THE KAUFMANN FUND, INC.

                   SUPPLEMENT TO PROSPECTUS, DATED MAY 1, 2000


         On October 20th, 2000,  Edgemont Asset Management,  Inc.  ("Edgemont"),
the investment adviser to The Kaufmann Fund, Inc.  ("Kaufmann Fund"),  reached a
definitive agreement with Federated Investors,  Inc.  ("Federated") for the sale
of  Edgemont's  advisory  business to Federated.  In connection  with this sale,
shareholders of the Kaufmann Fund will be asked to approve a  reorganization  of
the Fund into the  newly-created  Federated  Kaufmann  Fund  ("Reorganization"),
which would be managed by Federated  Investment  Management Company, a Federated
subsidiary.  Hans P. Utsch and Lawrence Auriana, the sole owners of Edgemont and
the current portfolio  managers of the Kaufmann Fund, will enter into employment
contracts  under which they will continue as co-managers  to be responsible  for
the day-to-day  portfolio  management of the Fund.  The Federated  Kaufmann Fund
would have the same investment objectives and substantially the same policies as
the Kaufmann Fund.

         The Kaufmann Fund's shareholders must approve the Reorganization before
it can take place. At a meeting held on November 20th, 2000, the Kaufmann Fund's
Board of Directors  unanimously  approved the Reorganization and recommended its
approval by the Fund's  shareholders.  A Special  Meeting of Shareholders of the
Kaufmann Fund will be held on April 6th, 2001 to consider the approval of a Plan
of  Reorganization.  Shareholders  owning  Kaufmann  Fund shares at the close of
business on the record  date,  January 8, 2001,  will be entitled to vote at the
Special Meeting and any adjournments thereof.  These shareholders will receive a
prospectus/proxy statement that describes the Reorganization and the features of
the  Federated  Kaufmann  Fund in more  detail  and that will  seek  shareholder
approval of the Plan of Reorganization.

         If  Kaufmann  Fund  shareholders  approve  the  Reorganization,  it  is
expected to be completed  shortly  thereafter,  assuming other customary closing
conditions  are  satisfied,  sometime in April of 2001.  The  Reorganization  is
expected  to be  tax-free  and  Kaufmann  Fund  shareholders  will  not bear any
expenses  related  to the  Reorganization.  As a result  of the  Reorganization,
existing  Kaufmann  Fund  shareholders  would,  in  effect,  have  their  shares
converted into an equivalent number of Class K Shares of the Federated  Kaufmann
Fund.

         After the  Reorganization,  existing Kaufmann Fund shareholders will be
able to buy Class K Shares of the Federated  Kaufmann Fund without sales charges
and  would  have the  opportunity  to invest  without  a sales  charge in a wide
variety of other funds managed by Federated and its affiliates.

         Federated was established in 1955 and is one of the largest mutual fund
investment  managers  in the  United  States.  It advises  185 mutual  funds and
separate  accounts,  which  totaled  approximately  $130 billion in assets as of
September 30, 2000.

         The date of this Supplement is December 14, 2000.