Market Overview
During the second quarter of 2010, domestic equity markets declined significantly as evidenced by the -11.32% return on the Russell 3000® Index. Mid cap companies had the best results with the Russell Midcap® Index returning -9.88%, followed by small and then large cap companies with the Russell 2000® Index returning -9.92% and the Russell Top 200® Index returning -12.07%. In terms of investment style, results for value companies exceeded those of growth companies with the Russell 3000® Value Index returning -11.09% as compared to the -11.55% result for the Russell 3000® Growth Index.

Fund Performance
During the second quarter of 2010, Federated MDT Small Cap Core Fund (Institutional Shares) returned -11.55% and underperformed the -9.92% return of its benchmark, the Russell 2000® Index. Holdings in the Healthcare, Financials, and Utilities sectors contributed the most to relative performance in the quarter. Specific stocks which contributed the most to relative performance included Odyssey Healthcare Incorporated, Schweitzer-Mauduit International Incorporated, Dollar Thrifty Automotive Group, and Valeant Pharmaceuticals International. Holdings in the Information Technology, Consumer Discretionary, Energy, and Consumer Staples sectors detracted the most from relative performance in the quarter. Specific stocks that detracted the most from relative performance included Bristow Group Incorporated, Kindred Healthcare Incorporated, Atheros Communications, and Tupperware Corporation.

Performance data quoted represents past performance which is no guarantee 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. Current performance may be lower of higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after tax returns, click on Performance to the left.

Also click Performance on the left for standard fund performance.

Positioning and Strategy
At the end of the second quarter of 2010, the portfolio’s most sizable overweight positions were in the Consumer Discretionary and Utilities sectors. The portfolio’s most significant underweight positions were in the Healthcare, Financials, and Industrials sectors. The portfolio will likely continue to favor growth and value stocks equally.