
6,100 Oakwood Homes Corp. 96,075
1,900 Oneida Ltd. 27,194
2,562 /2/Palm Harbor Homes, Inc. 64,691
233 /2/Panavision, Inc. 3,713
800 /2/Parkervision, Inc. 14,400
900 Pillowtex Corp. 29,250
3,000 Polaris Industries, Inc. 103,125
3,200 Pulte Corp. 82,400
1,300 /2/Recoton Corp. 28,925
1,400 Russ Berrie & Co., Inc. 27,650
1,900 Ryland Group, Inc. 47,263
1,700 SPX Corp. 92,544
1,931 /2/Samsonite Corp. 9,836
2,400 /2/Scotts Co. 80,100
2,200 Simpson Industries, Inc. 25,713
1,000 Skyline Corp. 31,063
1,900 Smith (A.O.) Corp. 38,831
3,200 /2/Sola International, Inc. 61,400
1,300 Standard Motor Products, Inc. 28,925
3,300 Standard Pacific Corp. 31,969
2,225 Standard Products Co. 34,905
900 Starrett (L.S.) Co., Class A 32,906
</TABLE>

Shares Value

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/1/COMMON STOCKS--continued

Consumer Durables--continued

1,200 /2/Steinway Musical Instruments $ 26,475
2,600 Sturm Ruger & Co., Inc. 35,913
2,700 Superior Industries International, Inc. 70,706
950 Thor Industries, Inc. 21,138
3,100 /2/Toll Brothers, Inc. 71,881
1,700 Toro Co. 37,613
3,400 Tyler Corp. 25,925
1,801 /2/U.S. Home Corp. 56,957
1,800 WD 40 Co. 47,700
1,900 Webb (Del) Corp. 44,650
2,900 Windmere-Durable Holdings 22,294
1,800 Winnebago Industries, Inc. 19,238
1,887 Wynns International, Inc. 35,499
2,200 X-Rite, Inc. 15,675
-------------------------------------------------------------------------------------------
TOTAL 4,373,281

-------------------------------------------------------------------------------------------
Consumer Non-Durables--2.9%

400 /2/800-JR CIGAR, Inc. 5,900
2,300 /2/American Italian Pasta Co., Class A 52,900
2,400 Authentic Fitness Corp. 33,150
2,300 /2/Beringer Wine Estates Holdings, Inc., Class B 104,363
1,862 Block Drug, Inc., Class A 67,265
2,300 Brown Group, Inc. 36,656
3,200 /2/Buckeye Technologies, Inc. 64,000
800 /2/Bush Boake Allen, Inc. 21,400
2,100 /2/Canandaigua Wine Co., Inc., Class A 105,263
2,500 ChemFirst, Inc. 48,438
4,900 Chiquita Brands International 52,063
2,300 Church and Dwight, Inc. 70,581
300 Coca-Cola Bottling Co. 18,075
800 /2/Columbia Sportswear Co. 14,000
1,300 /2/Consolidated Cigar Holdings, Inc. 14,950
4,600 Coors Adolph Co., Class B 230,000
5,850 Dimon, Inc. 75,684
1,800 /2/Donna Karan International, Inc. 13,500
2,800 Dreyers Grand Ice Cream, Inc. 36,750
5,700 Earthgrains Co. 171,000
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Consumer Non-Durables--continued

100 Farmer Brothers Co. $ 20,150
5,200 First Brands Corp. 196,300
1,100 /2/French Fragrances, Inc. 7,700
867 /2/General Cigar Holdings, Inc. 7,695
1,000 /2/General Cigar Holdings, Inc., Class B 7,500
2,100 /2/Gibson Greetings, Inc. 21,919
1,000 /2/Guess ?, Inc. 3,875
3,200 /2/Gymboree Corp. 21,400
1,800 /2/Hain Food Group, Inc. 36,225
3,400 /2/Hartmarx Corp. 17,213
1,633 Herbalife International, Inc., Class A 18,677
3,800 Herbalife International, Inc., Class B 34,200
2,254 Imperial Holly Corp. 16,060
2,200 International Multifoods Corp. 45,788
2,300 Justin Industries, Inc. 33,350
2,900 Kellwood Co. 79,025
1,000 /2/Kenneth Cole Productions, Inc., Class A 16,875
2,900 Lance, Inc. 55,463
1,800 Michael Foods, Inc. 43,200
1,000 /2/Mondavi Robert Corp., Class A 33,938
7,000 /2/NBTY, Inc. 56,000
1,974 Natures Sunshine Products, Inc. 31,337
4,700 /2/Nautica Enterprise, Inc. 97,231
1,700 /2/North Face, Inc. 20,294
1,100 /2/Omega Protein Corp. 9,763
1,800 OshKosh B'Gosh, Inc., Class A 37,575
900 Oxford Industries, Inc. 25,481
3,000 Phillips Van Heusen Corp. 27,563
600 Pilgrims Pride Corp. 13,838
4,300 /2/Playtex Products, Inc. 56,706
1,800 /2/Quiksilver, Inc. 37,238
4,200 /2/Ralcorp Holdings, Inc. 74,025
1,000 Riviana Foods, Inc. 19,594
4,000 Russell Corp. 98,250
1,900 Schweitzer-Mauduit International, Inc. 34,556
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Consumer Non-Durables--continued

4,300 /2/Smithfield Foods, Inc. $ 84,388
3,400 Smucker (J.M.) Co., Class A 74,800
2,200 St. John Knits, Inc. 44,413
6,200 Stride Rite Corp. 56,575
1,900 /2/The Boston Beer Co., Inc., Class A 15,675
1,900 /2/Thermolase Corp. 10,450
700 /2/Timberland Co., Class A 28,000
2,900 /2/Twinlab Corp. 64,344
4,600 Universal Corp. 171,638
6,800 Universal Foods Corp. 147,475
3,300 /2/Vlasic Foods International, Inc. 61,669
1,200 Weider Nutrition International, Inc. 5,925
5,700 Wolverine World Wide, Inc. 74,456
-------------------------------------------------------------------------------------------
TOTAL 3,431,750

-------------------------------------------------------------------------------------------
Energy Minerals--2.2%

2,300 Arch Coal, Inc. 40,969
1,300 /2/Atwood Oceanics, Inc. 36,563
4,170 /2/Barrett Resources 98,256
900 /2/Belco Oil & Gas Corp. 5,344
3,900 /2/Benton Oil & Gas Co. 19,988
2,400 Berry Petroleum Co., Class A 31,500
3,600 /2/Brown Tom, Inc. 51,750
3,000 Cabot Oil & Gas Corp., Class A 51,000
700 /2/Cal Dive International, Inc. 14,963
7,384 Chesapeake Energy Corp. 14,307
2,100 /2/Cliffs Drilling Co. 48,038
3,200 /2/Comstock Resources, Inc. 15,800
5,125 Cross Timbers Oil Co. 73,672
2,900 Devon Energy Corp. 98,238
800 /2/Dril-Quip, Inc. 16,800
16,800 /2/EEX Corp. 65,100
2,000 /2/Forcenergy, Inc. 11,875
4,400 /2/Forest Oil Corp. 44,825
1,600 /2/Friede Goldman International, Inc. 26,800
3,700 /2/Frontier Oil Corp. 21,275
1,000 Getty Realty Corp. 14,500
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Energy Minerals--continued

2,200 /2/HS Resources, Inc. $ 21,725
17,600 /2/Harken Energy Corp. 60,500
6,700 Helmerich & Payne, Inc. 159,544
800 Holly Corp. 12,300
2,100 /2/IRI International Corp. 11,419
5,200 /2/Input/Output, Inc. 46,150
3,300 KCS Energy, Inc. 16,706
2,400 /2/Key Energy Group, Inc. 23,850
2,584 /2/Louis Dreyfus Natural Gas Corp. 37,630
900 Lufkin Industries, Inc. 18,338
7,000 /2/Marine Drilling Cos., Inc. 78,313
4,292 /2/Meridian Resource Corp. 17,973
2,700 Mitchell Energy & Development, Class A 37,631
4,200 /2/Newfield Exploration Co. 102,113
2,600 /2/Nuevo Energy Co. 55,088
3,000 /2/Oceaneering International, Inc. 43,125
2,900 /2/Offshore Logistics, Inc. 43,591
8,200 /2/Parker Drilling Co. 40,488
4,100 /2/Patterson Energy Inc. 25,369
800 Penn Virginia Corp. 17,300
2,200 /2/Plains Resources, Inc. 37,400
4,900 Pogo Producing Co. 73,500
2,800 /2/Pool Energy Services Co. 37,363
4,800 Quaker State Corp. 67,800
1,800 RPC Energy Services, Inc. 16,763
2,800 Range Resources Corp. 15,925
2,700 Resource America, Inc., Class A 26,663
900 /2/Rutherford-Moran Oil Corp. 6,750
1,800 /2/SEACOR SMIT, Inc. 86,063
13,600 /2/Santa Fe Energy Resource, Inc. 110,500
3,000 /2/Seitel, Inc. 39,750
4,400 Snyder Oil Corp. 70,125
1,400 St. Mary Land & Exploration Co. 29,400
1,800 /2/Stone Energy Corp. 57,825
1,930 /2/Swift Energy Co. 17,611
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Energy Minerals--continued

4,200 /2/Tesoro Petroleum Corp. $ 62,213
1,100 /2/The Houston Exploration Co. 19,525
4,800 /2/Titan Exploration, Inc. 28,200
1,500 /2/TransTexas Gas Corp. 2,344
2,900 /2/Transmontaigne Inc. 45,131
2,700 /2/Trico Marine Services, Inc. 19,238
6,000 /2/Tuboscope Inc. 74,250
1,700 /2/UTI Energy Corp. 15,194
4,900 Vintage Petroleum, Inc. 63,700
-------------------------------------------------------------------------------------------
TOTAL 2,693,949

-------------------------------------------------------------------------------------------
Finance--19.8%

1,341 1st Source Corp. 42,912
1,100 /2/AMERCO 25,850
3,350 Aames Financial Corp. 13,819
2,000 Aaron Rents, Inc. 29,500
1,600 /2/Acceptance Insurance Cos., Inc. 31,400
3,000 Advanta Corp., Class A 35,813
1,000 Advest Group, Inc. 20,750
2,300 /2/Affiliated Managers Group 51,175
900 Alabama National Bancorp 24,413
1,740 Albank Financial Corp. 106,358
400 /2/Alexander's, Inc. 29,975
1,400 Alexandria Real Estate Equities, Inc. 37,363
3,200 Alfa Corp. 67,100
300 Allied Group, Inc. 14,438
3,825 Amcore Financial, Inc. 91,561
2,212 AmerUs Life Holdings, Inc., Class A 53,365
1,300 /2/AmeriTrade Holding Corp., Class A 19,906
1,047 American Annuity Group, Inc. 24,081
3,000 American Health Properties, Inc. 66,750
2,100 American Heritage Life Investments 43,706
8,000 /2/Americredit Corp. 107,000
3,100 /2/Amerin Corp. 66,263
1,800 Amli Residential Properties Trust 40,500
600 Amplicon, Inc. 9,600
2,300 Anchor Bancorp Wisconsin, Inc. 49,450
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

900 Andover Bancorp, Inc. $ 28,125
2,700 Anthracite Capital, Inc. 15,525
733 Apartment Investment & Management Co., Series E 29,137
5,100 /2/Arcadia Financial Ltd. 21,356
1,200 Area Bancshares Corp. 30,450
2,300 Argonaut Group, Inc. 58,506
3,100 Arm Financial Group, Inc., Class A 59,481
2,300 Associated Estates Realty Corp. 30,331
3,800 /2/Avis Rent A Car, Inc. 77,425
2,400 /2/BA Merchant Services, Inc., Class A 39,000
966 BB&T Corp. 34,474
702 /2/BOK Financial Corp. 33,828
5,794 BRE Properties, Inc., Class A 139,780
950 BSB Bancorp, Inc. 26,600
1,660 BT Financial Corp. 46,065
1,600 Baldwin & Lyons, Inc., Class B 36,750
400 BancFirst Corp. 15,150
900 BancFirst Ohio Corp. 26,775
5,920 Bancorpsouth, Inc. 117,660
1,556 Bank Granite Corp. 52,126
2,600 /2/Bank Plus Corp. 10,563
1,700 BankUnited Financial Corp., Class A 15,406
4,900 BankAtlantic Bancorp, Inc. 41,650
2,000 Banknorth Group, Inc. 63,750
2,700 Bay View Capital Corp. 46,575
3,000 Bedford Property Investors, Inc. 53,625
2,950 Berkley, W. R. Corp. 88,961
4,800 Berkshire Realty Co., Inc. 43,200
1,700 Blanch, E. W. Holdings, Inc. 66,194
2,200 Boykin Lodging Co. 31,350
3,146 Bradley Real Estate, Inc. 66,066
4,400 Brandywine Realty Trust 78,650
1,672 Brenton Banks, Inc. 28,424
1,800 Brookline Bancorp, Inc. 23,400
3,600 /2/Budget Group, Inc., Class A 64,575
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

4,200 Burnham Pacific Properties, Inc. $ 55,125
1,800 /2/CB Richard Ellis Services 35,100
3,000 CBL & Associates Properties, Inc. 78,188
2,900 CCA Prison Realty Trust 68,150
3,300 /2/CCC Information Service Group, Inc. 36,713
1,100 CFSB Bancorp, Inc. 27,500
3,000 CMAC Investment Corp. 125,625
2,200 /2/CNA Surety Corp. 30,938
4,174 CNB Bancshares, Inc. 177,395
1,700 /2/CORT Business Services Corp. 33,363
1,200 CVB Financial Corp. 27,600
2,400 Cabot Industrial Trust 48,000
5,833 Camden Property Trust 156,762
2,800 Capital Automotive REIT 39,550
400 Capital City Bank Group, Inc. 11,600
300 /2/Capital Factors Holdings, Inc. 5,213
2,900 Capital Re Corp. 53,106
1,100 Capitol Transamerica Corp. 20,900
8,050 Capstead Mortgage Corp. 25,156
2,300 Carolina First Corporation 53,044
1,000 Cathay Bancorp, Inc. 31,750
2,000 /2/Centennial Bancorp 32,875
2,300 CenterPoint Properties Corp. 82,225
2,600 Centertrust Retail Properties, Inc. 28,275
6,000 /2/Century Business Services, Inc. 83,625
1,200 Century South Banks, Inc. 32,400
2,700 Charter Municipal Mortgage Acceptance Co. 34,763
1,100 Chartwell Re Corp. 27,363
2,800 Chateau Communities, Inc. 82,250
2,000 Chelsea GCA Realty, Inc. 68,750
1,366 Chemical Financial Corp. 56,006
1,800 Chicago Title Corp. 75,263
1,906 Chittenden Corp. 56,942
3,200 Citizens Banking Corp. 103,200
800 Citizens Corp. 24,200
900 City Holding Co. 31,556
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

3,400 Colonial Properties Trust $ 93,500
1,300 /2/Columbia Banking Systems, Inc. 26,163
2,958 Commerce Bancorp, Inc. 120,148
3,400 Commerce Group, Inc. 117,725
7,510 Commercial Federal Corp. 170,383
3,900 Commercial Net Lease Realty 57,281
1,969 Commonwealth Bancorp 28,058
1,000 Community Bank System, Inc. 28,000
6,200 Community First Bankshares, Inc. 123,225
1,295 Community Trust Bancorp, Inc. 33,346
1,800 Conning Corp. 26,550
1,600 /2/ContiFinancial Corp. 11,900
5,700 Cornerstone Realty Income Trust, Inc. 61,275
1,000 Corus Bankshares, Inc. 38,828
3,300 Cousins Properties, Inc. 94,463
4,650 Crawford & Co., Class B 73,238
2,900 /2/Credit Acceptance Corp. 16,313
1,300 /2/Crescent Operating, Inc. 6,419
6,300 Criimi Mae, Inc. 8,663
3,100 Crown American Realty Trust 24,800
3,540 Cullen Frost Bankers, Inc. 188,505
1,100 D & N Financial Corp. 21,175
1,700 Dain Rauscher Corp. 57,800
1,927 /2/Delphi Financial Group, Inc., Class A 89,846
700 /2/Delta Financial Corp. 3,981
7,600 Developers Diversified Realty 143,450
1,700 Dime Community Bancorp, Inc. 40,694
3,200 /2/Dollar Thrifty Automotive Group 43,400
4,100 Doral Financial Corp. 71,750
2,684 Downey Financial Corp. 62,906
600 Duff & Phelps Credit Rating 28,425
5,700 Dynex Capital, Inc. 27,431
4,800 /2/E*Trade Group, Inc. 86,400
2,100 EastGroup Properties, Inc. 40,031
3,800 Eaton Vance Corp. 85,025
Shares Value
/1/COMMON STOCKS--continued

Finance--continued

2,000 /2/Electro Rent Corp. $ 19,500
3,200 Enhance Financial Services Group, Inc. 78,600
1,800 Entertainment Properties Trust 29,925
4,800 Equity Inns, Inc. 50,400
2,703 Equity Residential Properties Trust 113,526
1,900 Essex Property Trust, Inc. 59,613
1,700 Everen Capital Corp. 34,638
1,100 Evergreen Bancorp, Inc. 30,525
1,300 Executive Risk, Inc. 61,750
840 F & M Bancorp 27,720
1,367 F & M Bancorporation, Inc. 40,839
2,855 F & M National Corp. 84,758
4,100 FBL Financial Group, Inc., Class A 104,294
2,164 FNB Corp. 59,510
1,200 /2/FPIC Insurance Group, Inc. 34,950
900 Farmers Capital Bank Corp. 31,725
400 /2/Federal Agricultural Mortgage Association, Class C 15,200
5,200 Federal Realty Investment Trust 117,650
4,378 FelCor Lodging Trust, Inc. 103,157
2,448 Fidelity National Financial, Inc. 75,276
1,150 /2/Financial Federal Corp. 26,809
6,550 First American Financial Corp. 205,097
1,100 First Charter Corp. 20,350
900 First Citizens Bancshares, Inc., Class A 80,325
1,600 First Commerce Bancshares, Inc., Class B 47,600
2,900 First Commmonwealth Financial Corp. 74,856
2,100 First Federal Capital Corp. 32,025
3,390 First Financial Bancorp 98,734
1,106 First Financial Bankshares, Inc. 42,028
857 First Financial Corp. 36,637
1,800 First Financial Holdings, Inc. 34,650
2,900 First Hawaiian, Inc. 115,638
1,207 First Indiana Corp. 22,631
5,000 First Industrial Realty Trust 128,125
1,400 First Liberty Financial Corp. 27,825
1,300 First Merchants Corp. 32,175
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

2,204 First Midwest Bancorp, Inc. $ 90,364
1,200 /2/First Republic Bank 29,700
1,400 /2/First Sierra Financial, Inc. 12,688
4,187 First Source Bancorp, Inc. 36,115
4,100 First Union Real Estate Equity 23,831
2,800 First United Bancshares 54,600
1,540 First Washington Bancorp, Inc. 33,880
1,403 First Western Bancorp, Inc. 36,127
700 /2/FirstCity Financial Corp. 9,275
2,700 /2/FirstFed Financial Corp. 44,213
3,300 Firstbank Corp. 79,406
800 Flagstar Bancorp, Inc. 19,200
2,300 Foremost Corp. of America 40,969
1,800 Forest City Enterprises, Inc., Class A 38,700
6,400 Franchise Finance Corp. of America 159,200
1,300 /2/Franchise Mortgage Acceptance Co. LLC 11,375
1,700 Freedom Securities Corp. 23,163
3,100 /2/Friedman, Billings, Ramsey Group, Inc., Class A 15,888
900 /2/Frontier Financial Corp. 43,425
4,253 Frontier Insurance Group, Inc. 69,377
700 Fund American Enterprises, Inc. 88,725
1,900 GBC Bancorp 50,588
3,300 Gables Residential Trust 86,831
2,200 Gallagher (Arthur J.) & Co. 93,225
4,700 General Growth Properties, Inc. 167,144
4,200 Glenborough Realty Trust, Inc. 90,038
3,100 Glimcher Realty Trust 50,181
1,100 Gold Banc Corp., Inc. 16,363
1,000 Golf Trust of America, Inc. 26,750
1,800 Grand Premier Financial, Inc. 24,075
2,300 Great Lakes REIT, Inc. 37,806
1,200 Greater Bay Bancorp 38,400
2,600 /2/Grubb & Ellis Co. 25,350
1,200 Guarantee Life Cos., Inc. 23,100
5,000 HCC Insurance Holdings, Inc. 89,688
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

3,900 HSB Group, Inc. $ 157,463
2,300 /2/Hambrecht & Quist Group 44,131
1,000 /2/Hamilton Bancorp, Inc. 27,500
1,255 Hancock Holding Co. 60,240
1,907 Harbor Florida Bancshares, Inc. 20,858
1,400 Harleysville Group, Inc. 29,925
893 Harleysville National Corp. 31,255
1,100 Harris Financial, Inc. 17,119
1,100 Haven Bancorp, Inc. 15,263
2,600 /2/Headlands Mortgage Co. 39,000
4,100 Health Care Property Investors, Inc. 137,863
3,300 Health Care REIT, Inc. 74,663
1,600 /2/HealthCare Financial Partners, Inc. 49,000
5,299 Healthcare Realty Trust, Inc. 124,195
1,800 /2/Highlands Insurance Group, Inc. 18,675
1,600 Hilb Rogal & Hamilton Co. 30,400
1,600 /2/Home Choice Holdings, Inc. 20,900
2,100 Home Properties of New York, Inc. 56,438
1,900 Hooper Holmes, Inc. 45,244
1,100 Horizon Bancorp, Inc. 42,075
4,800 Hospitality Properties Trust 127,200
3,709 Hubco, Inc. 100,143
4,100 /2/IMC Mortgage Co. 8,200
3,150 IMPAC Mortgage Holdings, Inc. 12,994
1,350 /2/INSpire Insurance Solutions, Inc. 33,750
4,100 IRT Property Co. 42,025
4,378 /2/Imperial Bancorp 60,745
4,600 Imperial Credit Commercial Mortgage Investment Corp. 38,525
3,954 /2/Imperial Credit Industries, Inc. 26,195
10,000 /2/Independence Community Bank Corp. 136,875
1,700 Independent Bank Corp. 26,563
2,067 /2/Insignia/ESG Holdings, Inc. 26,351
2,750 InterWest Bancorp, Inc. 73,047
1,400 International Bancshares Corp. 76,213
1,750 Interpool, Inc. 24,719
400 /2/Investment Technology Group, Inc. 13,100
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

900 Investors Financial Services Corp. $ 48,488
2,400 Irvine Apartment Communities, Inc. 63,000
1,600 Irwin Financial Corp. 43,200
4,050 JDN Realty Corp. 86,316
1,800 JP Realty, Inc. 37,688
1,100 JSB Financial, Inc. 58,094
1,333 Jeffbanks, Inc. 30,159
1,800 Jefferies Group, Inc. 54,000
1,200 Jefferson Savings Bancorp, Inc. 19,350
800 John Nuveen & Co., Inc., Class A 27,900
400 Kansas City Life Insurance Co. 33,400
2,332 KeyCorp 70,689
3,700 Kilroy Realty Corp. 82,094
3,500 Koger Equity, Inc. 59,063
3,400 LNR Property Corp. 60,350
3,700 LTC Properties, Inc. 63,363
1,600 LaSalle Hotel Properties 18,600
2,100 /2/LaSalle Partners, Inc. 61,425
2,000 LandAmerica Financial Group, Inc. 103,875
2,400 Laser Mortgage Management, Inc. 14,250
800 /2/Leasing Solutions, Inc. 8,150
2,200 Lexington Corporate Properties Trust 27,500
1,448 Liberty Corp. 60,092
1,600 Life Re Corp. 149,300
2,800 Life USA Holdings, Inc. 34,825
2,700 /2/Local Financial Corp. 24,469
2,900 /2/Long Beach Financial Corp. 20,844
4,369 MAF Bancorp, Inc. 107,041
1,800 MGI Properties, Inc. 52,650
2,100 MMI Companies, Inc. 33,731
3,900 Macerich Co. (The) 107,494
800 Mahoning National Bancorp., Inc. 27,600
1,900 Mainstreet Bankgroup, Inc. 77,663
2,800 Manufactured Home Communities, Inc. 69,825
600 /2/Markel Corp. 89,175
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

1,000 McGrath Rentcorp. $ 20,875
800 Meadowbrook Insurance Group, Inc. 19,700
1,400 Medallion Financial Corp. 24,850
2,878 /2/Medical Assurance, Inc. 77,706
1,000 Merchants New York Bancorp, Inc. 34,438
4,100 Meridian Industrial Trust, Inc. 90,200
255 /2/Merry Land Properties, Inc. 1,051
400 Michigan Financial Corp. 13,575
1,033 Mid American Bancorp 26,471
2,400 Mid-American Apartment Communities, Inc. 58,800
600 Midland Co. 14,400
1,900 Mills Corp. 41,206
800 Mississippi Valley Bancshares, Inc. 27,900
3,662 Morgan Keegan, Inc. 68,205
2,000 NAC Re Corp. 96,875
1,693 NBT Bancorp, Inc. 38,304
2,000 National Bancorp Alaska, Inc. 75,000
800 /2/National City Bancorporation 21,600
1,447 National City Bancshares, Inc. 58,784
1,700 National Golf Properties, Inc. 48,450
3,100 National Health Investors, Inc. 87,381
1,755 National Penn Bancshares, Inc. 47,385
200 /2/National Western Life Insurance Co., Class A 23,400
5,600 Nationwide Health Properties, Inc. 129,150
11,660 New Plan Excel Realty Trust 265,265
1,900 Northwest Bancorp, Inc. 22,563
600 Nymagic, Inc. 12,600
1,800 Ocean Financial Corp. 26,100
2,300 Ocwen Asset Investment Corp. 9,200
3,663 Old National Bancorp 187,843
1,200 Omega Financial Corp. 40,500
2,639 Omega Healthcare Investors 81,809
4,243 One Valley Bancorp West Virginia, Inc. 137,367
1,433 Oriental Financial Group 45,856
1,800 /2/PBOC Holdings, Inc. 17,325
2,100 /2/PFF Bancorp, Inc. 30,844
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

2,400 PS Business Parks, Inc. $ 48,300
1,563 PXRE Corp. 39,661
2,300 Pacific Gulf Properties, Inc. 45,569
1,300 Pan Pacific Retail Properties, Inc. 24,294
1,100 Park National Corp. 108,900
1,400 Parkway Properties, Inc. 39,900
800 /2/Penn Treaty American Corp. 16,850
3,400 Penncorp Financial Group, Inc. 5,738
2,000 Pennsylvania Manufacturers Corp., Class A 39,250
1,600 Pennsylvania Real Estate Investment Trust 32,600
4,700 Peoples Bancorp, Inc. 47,588
800 Peoples Holding Co. 27,200
800 /2/Philadelphia Consolidated Holding Corp. 18,700
600 Pinnacle Banc Group, Inc. 18,000
2,900 Pioneer Group, Inc. 41,506
1,350 Poe & Brown, Inc. 52,228
2,200 Premier Bankshares, Inc. 48,400
5,100 Prentiss Properties Trust 105,188
3,000 Presidential Life Corp. 54,375
509 Price Enterprises, Inc. 2,481
1,200 Prime Bancorp, Inc. 22,200
700 Prime Bancshares, Inc. 12,075
600 Prime Group Realty Trust 9,638
5,635 Prime Retail, Inc. 54,589
3,166 Provident Bankshares Corp. 80,720
2,372 Queens County Bancorp, Inc. 70,715
3,000 RFS Hotel Investors, Inc. 39,000
1,025 RLI Corp. 33,569
3,600 Realty Income Corp. 89,775
5,200 Reckson Associates Realty Corp. 117,975
1,700 Redwood Trust, Inc. 23,375
1,800 Regency Realty Corp. 41,513
3,300 Reinsurance Group of America 181,913
1,200 Reliance Bancorp, Inc. 29,700
1,200 /2/Rent-Way, Inc. 28,350
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

3,100 /2/Rental Service Corp. $ 68,975
2,770 Republic Bancorp, Inc. 45,705
700 /2/Republic Bancshares, Inc. 13,650
1,100 Republic Banking Corp. of Florida 11,000
5,736 Republic Security Financial Corp. 51,622
1,896 Resource Bancshares Mortgage Group, Inc. 27,966
3,400 Richmond County Financial Corp. 49,725
2,600 Riggs National Corp. 62,725
1,700 /2/Risk Capital Holdings, Inc. 35,275
6,325 Rollins Truck Leasing Corp. 73,528
5,400 Roslyn Bancorp, Inc. 92,475
1,850 S & T Bancorp, Inc. 100,825
1,700 SCPIE Holdings, Inc. 53,338
900 SIS Bancorp, Inc. 35,775
3,100 SL Green Realty Corp. 58,706
2,000 Santa Barbara Bancorp 48,500
5,200 /2/Security Capital Group, Inc. 82,875
3,800 Selective Insurance Group, Inc. 69,588
900 Shoreline Financial Corp. 24,075
1,275 Signal Corp. 42,713
2,600 /2/Silicon Valley Bancshares 53,300
800 Simmons 1st National Corp., Class A 35,900
4,693 Sky Financial Group, Inc. 143,137
2,200 Smith (Charles E.) Residential Realty, Inc. 67,375
1,200 /2/Southern Pacific Funding Corp. 94
2,700 /2/Southwest Bancorp. of Texas, Inc. 41,344
1,370 Southwest Securities Group, Inc. 25,345
1,700 Sovran Self Storage, Inc. 43,563
5,345 St. Paul Bancorp, Inc. 109,907
1,800 State Auto Financial Corp. 25,425
5,900 Staten Island Bancorp, Inc. 107,306
1,100 Sterling Bancorp 23,650
2,900 Sterling Bancshares, Inc. 41,325
800 Sterling Financial Corp. 34,400
900 Stewart Information Services Corp. 45,113
1,900 Storage Trust Realty 42,631
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

600 Student Loan Corp. $ 28,125
2,800 Summit Properties, Inc. 49,350
2,200 Sun Communities, Inc. 73,563
4,900 Sunstone Hotel Investors, Inc. 44,406
3,600 /2/Sunterra Corp. 34,200
4,405 Susquehanna Bankshares, Inc. 99,663
2,000 T R Financial Corp. 65,500
5,700 TIG Holdings, Inc. 79,444
700 Tanger Factory Outlet Centers, Inc. 15,356
5,100 Taubman Centers, Inc. 69,806
1,900 Texas Regional Bancshares, Inc., Class A 43,225
2,100 The Trust Company of New Jersey 52,500
2,900 Thornburg Mortgage Asset Co. 23,744
2,200 Tower Realty Trust, Inc. 44,550
2,100 Town & Country Trust 31,631
3,800 /2/Trammell Crow Co. 82,175
1,600 Trenwick Group, Inc. 53,200
1,800 /2/Triad Guaranty, Inc. 38,250
2,800 Triangle Bancorp, Inc. 50,925
3,000 Trinet Corporate Realty Trust, Inc. 86,250
3,457 Trustco Bank Corp. 96,789
5,000 /2/UICI 73,750
1,952 UMB Financial Corp. 89,426
1,500 US Restaurant Properties 36,656
900 USB Holdings Co., Inc. 16,200
5,628 UST Corp. 130,148
5,900 /2/Unicapital Corp. 40,931
5,100 United Bankshares, Inc. 136,425
3,280 United Companies Financial Corp. 13,940
13,600 United Dominion Realty Trust, Inc. 151,300
950 United Fire & Casualty Co. 35,922
1,310 United National Bancorp 30,130
3,655 /2/United Rentals, Inc. 98,228
1,300 Urban Shopping Centers, Inc. 42,900
1,800 USBANCORP, Inc. 33,300
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Finance--continued

1,800 Vermont Financial Services Corp. $ 40,725
1,650 Vesta Insurance Group, Inc. 13,200
1,300 WSFS Financial Corp. 22,263
2,200 Walden Residential Properties, Inc. 50,738
4,700 Washington Real Estate Investment Trust 83,425
1,250 Washington Trust Bancorp 27,500
5,000 Webster Financial Corp. Waterbury 123,438
2,600 Weeks Corp. 75,563
3,600 Weingarten Realty Investors 159,975
2,200 /2/Wellsford Real Properties, Inc. 18,975
2,750 Wesbanco, Inc. 79,406
1,850 West Coast Bancorp 33,994
5,590 WestAmerica Bancorporation 185,868
1,265 Westcorp, Inc. 8,697
2,100 Western Bancorp 66,150
2,200 Western Investment Real Estate Trust 28,325
5,600 Westernbank Puerto Rico 84,350
4,000 Westfield America, Inc. 68,750
3,025 Whitney Holding Corp. 111,169
400 /2/Wilshire Financial Services Group, Inc. 1,225
2,000 Xtra Corp. 83,750
1,200 Zenith National Insurance Corp. 30,675
-------------------------------------------------------------------------------------------
TOTAL 23,682,623

-------------------------------------------------------------------------------------------
Health Care--8.0%

2,766 ADAC Laboratories 81,943
4,000 /2/AXYS Pharmaceuticals, Inc. 20,750
2,650 /2/Access Health, Inc. 95,069
2,900 /2/Acuson Corp. 43,681
1,100 /2/Advance Paradigm, Inc. 36,300
4,700 /2/Advanced Tissue Sciences, Inc., Class A 14,247
2,000 /2/Affymetrix, Inc. 49,000
4,100 /2/Agouron Pharmaceuticals, Inc. 158,875
5,900 /2/ALARIS Medical Inc. 32,819
1,300 /2/Algos Pharmaceutical Corp. 33,313
2,600 /2/Alkermes, Inc. 50,700
2,200 Alpharma, Inc., Class A 60,913
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Health Care--continued

2,100 /2/Alternative Living Services, Inc. $ 54,863
2,000 /2/AmeriPath, Inc. 26,000
2,800 /2/AmeriSource Health Corp., Class A 146,825
1,450 /2/American HomePatient, Inc. 3,716
1,050 American Medical Security Group, Inc. 9,188
3,600 /2/American Oncology Resources, Inc. 47,925
2,200 /2/American Retirement Corp. 33,550
900 /2/Andrx Corp. 35,100
5,400 /2/Apria Healthcare Group, Inc. 21,938
1,900 Arrow International, Inc. 52,725
2,000 /2/Assisted Living Concepts, Inc. 27,000
1,700 /2/Aviron 32,300
4,000 Ballard Medical Products 85,000
1,175 /2/Barr Laboratories, Inc. 40,170
2,166 Bindley Western Industries, Inc. 78,518
1,350 /2/Bio Rad Laboratories, Inc., Class A 29,784
6,300 /2/Bio-Technology General Corp. 46,069
900 /2/Biomatrix, Inc. 42,300
1,300 /2/Boron, LePore & Associates, Inc. 35,100
1,200 /2/Brookdale Living Communities 21,900
2,000 /2/CONMED Corp. 53,000
1,400 /2/Capital Senior Living Corp. 16,450
1,300 /2/CareMatrix Corp. 32,013
2,900 Carter Wallace, Inc. 51,475
3,100 /2/Cell Genesys, Inc. 10,656
1,600 /2/Centennial Healthcare Corp. 23,350
3,600 /2/Cephalon, Inc. 27,000
3,400 /2/Cerner Corp. 76,075
1,200 /2/Chattem, Inc. 33,300
800 /2/Closure Medical Corp. 21,100
3,100 /2/Columbia Laboratories, Inc. 10,075
6,128 /2/Concentra Managed Care, Inc. 62,812
2,000 /2/Cooper Companies, Inc. 47,500
3,200 /2/Cor Therapeutics, Inc. 38,600
1,800 /2/Coulter Pharmaceutical, Inc. 50,850
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Health Care--continued

7,700 /2/Covance, Inc. $ 214,638
7,700 /2/Coventry Health Care, Inc. 74,594
1,700 /2/Curative Health Services, Inc. 46,325
2,100 /2/Cytyc Corp. 35,175
1,200 /2/DVI, Inc. 18,750
1,800 /2/Datascope Corp. 40,613
1,400 Diagnostic Products Corp. 31,588
6,100 /2/Dura Pharmaceuticals, Inc. 73,581
1,300 /2/Entremed, Inc. 33,963
2,826 /2/Enzo Biochem, Inc. 29,673
1,400 /2/First Consulting Group, Inc. 23,013
2,300 /2/Fuisz Technologies Ltd. 20,988
1,800 /2/Geltex Pharmaceuticals, Inc. 45,000
4,700 /2/Genesis Health Ventures, Inc. 63,450
10,400 /2/Gensia, Inc. 39,000
4,000 /2/Gilead Sciences, Inc. 113,500
2,100 /2/Guilford Pharmaceuticals, Inc. 34,388
3,000 /2/Haemonetics Corp. 64,688
2,400 /2/Hanger Orthopedic Group, Inc. 47,400
1,106 Healthplan Services Corporation 10,369
3,000 /2/Henry Schein, Inc. 116,063
2,300 /2/Heska Corp. 11,356
1,800 /2/Hologic, Inc. 24,638
2,900 /2/Human Genome Sciences, Inc. 100,413
4,600 /2/ICOS Corp. 85,100
2,300 /2/IDEC Pharmaceuticals Corp. 68,713
4,700 /2/IDEXX Laboratories, Inc. 107,219
1,200 /2/IDX Systems Corp. 50,850
1,400 /2/Igen, Inc. 41,825
3,200 /2/Imclone Systems, Inc. 28,400
3,000 /2/Immune Response Corp. 36,750
1,000 /2/Impath, Inc. 30,625
3,000 /2/Incyte Pharmaceuticals, Inc. 91,500
2,100 /2/Inhale Therapeutic Systems 55,125
3,100 Invacare Corp. 69,750
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Health Care--continued

3,600 /2/Isis Pharmaceuticals, Inc. $ 34,650
12,900 Ivax Corp. 122,550
3,000 Jones Pharma, Inc. 96,938
1,800 /2/KV Pharmaceutical Co., Class B 41,175
1,000 /2/Kendle International, Inc. 26,250
330 /2/LTC Healthcare, Inc. 784
300 Labone, Inc. 4,725
6,300 /2/Laboratory Corporation of America Holdings 10,238
1,450 Life Technologies, Inc. 53,786
1,300 /2/Lifecore Biomedical, Inc. 9,263
4,892 /2/Ligand Pharmaceuticals, Inc., Class B 53,201
5,000 /2/Liposome Co., Inc. 31,250
2,400 /2/Macrochem Corp. 18,600
4,100 /2/Magellan Health Services, Inc. 37,156
9,280 /2/Mariner Post-Acute Network, Inc. 53,940
1,700 /2/Marquette Medical Systems, Class A 75,756
1,900 /2/Maxxim Medical, Inc. 47,975
10,300 /2/Medaphis Corp. 33,475
1,300 /2/Medical Manager Corp. 32,338
2,400 /2/Medicis Pharmaceutical Corp., Class A 120,300
3,100 /2/Medimmune, Inc. 208,475
3,000 /2/Medquist, Inc. 80,813
1,008 Medtronic, Inc. 65,520
3,100 Mentor Corp. 52,700
6,300 /2/Mid Atlantic Medical Services, Inc. 49,219
3,700 /2/Millennium Pharmaceuticals, Inc. 67,988
1,000 /2/MiniMed, Inc. 55,500
950 /2/Miravant Medical Technologies 11,875
1,800 /2/NCS HealthCare, Inc., Class A 31,725
1,000 National Healthcare Corp. 19,813
1,600 /2/Neurogen Corp. 21,800
3,800 /2/Nexstar Pharmaceuticals, Inc. 33,725
8,100 /2/NovaCare, Inc. 33,413
1,000 /2/Novoste Corp. 17,500
1,700 /2/OEC Medical Systems, Inc. 42,500
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Health Care--continued

1,200 /2/Ocular Sciences, Inc. $ 30,150
3,932 /2/Organogenesis, Inc. 61,192
4,800 /2/Orthodontic Centers of America, Inc. 90,900
2,675 Owens & Minor, Inc. 42,466
10,600 /2/Oxford Health Plans, Inc. 125,213
9,200 /2/PSS World Medical, Inc. 203,550
3,200 /2/Parexel International Corp. 70,600
2,100 /2/Pathogenesis Corp. 84,000
2,900 /2/Patterson Dental Co. 119,625
2,000 /2/Pediatrix Medical Group 93,250
900 /2/Perclose, Inc. 21,488
8,600 /2/Perrigo Co. 68,263
9,000 /2/PharMerica, Inc. 30,375
2,251 /2/Pharmaceutical Product Development, Inc. 60,777
1,700 /2/Pharmacyclics, Inc. 27,413
2,800 /2/PhyMatrix Corp. 10,500
10,300 /2/Phycor, Inc. 74,675
3,700 /2/Physician Reliance Network, Inc. 41,163
1,700 /2/Priority HealthCare Corp., Class B 50,150
2,400 /2/Protein Design Laboratories, Inc. 57,600
1,100 /2/Province Heathcare Co. 28,738
2,200 /2/QuadraMed Corp. 45,100
4,000 /2/Quest Diagnostic Inc. 66,500
3,000 /2/Regeneron Pharmaceuticals, Inc. 24,750
5,275 /2/Renal Care Group, Inc. 153,634
1,650 /2/Res-Care, Inc 36,506
1,000 /2/ResMed, Inc. 51,000
3,743 /2/Respironics, Inc. 57,783
3,300 /2/Roberts Pharmaceutical Corp. 73,425
1,400 /2/Sabratek Corp. 42,000
2,100 /2/SangStat Medical Corp. 43,575
700 /2/Schein Pharmaceutical, Inc. 7,438
5,000 /2/Scios, Inc. 26,250
3,500 /2/Sepracor, Inc. 240,188
4,100 /2/Sequus Pharmaceuticals, Inc. 73,544
3,100 /2/Serologicals Corp. 70,138
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>

COMMON STOCKS--continued

Health Care--continued

3,150 /2/Sierra Health Services, Inc. $ 73,434
1,300 /2/Sugen, Inc. 17,225
7,124 /2/Sun Healthcare Group, Inc. 41,854
1,900 /2/Sunrise Assisted Living, Inc. 81,819
2,700 /2/Sunrise Medical, Inc. 31,050
1,600 /2/SuperGen, Inc. 12,200
900 /2/Superior Consultant Holdings Corp. 33,300
2,300 /2/Synetic, Inc. 99,188
2,400 /2/Techne Corp. 40,200
3,400 /2/Theragenics Corp. 68,638
2,100 /2/Thermedics, Inc. 22,575
700 /2/Thermo Bioanalysis Corp. 7,394
2,400 /2/Thermo Cardiosystems, Inc. 27,900
2,300 /2/Transitional Systems, Inc. 24,006
2,200 /2/Transkaryotic Therapies, Inc. 47,025
900 /2/Trex Medical Corp. 11,025
2,600 /2/Triangle Pharmaceuticals, Inc. 30,225
3,200 /2/U.S. Bioscience, Inc. 25,600
1,800 /2/United Payors & United Providers, Inc. 41,400
950 /2/United Wisconsin Services, Inc. 8,075
1,800 /2/VISX, Inc. 90,225
7,900 /2/Vencor, Inc. 36,538
1,800 /2/Ventana Medical Systems, Inc. 33,300
7,100 /2/Ventas, Inc. 81,206
3,300 /2/Vertex Pharmaceuticals, Inc. 87,038
2,700 /2/Veterinary Centers of America, Inc. 47,925
2,100 /2/Vical, Inc. 27,300
1,600 /2/ViroPharma, Inc. 29,000
800 Vital Signs, Inc. 12,800
1,606 /2/Vitalink Pharmacy Services, Inc. 36,132
4,200 /2/Vivus, Inc. 11,944
1,400 /2/Wesley Jessen VisionCare, Inc. 25,025
1,623 West Co., Inc. 48,183
1,100 /2/Xomed Surgical Products, Inc. 49,431
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Health Care--continued

4,600 /2/Zila, Inc $ 21,563
1,400 /2/Zonagen, Inc. 22,225
-------------------------------------------------------------------------------------------
TOTAL 9,585,663

-------------------------------------------------------------------------------------------
Producer Manufacturing--5.5%

1,900 /2/ACX Technologies, Inc. 27,313
1,000 /2/AFC Cable Systems, Inc. 24,625
1,900 /2/Advanced Lighting Technologies, Inc. 15,438
1,400 /2/Agribrands International, Inc. 41,038
3,600 /2/Allen Telecom, Inc. 19,800
1,200 Allied Products Corp. 10,050
2,200 /2/Alpine Group, Inc. 37,125
4,300 AMETEK, Inc. 91,106
1,400 /2/Anacomp, Inc. 18,550
3,500 /2/Anixter International, Inc. 54,031
5,060 Applied Power, Inc., Class A 139,466
1,000 /2/Astec Industries, Inc. 51,250
10,700 /2/Aura System, Inc. 12,372
1,247 /2/Avondale Industries, Inc. 32,500
4,313 Baldor Electric Co. 90,573
3,400 Belden, Inc. 49,513
3,200 Blount International, Inc., Class A 70,200
1,700 C&D Technologies, Inc. 41,438
3,950 /2/Cable Design Technologies, Class A 65,175
2,150 Chart Industries, Inc. 19,753
1,300 /2/Chase Industries, Inc. 17,225
1,400 /2/Citation Corp. 11,113
1,700 Commercial Intertech Corp. 30,281
1,800 Commercial Metals Corp. 47,925
1,600 Commonwealth Industries, Inc. 12,100
14,200 /2/Corporate Express, Inc. 165,963
2,100 /2/Cuno, Inc. 32,025
1,400 DT Industries, Inc. 25,200
4,700 /2/Dal-Tile International, Inc. 42,006
2,800 /2/Delco-Remy International, Inc. 31,325
1,100 /2/Detroit Diesel Corp. 19,456
1,700 /2/Encore Wire Corp. 18,913
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

3,900 /2/Essex International, Inc. $ 113,100
1,700 /2/Fairchild Corp., Class A 22,950
6,000 Federal Signal Corp. 144,375
5,178 Flowserve Corp. 93,204
700 Franklin Electronics, Inc. 42,044
1,850 /2/Gardner Denver, Inc. 26,594
800 General Binding Corp. 27,500
4,850 General Cable Corp. 95,788
1,600 /2/Genlyte Group, Inc. 31,700
800 /2/Gibraltar Steel Corp. 15,500
1,200 Gleason Corp. 24,225
2,900 /2/Global Industrial Technologies, Inc. 25,194
1,912 Graco, Inc. 50,429
800 Greenbrier Cos., Inc. 12,600
4,100 /2/Griffon Corp. 40,231
3,800 /2/Halter Marine Group, Inc. 32,775
3,800 /2/Hanover Compressor Co. 95,950
1,300 Hardinge, Inc. 26,813
2,009 /2/Hexcel Corporation 21,973
1,350 /2/Holophane Corp. 28,772
3,900 IDEX Corp. 100,913
2,000 /2/ITEQ, Inc. 5,375
6,100 Interface, Inc. 75,106
2,400 Intermet Corp. 39,000
5,300 JLG Industries, Inc. 87,781
2,300 Juno Lighting, Inc. 54,625
3,000 Kaman Corp., Class A 48,750
4,300 Kaydon Corp. 151,038
4,800 Kimball International, Inc., Class B 88,950
1,900 /2/Knoll Inc. 51,300
2,200 Kuhlman Corp. 58,300
6,500 Lincoln Electric Holdings 142,594
1,650 Lindsay Manufacturing Co. 26,813
2,600 /2/Littelfuse, Inc. 57,200
2,100 /2/MICROS Systems, Inc. 46,331
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

3,600 /2/Magnetek, Inc. $ 45,675
2,250 Manitowoc, Inc. 78,750
7,700 Mark IV Industries, Inc. 118,388
2,000 /2/Maverick Tube Corp. 14,000
3,700 /2/Metals USA, Inc. 36,769
5,100 Milacron Inc. 98,813
5,200 /2/Miller Industries, Inc. 27,300
2,900 Modine Manufacturing Co. 94,975
2,300 /2/MotivePower Industries, Inc. 58,506
4,700 /2/Mueller Industries, Inc. 105,750
829 NACCO Industries, Inc., Class A 76,268
2,300 /2/NCI Building System, Inc. 49,738
1,800 Nordson Corp. 80,663
1,200 /2/Nortek, Inc. 32,475
2,300 /2/Oak Industries, Inc. 62,244
1,300 OmniQuip International, Inc. 17,388
2,000 /2/Polycom, Inc. 26,125
3,200 Precision Castparts Corp. 140,800
3,600 /2/Presstek, Inc. 26,550
3,100 ROHN Industries, Inc. 8,913
1,900 RTI International Metals, Inc. 28,263
3,600 /2/Rayovac Corp. 73,125
2,800 Regal Beloit Corp. 58,975
1,350 Reliance Steel & Aluminum Co. 41,766
1,000 Robbins & Myers, Inc. 23,625
4,100 Roper Industries, Inc. 73,031
700 /2/Ryerson Tull, Inc., Class A 7,919
1,950 /2/SLI, Inc. 32,663
1,400 /2/SPS Technologies, Inc. 69,300
1,200 Sauer, Inc., ADR 8,700
1,400 Scotsman Industries, Inc. 28,613
2,400 /2/Scott Technologies, Inc. 33,600
900 /2/Shaw Group, Inc. 8,663
700 /2/Shiloh Industries, Inc. 11,375
600 /2/Simpson Manufacturing Co., Inc. 19,650
600 /2/Special Metals Corp. 6,000
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Producer Manufacturing--continued

1,500 /2/Specialty Equipment Cos., Inc. $ 33,750
1,600 Standex International Corp. 39,500
4,100 Stewart & Stevenson Services 56,119
1,600 /2/Stoneridge, Inc. 23,900
1,050 Superior Telecom, Inc. 45,150
1,700 TJ International, Inc. 33,469
2,600 Tecumseh Products Co., Class A 135,200
1,200 Tennant Co. 40,950
2,300 /2/Terex Corp. 50,025
1,300 /2/Thermo Fibertek, Inc. 7,963
2,100 Thomas Industries, Inc. 38,063
2,300 Titan International, Inc. 23,863
6,100 /2/Tower Automotive, Inc. 135,725
2,700 Tredegar Industries, Inc. 60,919
2,040 /2/Triarc Companies, Inc., Class A 31,875
1,200 Valhi, Inc. 13,425
2,600 Valmont Industries, Inc. 40,950
1,800 Varlen Corp. 53,775
660 Virco Manufacturing Corp. 13,035
3,050 Wabash National Corp. 54,138
5,700 /2/Walter Industries, Inc. 79,800
16,600 /2/Wastemasters, Inc. 11,413
2,500 Watsco, Inc. 42,344
2,100 Watts Industries, Inc., Class A 38,588
7,615 Wausau-Mosinee Paper Corp. 132,787
2,200 Westinghouse Air Brake Co. 47,300
1,900 /2/Wolverine Tube, Inc. 40,256
1,100 Woodward Governor Co. 24,200
2,400 /2/Zebra Technologies Corp., Class A 78,600
-------------------------------------------------------------------------------------------
TOTAL 6,523,081

-------------------------------------------------------------------------------------------
Retail Trade--3.7%

875 /2/99 Cents Only Stores 40,469
1,800 /2/American Eagle Outfitters, Inc. 72,900
3,000 /2/Ames Department Stores, Inc. 55,125
2,600 /2/Ann Taylor Stores Corp. 75,400
Shares Value
/1/COMMON STOCKS--continued

Retail Trade--continued

3,100 /2/Bally Total Fitness Holding Corp. $ 58,513
1,000 Blair Corp. 23,188
800 /2/Brylane, Inc. 12,900
900 /2/Buckle, Inc. 16,313
2,640 Burlington Coat Factory Warehouse 39,600
900 /2/CDW Computer Centers, Inc. 67,444
1,250 CPI Corp. 28,672
2,400 /2/CSK Auto Corp. 62,550
6,900 Casey's General Stores, Inc. 96,600
3,270 Cash America International, Inc. 40,875
2,200 Cato Corp., Class A 29,288
3,900 /2/Central Garden & Pet Co. 77,025
13,200 /2/Charming Shoppes, Inc. 49,500
1,700 /2/Children's Place Retail Stores, Inc. 17,638
5,275 Claire's Stores, Inc. 89,345
1,300 /2/Coldwater Creek, Inc. 16,169
1,800 /2/Cole National Corp., Class A 37,350
1,100 /2/Cost Plus, Inc. 33,000
300 /2/Delia's, Inc. 2,513
1,100 /2/Discount Auto Parts, Inc. 26,538
1,900 /2/Dominick's Supermarkets, Inc. 92,744
2,600 /2/Dress Barn, Inc. 36,725
2,200 /2/Duane Reade, Inc. 84,975
3,300 /2/Eagle Hardware & Garden, Inc. 76,725
1,700 /2/Elder-Beerman Stores Corp. 19,869
2,200 /2/Express Scripts, Inc., Class A 214,913
6,200 Fingerhut Companies, Inc. 52,313
2,300 /2/Finish Line, Inc., Class A 24,438
900 /2/Finlay Enterprises, Inc. 6,384
3,200 /2/Footstar, Inc. 83,600
1,100 Freds, Inc. 14,369
1,600 /2/Friedmans, Inc., Class A 9,600
1,100 /2/Gadzooks, Inc. 9,006
1,900 /2/Garden Ridge Corp. 15,438
3,400 /2/Genesco, Inc. 20,400
1,300 /2/Genesis Direct, Inc. 6,013
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Retail Trade--continued

420 Genovese Drug Stores, Inc., Class A $ 9,293
2,200 Global DirectMail Corp. 31,350
2,400 /2/Goody's Family Clothing, Inc. 25,650
2,300 Great Atlantic & Pacific Tea Co., Inc. 54,050
1,700 /2/Group 1 Automotive, Inc. 29,113
2,200 /2/Guitar Center, Inc. 37,675
2,800 Hancock Fabrics, Inc. 24,325
15,300 /2/Hanover Direct, Inc. 42,075
1,200 Haverty Furniture Cos., Inc. 22,650
7,800 Heilig-Meyers Co. 59,963
3,300 /2/Hollywood Entertainment Corp. 50,325
5,000 /2/Homebase, Inc. 33,750
1,200 Ingles Markets, Inc., Class A 15,000
2,250 /2/Insight Enterprises, Inc. 65,250
2,200 Jo-Ann Stores, Inc. 39,600
3,375 /2/Just For Feet, Inc. 57,164
800 /2/K & G Men's Center, Inc. 6,700
1,900 /2/Lands' End, Inc. 32,419
5,100 /2/Linens 'N Things, Inc. 157,781
4,000 Longs Drug Stores Corp. 156,250
2,200 /2/Maxim Group, Inc. 38,775
2,737 /2/Mens Wearhouse, Inc. 66,372
3,300 /2/Michaels Stores, Inc. 66,000
4,600 /2/Micro Warehouse, Inc. 100,338
2,650 /2/Microage, Inc. 37,763
4,700 /2/Musicland Stores, Inc. 61,981
1,600 New England Business Service, Inc. 49,800
3,300 /2/Nine West Group, Inc. 41,869
1,800 /2/O'Reilly Automotive, Inc. 70,425
400 /2/ONSALE, Inc. 7,450
2,500 /2/P. J. America, Inc. 44,375
2,725 /2/Pacific Sunwear of California 58,928
1,100 /2/Party City Corp. 18,700
15,200 /2/PetSmart, Inc. 109,250
2,750 /2/Petco Animal Supplies, Inc. 24,406
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Retail Trade--continued

1,200 /2/Pomeroy Computer Resources $ 20,175
2,300 Regis Corp. Minnesota 70,581
2,000 /2/Renters Choice, Inc. 49,625
3,600 Ruddick Corp. 69,975
3,400 Shopko Stores, Inc. 106,463
1,300 Smart & Final, Inc. 11,213
18,800 /2/Southland Corp. 38,481
3,800 Spiegel, Inc., Class A 11,638
4,200 /2/Sports Authority, Inc. 32,025
3,500 /2/Stage Stores, Inc. 46,375
3,700 /2/Stein Mart, Inc. 29,138
6,500 /2/Sunglass Hut International, Inc. 30,063
1,000 /2/Syms Corp. 10,063
1,600 Talbots, Inc. 36,300
2,000 /2/Trans World Entertainment Corp. 41,250
1,400 /2/U.S.A. Floral Products, Inc. 12,775
2,100 /2/United Auto Group, Inc. 28,875
1,300 /2/Urban Outfitters, Inc. 17,063
1,600 /2/Value City Department Stores, Inc. 14,700
1,200 /2/West Marine, Inc. 8,475
1,400 /2/Wet Seal, Inc., Class A 29,575
1,400 /2/Wild Oats Markets, Inc. 34,475
4,600 /2/Zale Corp. 108,963
-------------------------------------------------------------------------------------------
TOTAL 4,441,508

-------------------------------------------------------------------------------------------
Services--11.5%

2,100 ABM Industries, Inc. 58,800
3,800 /2/ABR Information Services, Inc. 71,725
3,000 /2/ADVO, Inc. 76,313
800 /2/AHL Services, Inc. 27,000
800 /2/AMC Entertainment, Inc. 11,600
2,900 /2/APAC Teleservices, Inc. 18,125
1,100 /2/Abacus Direct Corp. 53,625
2,000 Ackerley Communications, Inc. 40,375
800 /2/Administaff, Inc. 26,250
5,200 /2/Advantica Restaurant Group, Inc. 33,150
4,785 /2/Allied Waste Industries, Inc. 103,476
</TABLE>

Shares Value

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<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

600 /2/Ambassadors International, Inc. $ 8,775
2,050 American Business Products, Inc. 38,053
900 /2/American Classic Voyages Co. 13,556
5,600 /2/American Media, Inc. 27,650
2,000 /2/American Skiing Co. 17,875
1,000 /2/Anchor Gaming 50,875
600 /2/AnswerThink Consulting Group, Inc. 11,588
3,300 Applebee's International, Inc. 67,238
1,340 /2/Applied Graphics Technologies, Inc. 15,996
2,925 Applied Industrial Technologies, Inc. 38,756
24,300 /2/Aqua Alliance, Inc. 54,675
3,900 /2/Ascent Entertainment Group, Inc. 26,569
3,737 Avado Brands, Inc. 29,429
900 /2/Aviation Sales Co. 29,925
6,000 /2/Aztar Corp. 31,125
1,350 /2/BARRA, Inc. 35,606
1,000 /2/Banner Aerospace, Inc. 7,938
3,850 Banta Corp. 95,769
1,900 /2/Bell & Howell Co. 50,350
300 /2/Berlitz International, Inc. 8,813
2,200 /2/Big Flower Holdings, Inc. 42,900
4,400 /2/Billing Concepts Corp. 62,150
5,500 Bob Evans Farms, Inc. 108,281
1,700 /2/Boise Cascade Office Products Corp. 15,619
1,700 /2/Borg Warner Security Corp. 25,925
4,900 Bowne & Co., Inc. 65,844
4,700 /2/Boyd Gaming Corp. 14,100
6,025 /2/Buffets, Inc. 65,145
800 Butler Manufacturing Co. 18,000
1,400 /2/CD Radio, Inc. 42,525
1,500 /2/CDI Corp. 32,719
2,350 /2/CEC Entertainment, Inc. 66,388
1,200 /2/CKS Group, Inc. 22,800
2,300 /2/CMG Information Services, Inc. 130,813
900 /2/CSS Industries, Inc. 24,188
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

2,700 /2/Calpine Corp. $ 60,075
400 Carbo Ceramics, Inc. 10,950
3,100 /2/Caribiner International, Inc. 20,344
1,000 /2/Carmike Cinemas, Inc., Class A 18,688
1,100 /2/Carriage Services, Inc. 25,713
800 /2/Casella Waste Systems, Inc. 23,600
1,400 Castle (A.M.) & Co. 26,075
2,400 /2/Catalina Marketing Corp. 114,450
6,200 /2/Catalytica, Inc. 100,750
1,450 Central Parking Corp. 60,809
1,300 /2/Championship Auto Racing Teams, Inc. 32,338
5,700 /2/Checkfree Holdings Corp. 89,597
2,200 /2/Cheesecake Factory, Inc. 42,075
5,000 /2/Choice Hotels International, Inc. 62,188
1,900 /2/ChoicePoint, Inc. 89,775
1,000 Churchill Downs, Inc. 36,125
1,700 /2/Coinmach Laundry Corp. 17,106
4,100 /2/Comfort Systems USA, Inc. 77,900
5,100 /2/CommScope, Inc. 71,081
2,300 /2/Computer Learning Centers, Inc. 20,556
1,400 /2/Consolidated Graphics, Inc. 66,413
2,166 /2/Consolidated Products, Inc. 40,071
1,200 /2/Copart, Inc. 26,400
1,100 /2/Cox Radio, Inc., Class A 41,181
1,400 /2/Daisytek International Corp. 21,088
2,100 Dames & Moore Group 25,200
700 /2/Data Processing Resources Corp. 16,013
1,200 /2/Data Transmission Network Corp. 35,700
1,700 /2/Dave & Buster's, Inc. 31,875
1,000 /2/Day Runner, Inc. 20,000
7,900 /2/DeVRY, Inc. 173,800
1,000 /2/Deltek Systems, Inc. 17,875
2,400 /2/Dendrite International, Inc. 49,500
1,100 Dover Downs Entertainment, Inc. 14,988
1,600 /2/Dycom Industries, Inc. 56,100
4,000 /2/Eastern Environmental Services 111,000
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

400 /2/EduTrek International, Inc., Class A $ 2,900
1,200 /2/Education Management Corp. 44,100
1,200 /2/Emmis Communications Corp., Class A 39,300
1,200 /2/@Entertainment, Inc. 8,100
2,700 /2/Equity Corp. International 66,994
9,400 /2/Extended Stay America, Inc. 90,475
800 /2/FactSet Research Systems 24,000
1,300 Fair Isaac & Co., Inc. 52,163
2,650 /2/Family Golf Centers, Inc. 55,816
5,200 Fisher Scientific International, Inc. 94,900
5,000 Fleming Cos., Inc. 50,938
3,600 /2/Florida Panthers Holdings, Inc. 35,100
4,600 /2/Foodmaker, Inc. 72,738
5,300 Foster Wheeler Corp. 84,138
3,000 /2/Franklin Covey Co. 59,250
2,550 G & K Services, Inc., Class A 116,663
800 /2/GC Cos., Inc. 29,900
2,700 Gaylord Entertainment Co. 71,550
2,900 /2/Getty Images, Inc. 35,706
5,200 /2/Grand Casinos, Inc. 45,825
2,475 Granite Construction, Inc. 82,448
300 Gray Communications 5,194
100 Grey Advertising, Inc. 35,500
19,200 /2/Grey Wolf, Inc. 22,800
7,900 /2/Greyhound Lines, Inc. 45,425
3,100 /2/Group Maintenance America Corp. 40,106
5,400 /2/Gtech Holdings Corp. 129,600
1,000 /2/Gulf Island Fabrication, Inc. 14,375
800 /2/Gulfmark Offshore, Inc. 14,500
2,900 /2/HA-LO Industries, Inc. 81,925
900 /2/Hagler Bailly, Inc. 21,150
4,100 Handleman Co. 40,744
4,100 Harland (John H.) Co. 59,450
800 Harveys Casino Resorts 20,350
5,000 Hollinger International, Inc. 65,000
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

2,600 /2/Hollywood Park, Inc. $ 24,863
2,300 /2/Homestead Village, Inc. 14,375
2,600 /2/Horizon Offshore, Inc. 17,550
3,800 /2/Host Marriott Services Corp. 39,425
3,200 Houghton Mifflin Co. 124,800
2,700 Hughes Supply, Inc. 71,719
1,200 Hunt Corp. 16,650
6,700 Hussmann International, Inc. 104,269
1,200 /2/IHOP Corp. 47,100
2,275 /2/ITT Educational Services, Inc. 67,539
4,100 /2/Indus International, Inc. 22,550
3,600 /2/Industri-Matematik International Corp. 16,650
3,650 /2/InfoUSA, Inc., Class B 18,706
4,200 Innkeepers USA Trust 48,300
2,800 /2/Insituform Technologies, Inc., Class A 33,775
2,300 /2/Integrated Electrical Services 38,956
6,200 /2/Interim Services, Inc. 131,750
2,200 International Speedway Corp., Class A 67,925
700 /2/JLK Direct Distribution, Inc., Class A 8,094
2,900 /2/Jacobs Engineering Group, Inc. 94,613
1,900 /2/Jones Intercable, Inc., Class A 53,319
1,400 /2/Journal Register Co. 22,488
3,000 /2/Labor Ready, Inc. 54,000
1,000 Landauer, Inc. 26,438
3,400 /2/Landrys Seafood Restaurants, Inc. 28,475
1,600 /2/Lason Holdings, Inc. 87,600
800 Lawson Products, Inc. 18,600
1,400 /2/Learning Tree International, Inc. 12,600
5,900 Lee Enterprises, Inc. 160,406
5,100 /2/Lone Star Steakhouse & Saloon 40,800
3,100 Luby's Cafeterias, Inc. 46,113
4,400 /2/Mail-Well, Inc. 57,475
2,975 Marcus Corp. 45,741
1,650 /2/Mastec, Inc. 39,291
1,000 /2/Maximus, Inc. 29,000
3,025 McClatchy Co., Class A 102,661
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

3,100 Media General, Inc., Class A $ 138,725
1,600 /2/MemberWorks, Inc. 37,000
5,627 MeriStar Hospitality Corp. 104,100
1,900 Merrill Corp. 31,825
3,850 /2/Metamor Worldwide, Inc. 98,897
2,482 Metris Cos., Inc. 81,596
900 /2/Metro Networks, Inc. 32,963
6,942 /2/Metromedia International Group, Inc. 42,520
1,350 /2/Metzler Group, Inc. 56,700
2,200 Midas, Inc. 60,913
3,873 /2/Midway Games, Inc. 38,008
4,400 /2/Morrison Knudsen Corp. 43,725
1,100 /2/NCO Group, Inc. 34,650
2,300 /2/NFO Worldwide, Inc. 21,563
8,747 /2/NOVA Corp. 252,570
1,200 /2/NPC International, Inc. 14,325
8,860 /2/Newpark Resources, Inc. 83,616
2,100 Norrell Corp. 28,481
3,600 /2/NovaCare Employee Services 20,025
600 /2/OMNI Energy Services Corp. 4,650
8,900 Olsten Corp. 81,769
800 /2/OmniAmerica, Inc. 15,900
1,400 /2/On Assignment, Inc. 47,600
1,300 /2/On Command Corp. 10,725
700 /2/PEC Israel Economic Corp. 17,369
2,750 /2/Papa Johns International, Inc. 104,414
2,400 /2/Paxson Communications Corp. 20,100
1,100 /2/Pegasus Communications Corp. 18,975
900 /2/Pegasystems, Inc. 9,506
800 /2/Penske Motorsports, Inc. 17,600
1,650 /2/Performance Food Group Co. 40,013
4,300 /2/Personnel Group of America, Inc. 66,650
2,300 /2/Peterson Cos., Inc. 61,094
5,800 Phoenix Investment Partners Ltd. 46,763
1,000 /2/Pierce Leahy Corp. 24,063
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

950 /2/Pinkertons, Inc. $ 15,556
4,800 /2/Planet Hollywood International, Inc., Class A 19,200
2,200 /2/Playboy Enterprises, Inc., Class B 31,625
8,300 /2/Premier Parks, Inc. 184,156
2,400 /2/Prepaid Legal Services, Inc. 57,450
1,600 /2/Preview Travel, Inc. 21,700
6,600 /2/Pride International, Inc. 76,725
700 /2/Primadonna Resorts, Inc. 5,075
3,000 /2/Primark Corp. 81,000
6,900 /2/Prime Hospitality Corp. 62,963
1,400 /2/ProBusiness Services, Inc. 51,188
1,400 /2/Profit Recovery Group International, Inc. 42,963
2,100 /2/Protection One, Inc. 23,625
5,700 /2/PsiNet, Inc. 82,294
4,300 /2/RCN Corp. 69,203
3,100 /2/Rainforest Cafe Inc. 20,538
3,700 /2/Red Roof Inns, Inc. 64,056
700 /2/RemedyTemp, Inc., Class A 12,775
6,200 Richfood Holdings, Inc. 110,050
2,200 /2/Rio Hotel & Casino, Inc. 30,800
2,500 Rollins, Inc. 43,125
4,610 /2/Romac International, Inc. 80,675
3,900 Ruby Tuesday, Inc. 65,813
1,900 /2/Rural / Metro Corp. 19,950
5,500 /2/Ryan's Family Steak Houses, Inc. 59,125
1,800 SEI Investments Co. 149,175
3,100 /2/SFX Entertainment, Inc., Class A 98,038
5,000 /2/SITEL Corp. 17,188
400 /2/SM&A Corp. 5,625
1,200 /2/SOS Staffing Services, Inc. 10,125
15,500 /2/Safety-Kleen Corp. 47,469
1,750 Sbarro, Inc. 41,125
1,700 /2/Scholastic Corp. 67,044
1,300 /2/Scientific Games Holdings Corp. 21,531
8,800 Sensormatic Electronics Corp. 49,500
1,900 /2/Service Experts, Inc. 57,356
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

2,600 Servico, Inc. $ 12,675
3,800 Shurgard Storage Centers, Inc., Class A 102,363
600 /2/Silverleaf Resorts, Inc. 7,088
2,525 /2/Sonic Corp. 47,975
5,200 Sothebys Holdings, Inc., Class A 112,450
1,700 /2/Speedway Motorsports, Inc. 35,700
3,100 /2/Spelling Entertainment Group, Inc. 20,925
2,100 /2/Staff Leasing, Inc. 25,988
2,200 /2/StaffMark, Inc. 38,638
1,700 Standard Register 48,769
2,800 /2/Station Casinos, Inc. 16,800
900 Stone & Webster, Inc. 28,688
3,700 Storage USA, Inc. 112,619
900 Strayer Education, Inc. 30,600
1,400 /2/Suburban Lodges of America, Inc. 11,113
2,800 /2/Superior Energy Services, Inc. 11,288
3,000 /2/Superior Services, Inc. 63,000
5,000 /2/Sylvan Learning Systems, Inc. 154,375
1,700 TCBY Enterprises, Inc. 12,006
8,200 /2/TCI Satellite Entertainment, Inc. 13,325
1,400 /2/TMP Worldwide, Inc. 42,000
2,800 /2/TeleTech Holdings, Inc. 27,650
3,815 /2/Tetra Tech, Inc. 77,492
1,400 /2/Tetra Technologies, Inc. 16,888
900 /2/Thermo Ecotek Corp. 11,194
1,100 /2/Travel Services International, Inc. 22,275
500 /2/Trendwest Resorts, Inc. 5,375
1,700 URS Corp. 28,688
4,600 /2/US Satellite Broadcasting Co. Inc., Class A 32,200
2,600 /2/USCS International, Inc. 77,350
1,100 Unifirst Corp. 30,594
9,200 Unisource Worldwide, Inc. 84,525
700 /2/United Natural Foods, Inc. 19,513
4,900 /2/United Stationers, Inc. 129,850
600 United Television, Inc. 66,150
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Services--continued

1,900 /2/VWR Scientific Products Corp. $ 46,194
3,500 /2/Vail Resorts, Inc. 93,625
4,800 /2/Valassis Communications, Inc. 191,400
200 Value Line, Inc. 8,200
5,800 /2/Vanstar Corp. 64,888
3,000 /2/Veritas DGC, Inc. 55,875
1,100 /2/Vincam Group, Inc. 17,394
1,000 /2/Vistana, Inc. 11,125
1,050 /2/Volt Information Science, Inc. 25,134
1,200 Wackenhut Corp., Class A 26,025
1,300 /2/Wackenhut Corrections Corp. 31,931
5,700 Wallace Computer Services, Inc. 124,688
400 /2/Waste Industries, Inc. 9,350
900 /2/Westaff Inc. 7,763
3,000 /2/Westwood One, Inc. 54,000
3,300 Wiley (John) & Sons, Inc., Class A 120,656
1,400 /2/Wilmar Industries, Inc. 34,650
3,000 /2/World Access, Inc. 64,125
5,100 /2/World Color Press, Inc. 154,913
1,300 /2/Young Broadcasting, Inc., Class A 41,031
2,000 Zapata Corp. 15,125
-------------------------------------------------------------------------------------------
TOTAL 13,740,955

-------------------------------------------------------------------------------------------
Technology--13.7%

1,900 /2/3DFX Interactive, Inc. 23,156
3,650 AAR Corp. 84,406
800 /2/ARIS Corp. 12,600
2,000 /2/ATMI, Inc. 27,500
1,100 /2/AVT Corp. 24,063
1,000 /2/Aavid Thermal Technologies 15,000
2,400 /2/Actel Corp. 30,750
6,320 /2/Acxiom Corp. 158,790
2,600 /2/Adtran, Inc. 65,894
800 /2/Advanced Energy Industries, Inc. 10,500
600 /2/Advantage Learning Systems, Inc. 27,600
700 /2/Advent Software, Inc. 24,325
1,200 /2/Alliant Techsystems, Inc. 84,000
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

1,900 /2/Alternative Resources Corp. $ 16,625
1,300 /2/Alydaar Software Corp. 8,206
5,600 /2/American Management System, Inc. 171,850
4,800 /2/Amkor Technology, Inc. 23,400
2,100 /2/Amphenol Corp., Class A 70,481
900 Analogic Corp. 34,425
2,800 Analysts International Corp. 49,175
2,600 /2/Anicom, Inc. 23,238
3,050 /2/Antec Corp. 50,706
700 /2/Apex PC Solutions, Inc. 18,288
3,000 /2/Applied Micro Circuits Corp. 72,000
4,397 /2/Artesyn Technologies, Inc. 63,482
900 /2/Artisan Components, Inc. 6,581
2,100 /2/Ascend Communications, Inc. 101,325
1,700 /2/Aspec Technology, Inc. 3,506
2,200 /2/Aspect Development, Inc. 69,506
6,700 /2/Aspect Telecommunications Corp. 101,338
2,800 /2/Aspen Technology, Inc. 39,200
3,819 /2/Avant! Corp. 65,162
2,600 Aviall, Inc. 28,113
3,100 /2/Avid Technology, Inc. 80,213
3,200 /2/Axent Technologies, Inc. 80,400
3,100 /2/BE Aerospace, Inc. 66,650
6,700 /2/BEA Systems, Inc. 131,278
1,600 /2/BRC Holdings, Inc. 29,800
700 /2/Bacou U.S.A., Inc. 12,206
2,779 /2/BancTec, Inc. 34,390
1,300 /2/Benchmark Electronics, Inc. 30,631
3,200 /2/Bisys Group, Inc. 140,000
2,200 /2/Black Box Corp. 73,425
3,730 /2/Boole & Babbage, Inc. 99,311
6,874 /2/Brightpoint, Inc. 84,207
2,300 /2/Broadvision, Inc. 34,500
3,187 /2/Burr Brown Corp. 59,159
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

4,400 /2/C-Cube Microsystems, Inc. $ 78,650
1,100 /2/CNET, Inc. 41,869
1,200 /2/CDnow, Inc. 8,775
4,100 /2/CHS Electronics, Inc. 39,975
3,300 /2/CSG Systems International, Inc. 179,850
1,384 CTS Corp. 41,001
400 /2/Cable Michigan, Inc. 14,950
1,800 /2/California Microwave 13,838
4,700 /2/CellNet Data Systems, Inc. 29,963
4,400 /2/Cellstar Corp. 30,250
4,000 /2/Checkpoint System, Inc. 47,500
8,800 /2/Cirrus Logic, Inc. 85,525
2,900 /2/Clarify, Inc. 39,513
4,600 /2/Cognex Corp. 71,300
3,100 /2/Coherent, Inc. 36,425
1,300 Cohu, Inc. 22,344
600 /2/Com21, Inc. 9,000
1,300 /2/Complete Business Solutions, Inc. 30,875
2,900 /2/Compucom System, Inc. 14,138
4,100 /2/Computer Horizons Corp. 94,300
200 /2/Computer Management Sciences 3,700
2,200 Computer Task Group, Inc. 67,375
1,900 /2/Concentric Network Corp. 46,075
1,700 /2/Concord Communications, Inc. 63,113
1,700 /2/Cotelligent, Inc. 32,088
2,850 /2/Credence Systems Corp. 42,394
700 Cubic Corp. 13,475
700 Curtiss Wright Corp. 26,600
2,600 /2/Cylink Corp. 10,888
3,800 /2/Cymer, Inc. 46,550
11,900 /2/Cypress Semiconductor Corp. 132,388
1,000 /2/DBT Online, Inc. 20,250
3,200 /2/DII Group, Inc. 47,000
5,300 /2/DSP Communications, Inc. 52,006
3,700 Dallas Semiconductor Corp. 136,900
1,900 Daniel Industries, Inc. 26,363
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

6,600 /2/Data General Corp. $ 112,200
1,600 /2/DataWorks Corp. 10,900
2,000 /2/Datastream Systems, Inc. 20,125
1,350 /2/Davox Corp. 10,969
1,700 /2/DecisionOne Holdings Corp. 10,094
1,200 /2/Dialogic Corp. 27,000
4,700 /2/Diamond Multimedia Systems, Inc. 27,025
900 /2/Diamond Technology Partners, Class A 11,588
1,700 /2/Digi International, Inc. 25,500
6,100 /2/Digtial Microwave Corp. 26,688
3,000 /2/Dionex Corp. 79,875
1,600 /2/Documentum, Inc. 54,400
1,900 /2/DoubleClick, Inc. 62,700
1,150 /2/Ducommun, Inc. 18,400
700 /2/Dupont Photomasks, Inc. 25,375
1,800 /2/EarthLink Network, Inc. 69,300
1,700 /2/Echostar Communications Corp., Class A 45,900
1,600 /2/Electro Scientific Industries, Inc. 40,200
2,600 /2/Electroglas, Inc. 32,663
6,900 /2/Electronics for Imaging, Inc. 166,031
900 /2/Engineering Animation, Inc. 39,431
2,800 /2/Envoy Corp. 82,600
2,200 /2/Esterline Technologies Corp. 44,000
2,900 /2/Etec Systems, Inc. 98,238
1,300 /2/Evans & Sutherland Computer Co. 23,075
700 /2/Excel Switching Corp. 14,175
3,600 /2/Excite, Inc. 138,825
1,700 /2/Exodus Communications, Inc. 53,975
1,300 /2/F.Y.I., Inc. 37,375
3,000 /2/FSI International, Inc. 19,500
3,900 /2/Filenet Corp. 36,075
300 /2/Forrester Research, Inc. 9,675
4,500 GenCorp, Inc. 99,563
3,800 /2/GenRad, Inc. 61,750
4,000 /2/General Magic, Inc. 23,000
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

3,700 /2/General Semiconductor, Inc. $ 29,369
1,100 /2/Genesys Telecommunications Laboratories, Inc. 28,875
2,400 /2/GeoTel Communications Corp. 62,400
2,600 Gerber Scientific, Inc. 58,825
8,100 /2/Glenayre Technologies, Inc. 48,600
1,100 /2/Great Plains Software, Inc. 40,425
1,300 /2/H.T.E., Inc. 13,163
1,800 /2/HADCO Corp. 56,700
5,000 /2/HMT Technology Corp. 43,125
3,300 /2/HNC Software 110,963
525 Hach Co. 5,316
525 Hach Co., Class A 4,725
4,175 /2/Harbinger Corp. 27,659
1,300 Harmon Industries, Inc. 32,988
800 Heico Corp. 19,800
2,400 Helix Technology Corp. 27,450
1,700 Henry Jack & Associates, Inc. 77,563
2,600 /2/Hutchinson Technology, Inc. 50,538
1,400 /2/Hypercom Corp. 13,300
3,880 /2/Hyperion Solutions Corp. 116,400
900 /2/ICON CMT Corp. 11,363
700 /2/ISS Group, Inc. 19,294
1,900 /2/Inacom Corp. 36,813
1,550 /2/Information Management Resources 36,425
3,900 /2/Information Resources, Inc. 30,956
20,200 /2/Informix Corp. 102,894
3,200 /2/Infoseek Corp. 94,800
1,900 Innovex, Inc. 26,600
6,800 /2/Inprise Corp. 33,575
10,800 /2/Integrated Device Technology, Inc. 74,925
2,300 /2/Integrated Process Equipment Corp. 20,556
2,400 /2/Integrated Systems, Inc. 27,000
600 /2/Intelligroup, Inc. 10,350
2,800 Inter-Tel, Inc. 50,575
6,300 /2/Interdigital Communications Corp. 31,106
5,600 /2/Intergraph Corp. 36,400
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

2,600 /2/International Network Services $ 110,500
6,800 /2/International Rectifier Corp. 61,200
1,600 /2/International Telecommunication Data Systems, Inc. 38,200
2,250 /2/Iron Mountain, Inc. 68,766
1,600 /2/Itron, Inc. 12,400
2,700 /2/JDA Software Group, Inc. 25,650
2,800 /2/Jabil Circuit, Inc. 129,675
1,600 /2/Kellstrom Industries, Inc. 36,000
5,000 /2/Kemet Corp. 70,000
3,600 /2/Kent Electronics Corp. 58,275
7,000 /2/Komag, Inc. 39,375
1,300 /2/Kopin Corp. 19,825
1,200 /2/Kroll-O'Gara Co. 29,550
1,100 /2/Kronos, Inc. 39,600
3,100 /2/Kulicke & Soffa Industries 50,569
800 /2/L-3 Communications Holdings, Inc. 34,400
1,900 /2/Ladish Co., Inc. 16,269
5,000 /2/Lam Research Corp. 72,188
2,900 /2/Lattice Semiconductor Corp. 98,600
4,900 /2/Legato Systems, Inc. 191,713
4,675 /2/Level One Communications, Inc. 123,011
5,000 /2/Lycos, Inc. 203,125
2,000 /2/MAPICS, Inc. 37,750
2,600 /2/MEMC Electronic Materials 17,875
1,100 /2/META Group, Inc. 26,400
3,900 /2/MMC Networks, Inc. 40,950
900 /2/MOOG Inc., Class A 27,619
3,000 /2/MRV Communications, Inc. 20,813
3,300 /2/MTI Technology Corp. 10,725
2,400 MTS Systems Corp. 29,700
4,400 /2/Macromedia, Inc. 88,000
400 /2/Manhattan Associates, Inc. 6,400
2,600 /2/Manugistics Group, Inc. 37,375
2,200 /2/Marshall Industries 63,250
2,600 /2/Mastech Corp. 61,100
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

8,100 /2/Mentor Graphics Corp. $ 65,306
2,000 /2/Mercury Interactive Corp. 83,000
10,600 /2/Merisel, Inc. 27,825
4,700 Methode Electronics, Inc., Class A 72,263
900 /2/Metro Information Services, Inc. 21,375
1,700 /2/Metromedia Fiber Network, Inc. 64,388
5,000 /2/Mettler Toledo International, Inc. 109,375
1,800 /2/Micrel, Inc. 59,175
1,375 /2/Micro Focus Group plc, ADR 26,125
6,700 /2/Microchip Technology, Inc. 181,319
1,300 /2/Micromuse, Inc. 22,181
4,600 /2/Micron Electronics, Inc. 96,313
2,000 /2/Mindspring Enterprises, Inc. 79,375
400 /2/Mobius Management Systems, Inc. 4,650
1,600 /2/N2K, Inc. 7,900
3,700 National Computer Systems, Inc. 103,600
4,400 National Data Corp. 149,050
1,950 /2/National Instruments Corp. 53,381
1,000 /2/National Processing, Inc. 5,875
1,400 /2/Natural Microsystems Corp. 12,556
2,600 /2/NeoMagic Corp. 43,550
4,000 /2/Network Appliance, Inc. 219,000
2,900 /2/Network Equipment Technologies, Inc. 30,813
600 /2/Network Solutions, Inc. 32,025
900 /2/New Era of Networks, Inc. 44,325
4,700 Newport News Shipbuilding, Inc. 123,669
1,400 /2/Nichols Research Corp. 28,525
1,200 /2/Norstan, Inc. 20,550
4,500 /2/Novellus Systems, Inc. 174,656
2,200 OEA, Inc. 24,613
5,000 /2/Oak Technology, Inc. 17,813
1,700 /2/Objective Systems Integrators, Inc. 8,925
4,000 /2/Omnipoint Corp. 37,000
3,000 /2/Open Market, Inc. 18,375
300 /2/Optical Cable Corp. 3,694
5,700 /2/P-COM, Inc. 18,169
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

4,000 /2/PMC-Sierra, Inc. $ 179,500
2,200 /2/PRI Automation, Inc. 38,088
9,200 /2/Pairgain Technologies, Inc. 75,613
1,300 Park Electrochemical Corp. 23,806
2,100 /2/Paymentech, Inc. 32,288
1,300 /2/Pegasus Systems, Inc. 22,588
1,000 /2/Peregrine Systems, Inc. 34,875
53 /2/Perkin-Elmer Corp., Warrants 288
2,800 /2/Photronic, Inc. 61,075
5,000 /2/PictureTel Corp. 36,875
1,000 /2/Pinnacle Systems, Inc. 34,000
3,425 Pioneer Standard Electronics, Inc. 30,611
2,200 /2/Plantronics, Inc. 125,263
2,900 /2/Platinum Software Corp. 27,188
1,900 /2/Plexus Corp. 47,263
600 /2/Powerwave Technologies, Inc. 7,238
3,400 /2/Premisys Communications, Inc. 35,913
600 Primex Technologies, Inc. 22,050
2,300 /2/Progress Software Corp. 59,944
900 /2/Project Software & Development, Inc. 16,313
1,100 /2/QAD, Inc. 5,156
1,000 /2/QRS Corp. 38,000
1,100 /2/Qlogic Corp. 101,613
1,930 /2/Quantum Corp. 33,896
2,600 /2/REMEC, Inc. 27,300
600 /2/RWD Technologies, Inc. 11,325
900 /2/Radiant Systems, Inc. 6,075
1,900 /2/Rambus, Inc. 124,272
11,352 /2/Rational Software Corp. 254,001
5,900 /2/Read-Rite Corp. 63,425
1,100 /2/RealNetworks, Inc. 37,056
3,000 /2/Remedy Corp. 26,250
1,820 /2/Renaissance Worldwide, Inc. 17,176
6,800 /2/S3, Inc. 21,463
1,400 /2/SCB Computer Technology, Inc. 10,325
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

1,600 /2/SCM Microsystems, Inc. $ 76,000
1,700 /2/SDL, Inc. 37,400
1,000 /2/SPR, Inc. 18,000
1,200 /2/SS&C Technologies, Inc. 13,500
3,700 /2/Safeguard Scientifics, Inc. 99,206
800 /2/Sanchez Computer Associates 20,100
2,600 /2/Sandisk Corp. 25,025
1,200 Sandy Spring Bancorp, Inc. 38,550
1,200 /2/Sapient Corp. 54,075
1,700 /2/Sawtek, Inc. 34,319
5,000 /2/Security Dynamics Technologies, Inc. 51,250
1,700 /2/Semtech Corp. 40,481
800 /2/Sequa Corp., Class A 51,200
5,700 /2/Sequent Computer System, Inc. 56,288
3,600 /2/Shiva Corp. 20,363
4,300 /2/Silicon Valley Group, Inc. 55,094
1,300 /2/Siliconix, Inc. 23,400
2,300 /2/Sipex Corp. 63,825
3,300 /2/Smart Modular Technologies, Inc. 69,300
4,000 /2/Software AG Systems, Inc. 60,000
700 /2/Special Devices, Inc. 21,350
1,400 /2/Spectra-Physics Lasers, Inc. 10,456
1,800 /2/Speedfam International, Inc. 29,025
1,800 /2/Splash Technology Holdings, Inc. 15,188
1,700 /2/Sportsline USA, Inc. 23,906
4,817 /2/Structural Dynamics Research Corp. 69,244
10,700 /2/Sybase, Inc. 63,531
2,200 /2/Sykes Enterprises, Inc. 43,175
7,200 /2/Symantec Corp. 115,200
700 /2/Syntel, Inc. 9,800
4,250 System Software Association 26,031
4,400 /2/Systems & Computer Technology Corp. 62,700
2,800 /2/Tava Technologies, Inc. 16,625
1,900 Technitrol, Inc. 51,775
5,300 /2/Technology Solutions Corp. 63,600
4,500 /2/Tekelec, Inc. 80,719
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Technology--continued

2,100 Telxon Corp. $ 43,050
400 /2/Thermo Optek Corp. 3,525
400 /2/Thermoquest Corp. 4,050
1,150 /2/Thermotrex Corp. 15,022
3,700 /2/Transaction Systems Architects, Inc., Class A 133,547
1,800 /2/TriStar Aerospace Co. 18,450
3,000 /2/Trimble Navigation Ltd. 24,000
1,600 /2/Triumph Group, Inc. 51,800
4,800 /2/UNOVA, Inc. 69,300
5,700 /2/USWeb Corp. 81,938
2,800 /2/Ultratech Stepper, Inc. 50,400
3,200 /2/Unitrode Corp. 40,200
5,800 /2/VLSI Technology, Inc. 55,825
3,400 /2/Vantive Corp. 24,863
1,200 /2/Veeco Instruments, Inc. 35,625
700 /2/Verio, Inc. 9,713
400 /2/Verisign, Inc. 12,275
2,600 /2/Viasoft, Inc. 15,925
2,600 /2/Vicor Corp. 24,375
6,800 /2/Vishay Intertechnology, Inc. 102,850
3,200 /2/Visio Corp. 85,200
2,700 /2/Visual Networks, Inc. 76,950
6,000 /2/Wang Laboratories, Inc. 128,250
2,100 /2/WavePhore, Inc. 10,894
1,800 /2/Westell Technologies, Inc., Class A 6,750
3,800 /2/Whittman-Hart, Inc. 75,525
2,850 /2/Wind River Systems, Inc. 124,866
2,700 /2/Wyman Gordon Co. 38,813
3,000 /2/Xircom, Inc. 88,500
4,500 /2/Xylan Corp. 72,000
-------------------------------------------------------------------------------------------
TOTAL 16,338,449

-------------------------------------------------------------------------------------------
Transportation--1.8%

2,900 ASA Holdings Ltd. 104,038
4,600 Air Express International Corp. 96,600
7,300 /2/AirTran Holdings, Inc. 20,988
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Transportation--continued

1,100 /2/Airnet Systems, Inc. $ 15,469
2,900 /2/Alaska Air Group, Inc. 104,219
5,200 Alexander and Baldwin, Inc. 105,625
5,402 /2/America West Holdings Corp., Class B 83,056
2,800 /2/American Freightways Corp. 23,800
400 /2/Amtran, Inc. 8,850
2,700 Arnold Industries, Inc. 34,425
1,600 /2/Atlantic Coast Airlines Holdings 38,400
1,200 /2/Atlas Air, Inc. 41,400
5,400 C.H. Robinson Worldwide, Inc. 119,813
1,700 Circle International Group, Inc. 34,106
3,100 /2/Coach USA, Inc. 83,119
2,800 /2/Consolidated Freightways Corp. 30,275
900 /2/Covenant Transport, Inc., Class A 13,613
1,300 /2/Dispatch Management Services Corp. 18,038
1,100 /2/Eagle USA Airfreight, Inc. 14,094
3,200 Expeditors International Washington, Inc. 108,400
1,500 Florida East Coast Industries, Inc. 44,906
3,000 /2/Fritz Companies, Inc. 26,625
2,245 /2/Heartland Express, Inc. 40,410
2,900 Hunt (J.B.) Transportation Services, Inc. 48,575
1,800 /2/Hvide Marine, Inc., Class A 13,613
2,850 /2/Kirby Corp. 60,384
2,200 /2/Kitty Hawk, Inc. 22,000
800 /2/Knight Transportation, Inc. 14,200
1,400 /2/Landstar System, Inc. 49,700
1,200 /2/M.S. Carriers, Inc. 25,800
3,300 /2/Mesa Air Group, Inc. 16,706
1,550 /2/Mesaba Holdings, Inc. 28,288
1,900 /2/Midwest Express Holdings, Inc. 60,088
3,600 Overseas Shipholding Group, Inc. 63,450
2,600 Pittston BAX Group 15,113
2,100 Roadway Express, Inc. 29,006
2,700 SkyWest, Inc. 68,850
3,250 /2/Swift Transportation Co. 71,805
7,600 /2/Trans World Airlines, Inc. 38,000
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Transportation--continued

1,000 /2/US Xpress Enterprises, Inc., Class A $ 14,500
3,450 USFreightways Corp. 86,466
3,775 Werner Enterprises, Inc. 67,950
6,800 /2/Wisconsin Central Transportation Corp. 102,850
3,100 /2/Yellow Corp. 49,794
-------------------------------------------------------------------------------------------
TOTAL 2,157,407

-------------------------------------------------------------------------------------------
Utilities--7.0%

7,600 AGL Resources, Inc. 159,125
2,400 /2/Adelphia Communications Corp., Class A 90,300
1,700 /2/Aerial Communications, Inc. 9,563
4,700 Aliant Communications, Inc. 132,628
2,400 /2/American Mobile Satellite Corp. 9,675
12,290 /2/American Tower Corp. 268,844
1,000 Aquarion Co. 32,875
700 Aquila Gas Pipeline Co. 4,900
3,700 /2/Associated Group, Inc., Class A 124,875
3,950 Atmos Energy Corp. 117,266
1,800 Bay State Gas Co. 70,650
2,900 Black Hills Corp. 74,856
1,700 CFW Communications Co. 37,613
4,200 CMP Group, Inc. 77,438
16 CTG Resources, Inc. 370
1,600 California Water Service Group 42,200
2,100 /2/Cellular Communications International, Inc. 130,528
1,400 /2/Cellular Communications of Puerto Rico 16,450
2,005 /2/Centennial Cellular Corp., Class A 69,674
2,200 Central Hudson Gas & Electric Corp. 89,100
4,100 /2/Century Communications, Corp., Class A 90,713
1,800 Cilcorp, Inc. 92,700
462 /2/Citizens Utilities Co., Class B 4,160
3,000 Cleco Corp. 101,438
1,100 Colonial Gas Co. 37,744
2,400 Commonwealth Energy System 89,550
1,233 /2/Commonwealth Telephone Enterprises, Inc. 30,209
2,800 /2/CommNet Cellular, Inc. 30,800
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Utilities--continued

1,300 Connecticut Energy Corp. $ 36,400
1,100 E' Town Corp. 48,194
6,200 /2/e.spire Communications, Inc. 74,400
2,700 Eastern Enterprises 110,869
2,700 Eastern Utilities Association 70,031
7,300 /2/El Paso Electric Co. 63,875
1,100 /2/Electric Lightwave, Inc., Class A 8,663
2,200 Empire Distribution Electric Co. 50,325
3,400 Energen Corp. 61,200
4,900 Equitable Resources, Inc. 136,281
4,700 /2/General Communication, Inc., Class A 14,100
4,200 Hawaiian Electric Industries, Inc. 166,425
6,000 /2/ICG Communications, Inc. 124,125
2,100 /2/IDT Corp. 34,913
10,100 /2/ITC DeltaCom, Inc. 178,013
3,600 /2/IXC Communications, Inc. 139,500
5,000 Idacorp Inc. 156,250
3,933 Indiana Energy, Inc. 88,008
16,600 /2/Kelley Oil & Gas Corp. 23,863
2,000 /2/LCC International, Inc., Class A 9,500
2,300 Laclede Gas Co. 58,938
6,925 MDU Resources Group, Inc. 183,945
400 /2/MGC Communications, Inc. 4,000
2,100 Madison Gas & Electric Co. 48,563
3,600 /2/MetroCall, Inc. 14,400
4,400 Minnesota Power And Light Co. 184,525
5,433 /2/NTL, Inc. 260,444
1,700 NUI Corp. 39,844
6,800 Nevada Power Co. 171,700
2,300 New Jersey Resources Corp. 88,406
1,300 North Carolina Natural Gas Corp. 32,338
2,000 North Pittsburgh Systems, Inc. 27,000
3,200 Northwest Natural Gas Co. 89,200
2,300 Northwestern Corp. 56,781
4,100 ONEOK, Inc. 140,425
</TABLE>

Shares Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Utilities--continued

1,800 Orange & Rockland Utilities, Inc. $ 98,888
1,600 Otter Tail Power Co. 62,000
2,700 /2/PLD Telekom, Inc. 5,063
1,100 /2/Pacific Gateway Exchange, Inc. 31,763
4,600 /2/PageMart Wireless, Inc., Class A 25,300
1,300 Pennsylvania Enterprises, Inc. 32,175
4,700 Peoples Energy Corp. 173,313
3,100 Philadelphia Suburban Corp. 76,144
4,000 Piedmont Natural Gas, Inc. 139,000
2,000 /2/Powertel, Inc. 29,750
4,400 /2/Premiere Technologies, Inc. 24,200
2,800 /2/Primus Telecommunications Group, Inc. 30,975
5,500 Public Service Co. New Mexico 121,344
2,700 Public Service Co. North Carolina, Inc. 59,569
5,100 Rochester Gas & Electric Corp 148,538
3,100 SIGCORP, Inc. 106,369
8,300 /2/Seagull Energy Corp. 99,081
1,932 Semco Energy, Inc. 32,844
4,100 Sierra Pacific Resources 149,394
7,900 /2/SkyTel Communications, Inc. 130,844
2,300 SmarTalk Teleservices, Inc. 13,369
1,024 South Jersey Industries, Inc. 26,240
2,180 /2/Southern Union Co. 50,549
4,000 Southwest Gas Corp. 94,750
3,200 Southwestern Energy Co. 21,600
2,800 /2/Star Telecommunications, Inc. 36,750
1,400 TNP Enterprises, Inc. 47,250
5,300 /2/Tel-Save Holdings, Inc. 47,534
1,000 /2/Telegroup, Inc. 1,688
1,250 /2/Transaction Network Services, Inc. 34,219
4,300 UGI Corp. 98,363
800 /2/US LEC Corp., Class A 10,450
3,100 /2/USN Communications, Inc. 1,453
4,160 /2/UniSource Energy Corp. 64,480
1,900 United Illuminating Co. 93,100
</TABLE>

Shares or
Principal

Amount Value

- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/1/COMMON STOCKS--continued

Utilities--continued

5,200 /2/United International Holdings, Inc., Class A $ 67,600
3,636 United Water Resources, Inc. 70,448
3,400 /2/Vanguard Cellular Systems, Inc., Class A 78,200
4,900 WICOR, Inc. 119,438
3,100 WPS Resources Corp. 103,075
5,800 Washington Gas Light Co. 153,338
7,300 Washington Water Power Co. 137,331
2,300 /2/West TeleServices Corp. 27,600
2,800 Western Gas Resources, Inc. 22,925
10,000 /2/Western Wireless Corp., Class A 202,500
5,200 /2/WinStar Communications, Inc. 140,400
1,300 Yankee Energy Systems, Inc. 39,813
-------------------------------------------------------------------------------------------
TOTAL 8,412,705

-------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $95,243,218) 102,129,845
-------------------------------------------------------------------------------------------
/3/SHORT-TERM U.S. GOVERNMENT OBLIGATION0.6%

$ 700,000 United States Treasury Bill, 1/7/1999 (identified cost $693,968) 694,953
-------------------------------------------------------------------------------------------
/4/REPURCHASE AGREEMENT21.6%

25,850,000 Westdeutsche Landesbank Girozentrale, 5.42%, dated 10/30/1998, due

11/2/1998 (atamortized cost) 25,850,000

-------------------------------------------------------------------------------------------
/5/ TOTAL INVESTMENTS (IDENTIFIED COST $121,787,186) $128,674,798
-------------------------------------------------------------------------------------------
</TABLE>

1 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 total market value of
open Index futures contracts is $17,335,500 at October 31, 1998, which
represents 14.5% of net assets. Taking into consideration these open Index
futures contracts, the fund's effective total exposure to the Index is 99.9%.

2 Non-income producing security.

3 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.

5 The cost of investments for federal tax purposes amounts to $121,869,358. The
net unrealized appreciation of investments on a federal tax basis amounts to
$6,805,440 which is comprised of $21,185,981 appreciation and $14,380,541
depreciation at October 31, 1998.

Note: The categories of investments are shown as a percentage of net assets
($119,595,305) at October 31, 1998.

The following acronyms are used throughout this portfolio:

ADR --American Depositary Receipt
LLC --Limited Liability Corporation
PLC --Public Limited Company
REIT--Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1998

<TABLE>
<CAPTION>
Assets:

- --------------------------------------------------------------------------------------
<S> <C> <C>
Investments in repurchase agreements $ 25,850,000

- --------------------------------------------------------------------------------------
Investments in securities 102,824,798

- ----------------------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $121,787,186 and

tax cost $121,869,358) 128,674,798
- --------------------------------------------------------------------------------------
Income receivable 88,842

- --------------------------------------------------------------------------------------
Receivable for investments sold 1,770

- --------------------------------------------------------------------------------------
Receivable for shares sold 586,640

- --------------------------------------------------------------------------------------
Receivable for daily variation margin 553,200

- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 129,905,250

- ----------------------------------------------------------------------------------------------------------------------
Liabilities:

- --------------------------------------------------------------------------------------
Payable for investments purchased $10,039,177

- --------------------------------------------------------------------------------------
Payable for shares redeemed 141,400

- --------------------------------------------------------------------------------------
Payable to Bank 114,045

- --------------------------------------------------------------------------------------
Accrued expenses 15,323

- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 10,309,945

- ----------------------------------------------------------------------------------------------------------------------
Net Assets for 9,185,226 shares outstanding $119,595,305
- ----------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:

- --------------------------------------------------------------------------------------
Paid in capital $105,189,219

- --------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts 6,732,396
- --------------------------------------------------------------------------------------
Accumulated net realized gain on investments and futures contracts 7,588,149
- --------------------------------------------------------------------------------------
Undistributed net investment income 85,541

- ----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $119,595,305

- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:

- --------------------------------------------------------------------------------------
Institutional Shares:

- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value and Offering Price Per Share

($118,494,076/9,100,518 shares outstanding) $ 13.02
- ----------------------------------------------------------------------------------------------------------------------
Redemption Proceeds Per Share $ 13.02
- ----------------------------------------------------------------------------------------------------------------------
Class C Shares:

- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value and Offering Price Per Share ($1,101,229/84,708 shares outstanding) $ 13.00
- ----------------------------------------------------------------------------------------------------------------------
Redemption Proceeds Per Share (99/100 of $13.00)/1/ $ 12.87
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

1 See "Contingent Deferred Sales Charge."

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1998

Investment Income:

- ---------------------------------------------------------------------------------------
<S> <C> <C>
Dividends $ 1,613,838

- ---------------------------------------------------------------------------------------
Interest 583,648

- ----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 2,197,486

- ----------------------------------------------------------------------------------------------------------------------
Expenses:

- ---------------------------------------------------------------------------------------
Investment advisory fee $ 676,597
- ---------------------------------------------------------------------------------------
Custodian fees 65,907

- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 38,484
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 5,190

- ---------------------------------------------------------------------------------------
Auditing fees 15,192

- ---------------------------------------------------------------------------------------
Legal fees 3,055

- ---------------------------------------------------------------------------------------
Portfolio accounting fees 56,082

- ---------------------------------------------------------------------------------------
Distribution services fee Class C Shares 2,347
- ---------------------------------------------------------------------------------------
Shareholder services fee Institutional Shares 337,516

- ---------------------------------------------------------------------------------------
Shareholder services fee Class C Shares 782
- ---------------------------------------------------------------------------------------
Share registration costs 38,859

- ---------------------------------------------------------------------------------------
Printing and postage 36,949

- ---------------------------------------------------------------------------------------
Insurance premiums 2,983

- ---------------------------------------------------------------------------------------
Miscellaneous 10,053

- ----------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,289,996

- ----------------------------------------------------------------------------------------------------------------------
Waivers:

- ---------------------------------------------------------------------------------------
Waiver of shareholder services fee Institutional Shares (175,508)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 1,114,488

- ----------------------------------------------------------------------------------------------------------------------
Net investment income 1,082,998

- ----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:

- ---------------------------------------------------------------------------------------
Net realized gain on investments and futures contracts 7,723,489
- ---------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and futures contracts (24,459,690)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and futures contracts (16,736,201)
- ----------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $(15,653,203)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:

- -----------------------------------------------------------------------------------
Operations:

- -----------------------------------------------------------------------------------
Net investment income $ 1,082,998 $ 1,331,787
- -----------------------------------------------------------------------------------
Net realized gain on investments and futures contracts ($7,778,675 and

$(12,354,400), respectively, as computed for federal tax purposes) 7,723,489 12,898,401
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation on investments

and futures contracts (24,459,690) 17,302,166
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (15,653,203) 31,532,354
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:

- -----------------------------------------------------------------------------------
Distributions from net investment income

- -----------------------------------------------------------------------------------
Institutional Shares (1,195,686) (1,249,969)
- -----------------------------------------------------------------------------------
Class C Shares (506)

- -----------------------------------------------------------------------------------
Distributions from net realized gains and futures contracts

- -----------------------------------------------------------------------------------
Institutional Shares (12,347,168) (12,838,180)
- -----------------------------------------------------------------------------------
Class C Shares (3,988)

- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (13,547,348) (14,088,149)
- ------------------------------------------------------------------------------------------------------------------------
Share Transactions:

- -----------------------------------------------------------------------------------
Proceeds from sale of shares 234,148,863 164,053,525
- -----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders

in payment of distributions declared 6,316,298 6,372,039
- -----------------------------------------------------------------------------------
Cost of shares redeemed (242,139,218) (182,089,956)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (1,674,057) (11,664,392)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS (30,874,608) 5,779,813
- ------------------------------------------------------------------------------------------------------------------------
Net Assets:

- -----------------------------------------------------------------------------------
Beginning of period 150,469,913 144,690,100
- ------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of

$85,541 and $198,735, respectively) $ 119,595,305 $ 150,469,913
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1998

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.
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

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

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 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

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.

The following reclassifications have been made to the financial statements.

Increase/(Decrease)

- -----------------------------------------------------------------
Accumulated Net Realized Gain Paid in Capital
<S> <C>
$(18,783) $18,783

</TABLE>

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

Federal Taxes

When-Issued and Delayed Delivery Transactions

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, 1998, the Fund had outstanding futures contracts as set forth
below:

Contracts

Expiration to Deliver/ Unrealized
Date Receive Position (Depreciation)

- --------------------------------------------------------------------------
<S> <C> <C> <C>
December 1998 91 Russell 2000 Long $(155,216)
- --------------------------------------------------------------------------
</TABLE>

Use of Estimates

Other

Investment transactions are accounted for on the trade date.

SHARES OF BENEFICIAL INTEREST

Year Ended October 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Institutional Shares:

- ----------------------------------------------------------------------------------------------
Shares sold 15,678,221 10,866,696
- ----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 425,161 466,620
- ----------------------------------------------------------------------------------------------
Shares redeemed (16,024,006) (12,365,954)
- --------------------------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS 79,376 1,032,638
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Period Ended October 31 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class C Shares:

- ----------------------------------------------------------------------------------------------
Shares sold 95,668

- ----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 303
- ----------------------------------------------------------------------------------------------
Shares redeemed (11,263)

- --------------------------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS 84,708
- --------------------------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 164,084 1,032,638
- --------------------------------------------------------------------------------------------------------------------------------
</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 investment advisory fee equal to 0.50% of the Fund's
average daily net assets. Under the terms of a sub-advisory agreement between
the Manager and Northern Trust Quantitative Advisors, Inc. (the "Sub-Manager"),
the Sub-Manager receives an annual fee from the Manager equal to 0.065% of the
Fund's average daily net assets. In addition, the 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.

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 Class C
Shares. The Plan provides that the Fund may incure distribution expenses
according to the following schedule annually, to compensate FSC.

Percentage of Average Daily

Share Class Name Net Assets of Class

- -------------------------------------------------------
<S> <C>
Class C Shares 0.75%

</TABLE>

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, 1998, were as follows:

<TABLE>

- -------------------------------------------------------
<S> <C>
Purchases $59,310,327

- -------------------------------------------------------
Sales $81,309,055

- -------------------------------------------------------
</TABLE>

YEAR 2000 (UNAUDITED)

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, 1998, 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
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.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Mini-
Cap Fund of Federated Index Trust at October 31, 1998, 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 the
periods presented, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Boston, Massachusetts
December 21, 1998

[LOGO OF FEDERATED INVESTORS]

WORLD-CLASS INVESTMENT MANGER(SM)

Federated
Mini-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SHARES

DECEMBER 31, 1998

P R O S P E C T U S

[LOGO OF FEDERATED INVESTORS]

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

1-800-341-7400

www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061
Cusip 31420E304

2062305A (12/98)

Federated is a registered mark [RECYCLED

of Federated Investors, Inc. PAPER

1998 (C) Federated Investors, Inc. LOGO] DECEMBER 31, 1998

Federated Mini-Cap Fund

A Portfolio of Federated Index Trust

INSTITUTIONAL SHARES

CONTENTS

<TABLE>

<S> <C>
Risk/Return Summary 12

- --------------------------------------------------------------------------------
What are the Fund's Fees and Expenses? 35
- --------------------------------------------------------------------------------
What are the Fund's Investment Strategies? 46
- --------------------------------------------------------------------------------
What are the Principal Securities in Which the Fund Invests? 47
- --------------------------------------------------------------------------------
What are the Specific Risks of Investing in the Fund? 47
- --------------------------------------------------------------------------------
What do Shares Cost? 58

- --------------------------------------------------------------------------------
How is the Fund Sold? 58

- --------------------------------------------------------------------------------
How to Purchase Shares 68

- --------------------------------------------------------------------------------
How to Redeem Shares 79

- --------------------------------------------------------------------------------
Account and Share Information 812

- --------------------------------------------------------------------------------
Who Manages the Fund? 914

- --------------------------------------------------------------------------------
Financial Information 10

- --------------------------------------------------------------------------------
</TABLE>

DECEMBER 31, 1998

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 80% of its assets in small capitalization common
stocks comprising the Russell 2000(R) Index (the "Index").

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.

Stock Market Risks

The value of the stocks in the Fund's portfolio will go up and down. These
fluctuations could be a sustained trend or a drastic movement. Fluctuations in
the Fund's portfolio may reflect changes in individual portfolio stocks or
general changes in stock valuations and will result in changes in the Fund's
share price. The Fund's investment manager (manager) attempts to manage market
risk through diversification by limiting the amount the Fund invests in each
stock. Other risks of investing in the Fund include risks related to company
size, sector risks and liquidity risks.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Shares as of the calendar
year-end for each of the last five years.

The `y' axis reflects the "% Total Return" beginning with -5% and
increasing in increments of 5% up to 30%.

The `x' axis represents calculation periods from the earliest calendar year
end of the Institutional Shares' start of business through the calendar year
ended December 31, 1997. The light gray shaded chart features five distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Institutional Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1993 through 1997 are: 15.29%, -2.84%, 26.34%, 15.31% and 20.26%,
respectively.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Funds Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.
The Fund's Institutional Shares total return from January 1, 1998 to September
30, 1998 was (17.14%).

Within the period shown in the chart, the Fund's Institutional Shares highest
quarterly return was 15.83% (quarter ended June 30, 1997). Its lowest quarterly
return was (5.62%) (quarter ended March 31, 1997).

Average Annual Total Return

Calendar Period Institutional Shares Russell 2000(R)
<S> <C> <C>
1 Year 20.36% 22.36%
5 Years 14.45% 16.41%
Life of Fund/1/ 15.71% 17.15%

</TABLE>

1 Since inception date of August 11, 1992.

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

What are the Fund's Fees and Expenses?

FEDERATED MINI-CAP FUND

FEES AND EXPENSES

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

<TABLE>

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

Annual Fund Operating Expenses (before waivers)/1/

Expenses That are Deducted From Fund Assets (as a percentage of average net assets)

Management Fee 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee/2/ 0.25%
Other Expenses 0.20%
Total Annual Fund Operating Expenses 0.95%
1 Although not contractually obligated to do so, the Shareholder Services provider waived certain amounts. These are shown
below along with the net expenses the Fund actually paid for the fiscal year ending October31, 1998.

Waiver of Fund Expenses 0.13%
Total Actual Annual Fund Operating Expenses (after waivers) 0.82%
2 The shareholder services fee has been voluntarily reduced. This voluntary reduction can be terminated at any time.
The shareholder services fee paid by the Fund (after the voluntary reduction) was 0.12% for the year ended
October 31, 1998.

</TABLE>

EXAMPLE

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

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

1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $97 $303 $525 $1,166

</TABLE>

What are the Fund's Investment Strategies?

The Fund pursues its investment objective by investing in the stocks of the
Index in the same weights as the Index. This is called a "full replication"
strategy. Market capitalization is determined by multiplying the number of
outstanding shares by the current market price per share. As of September 30,
1998, the capitalization range of the Index was $222 million to $1.4 billion. As
of the same date, the weighted median market capitalization of the Fund was $613
million.

The Fund purchases Index futures contracts in order to more closely track the
performance of the Index, while maintaining cash equivalent positions as
necessary for the Fund's operations.

What are the Principal Securities in Which the Fund Invests?

Common Stocks

Stock Index Futures

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price.

SECTOR RISK

LIQUIDITY RISKS

What Do Shares Cost?

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

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

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Class C Shares, each
representing interests in a single portfolio of securities.

This prospectus relates only to Institutional Shares. Each share class has
different sales charges and other expenses, which affect their performance.
Contact your investment professional or call 1-800-341-7400 for more information
concerning the other class.

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

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

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

. Establish an account with the investment professional; and

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

DIRECTLY FROM THE FUND

. Establish your account with the Fund by submitting a completed New Account

Form; and

. Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner and your Shares will be priced at the next calculated
NAV after the Fund receives your wire or your check. If your check does not
clear, your purchase will be canceled and you could be liable for any losses or
fees the Fund or its transfer agent incurs.

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

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number,
or Group Number

Nominee/Institution Name
Fund Name and Number and Account Number

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

BY CHECK

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

Federated Shareholder Services Company

P.O. Box 8600
Boston, MA 02266-8600

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

Federated Shareholder Services Company

1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

BY AUTOMATED CLEARINGHOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

. through an investment professional if you purchased Shares through an
investment professional; or

. directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

By Mail

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

You will receive a redemption amount based on the next calculated NAV after
the Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company

1099 Hingham Street
Rockland, MA 02370-3317

All requests must include:

. Fund Name and Share Class, account number and account registration;

. amount to be redeemed; and

. signatures of all Shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

. your redemption will be sent to an address other than the address of record;

. your redemption will be sent to an address of record that was changed within
the last thirty days; or

. a redemption is payable to someone other than the shareholder(s) of record.

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

PAYMENT METHODS FOR REDEMPTIONS

. an electronic transfer to your account at a financial institution that is an
ACH member; or

. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;

. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

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

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Who Manages the Fund?

The Manager receives an annual management fee equal to 0.50% of the Fund's
average daily net assets. The Manager waives a portion of its fee or reimburses
the Fund for certain operating expenses.

The Sub-Manager is a subsidiary of Northern Trust Corporation and is an
investment adviser primarily to corporate defined benefit and defined
contribution plans as well as public pension funds and tax-exempt foundations
and endowments. These plans have, as of September 30, 1998, placed approximately
$31.7 billion in assets with the Sub-Manager. Since 1973, the Sub-Manager has
developed and managed a family of equity and bond index funds in which some 368
nationwide non-financial institution clients invest. In total, the Sub- Manager
manages 78 commingled/common trust funds. Northern Trust is a bank-holding
company and one of the nation's largest trust institutions with subsidiaries
located across the United States and in several other countries. As of September
30, 1998, total assets of Northern Trust were $28.1 billion and trust assets
under administration were $1.1 trillion.

YEAR 2000 READINESS

Financial Information

FINANCIAL HIGHLIGHTS

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

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 77.

Year Ended October 31 1998 1997 1996 1995 1994
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Net Asset Value, Beginning of Period $ 16.68 $ 14.39 $ 13.33 $ 11.65 $ 12.66
Income from Investment Operations:

Net investment income 0.13 0.15 0.16 0.15 0.11
Net realized and unrealized gain (loss) on investments (2.19) 3.51 1.78 1.74 (0.23)
and futures contracts

TOTAL FROM INVESTMENT OPERATIONS (2.06) 3.66 1.94 1.89 (0.12)
Less Distributions:
Distributions from net investment income (0.14) (0.14) (0.16) (0.14) (0.11)
Distributions from net realized gain on investments (1.46) (1.23) (0.72) (0.07) (0.78)
and futures contracts

TOTAL DISTRIBUTIONS (1.60) (1.37) (0.88) (0.21) (0.89)
Net Asset Value, End of Period $ 13.02 $ 16.68 $ 14.39 $ 13.33 $ 11.65
Total Return/1/ (13.46%) 27.54% 15.09% 16.44% (0.91%)

Ratios to Average Net Assets:

Expenses 0.82% 0.76% 0.74% 0.75% 0.73%
Net investment income 0.80% 0.96% 1.14% 1.23% 0.98%
Expense waiver/reimbursement/2/ 0.13% 0.18% 0.23% 0.05% 0.11%
Supplemental Data:

Net assets, end of period (000 omitted) $118,494 $150,470 $144,690 $132,399 $98,441
Portfolio turnover 48% 52% 42% 42% 32%
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