FEDERATED STOCK TRUST, N-30D, 1999-12-29

FEDERATED STOCK TRUST
N-30D, 1999-12-29

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MANAGEMENT DISCUSSION AND ANALYSIS

Federated Stock Trust

Annual Report For 12 Months Ended October 31, 1999

The fiscal year ended October 31, 1999, provided another healthy period of
returns for your fund. The fund provided a total return of 11.03%* versus 11.67%
and 25.64% for the Average Lipper Multi-Cap Value Fund and the Standard & Poors
500 Index (the "S&P 500"),** respectively.

Despite healthy returns for the S&P 500 over the fiscal year, the market's
performance was delivered in a very narrow fashion as the returns of the market
were concentrated in a handful of ultra large capitalization, predominantly
technology growth stocks. The average stock in the S&P 500, as measured by the
equal weighted S&P 500, returned 15.6% for the reporting period. In fact, over
one half of the S&P 500's fiscal year return was delivered by only eleven
stocks, seven of which were Technology stocks. Five stocks: Microsoft, General
Electric, Cisco Systems, Intel and America Online provided nearly one third of
the S&P 500's total return. For the twelve month reporting period, the
Technology sector within the S&P 500 returned 66%. Needless to say, in this
market environment value strategies struggled. Surprisingly, the reporting
period was quite volatile from a market leadership perspective. The market went
from being extremely narrow for the first five months of the reporting period,
to broadening significantly in the April to June time frame and then reverting
back to the old leadership for the final five months of the fiscal year. The
fiscal year started with explosive returns as the market dismissed the pessimism
created by the Russian debt crisis and the Long Term Capital Management hedge
fund problems. This dramatic recovery was concentrated in technology stocks and
a short list of large capitalization growth stocks. Starting in April, however,
market leadership rotated to a broader group of cyclical, commodity and smaller
capitalization stocks. This move was sparked by strong first quarter earnings, a
revival in oil prices and signs of a global economic recovery. The perceived
revival of global economic activity benefited areas of the market, such as value
stocks and small cap stocks, that had not been the "safe havens" from the global
economic turmoil of the previous two years, and whose earnings should benefit
with a marked increase in global growth. However, this leadership was short
lived as the market reverted back to former leadership, a fairly narrow list of
Technology, Internet and growth stocks, despite evidence of a continued global
economic recovery. This narrowing for the last five months was perplexing from a
normal market cycle perspective, but it appears that market has become fixated
on Technology and momentum strategies.

* Past performance is no guarantee of future results. Investment return and
principal values will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original price

** This index is unmanaged.

Aiding relative performance for the year was an underweight position in the
underperforming Consumer Staples, Healthcare and Basic Materials sectors as well
as favorable relative security performance in the Consumer Staples sector. More
than offsetting these favorable influences was underweight positions in the
strong performing Technology and Communication Services sectors as well as
unfavorable relative security performance in the Capital Goods, Consumer
Cyclicals, Financials and Communication Services sectors. From a broader
perspective, performance was adversely impacted relative to the S&P 500 by the
narrow market participation described above, as well as an unfavorable
environment for value investors.

Looking ahead, despite the underperformance of the value style of investing
over the past two years, we remain committed to our investment disciplines. Over
time, we believe that our proprietary valuation models and security selection
process can add value for our investors. Our focus is to identify leading
companies which are temporarily out of favor and appear inexpensive relative to
their market history as well as to their expected growth. We will continue to
add these undervalued securities to the portfolio and eliminate those which
appear overvalued. History has shown that after periods of narrow market
leadership dominated by a handful of growth stocks, active value management can
provide superior returns.

LAST MEETING OF SHAREHOLDERS

The Special Meeting of shareholders of Federated Stock Trust (the "Fund") was
held on November 7, 1999. The following items were considered by shareholders
and the results of their voting were as follows.

1.Election of Trustees/1/
<TABLE>
<CAPTION>
Shares Voted Shares
Affirmatively Withheld
<S> <C> <C>
Thomas G. Bigley 30,221,037 307,149
- ------------------------------------------------------------------------
Nicholas P. Constantakis 30,223,336 304,850
- ------------------------------------------------------------------------
John F. Cunningham 30,224,519 303,667
- ------------------------------------------------------------------------
J. Christopher Donahue 30,224,949 303,237
- ------------------------------------------------------------------------
Charles F. Mansfield, Jr. 30,223,398 304,788
- ------------------------------------------------------------------------
John E. Murray, Jr. 30,224,212 303,974
- ------------------------------------------------------------------------
John S. Walsh 30,222,249 305,937
- ------------------------------------------------------------------------
</TABLE>

1 The following Trustees continued their terms as Trustees: John F. Donahue,
John T. Conroy, Lawrence D. Ellis, M.D., Peter E. Madden, and Marjorie P.
Smuts.

2. To Make Changes To The Fund's Fundamental Investment Policies:

(a) To approve amending the Fund's fundamental investment policy regarding
diversification.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,586,567 1,082,461 494,975
- ------------------------------------------------------------------------
</TABLE>

(b) To approve amending the Fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,814,931 854,097 494,975
- ------------------------------------------------------------------------
</TABLE>

(d) To approve amending the Fund's fundamental investment policy regarding
investments in commodities.

(e) To approve amending the Fund's fundamental investment policy regarding
underwriting securities.

(f) To approve amending the Fund's fundamental investment policy regarding
lending by the Fund.

(g) To approve amending the Fund's fundamental investment policy regarding
concentration of the Fund's investments in the securities of companies in the
same industry.
<TABLE>
<CAPTION>
For Against Abstentions

(h) To approve amending and making non-fundamental, the Fund's fundamental
investment policy regarding buying securities on margin.

(i) To approve amending and making non-fundamental, the Fund's fundamental
investment policy regarding investing in securities of other investment
companies.

(j) To approve amending and making non-fundamental, the Fund's fundamental
investment policy relating to pledging assets.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,586,567 1,086,613 494,975
- ------------------------------------------------------------------------
</TABLE>

(k) To approve amending and making non-fundamental, the Fund's fundamental
investment policies regarding investing in restricted securities and illiquid
securities.

(l) To approve amending and making non-fundamental, the Fund's fundamental
investment policies regarding investing in common stock and other securities.

(m) To approve amending and making non-fundamental, the Fund's fundamental
investment policies relating to investing in money market instruments and
entering into repurchase agreements.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,814,931 854,087 494,975
- ------------------------------------------------------------------------
</TABLE>

(n) To approve amending and making non-fundamental, the Fund's fundamental
investment policy relating to engaging in when-issued and delayed delivery
transactions.

3.To Eliminate Certain of the Fund's Fundamental Investment Policies:
(a) To approve removing the Fund's fundamental investment policy regarding
selling securities short.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,497,931 1,164,943 501,206
- ------------------------------------------------------------------------
</TABLE>

(b) To approve removing the Fund's fundamental investment policy regarding
investing in securities of new issuers.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,501,698 1,161,099 501,206
- ------------------------------------------------------------------------
</TABLE>

(c) To approve removing the Fund's fundamental investment policy regarding
investing in issuers whose securities are owned by officers and Trustees.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,724,372 938,425 501,206
- ------------------------------------------------------------------------
</TABLE>

(d) To approve removing the Fund's fundamental investment policy regarding
investing for the purpose of exercising control.
<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,723,240 939,557 501,206
- ------------------------------------------------------------------------
</TABLE>

(e) To approve removing the Fund's fundamental investment policy regarding
dealing in puts and calls.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,503,139 1,159,658 501,206
- ------------------------------------------------------------------------
</TABLE>

(f) To approve removing the Fund's fundamental investment policy regarding
engaging in short-term trading and portfolio turnover.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,731,139 931,294 501,206
- ------------------------------------------------------------------------
</TABLE>

(g) To approve removing the Fund's fundamental investment policy on investing in
oil, gas and mineral exploration or development programs.

(h) To approve removing the Fund's fundamental investment policy relating to
permissible investments.

4. To Approve Amendments to, and a Restatement of, the Trust's Declaration of
Trust:

(a) To approve requiring the approval of a majority of the outstanding voting
securities of the Fund in the event of the sale and conveyance of the assets of
the Fund to another trust or corporation.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
25,716,801 756,869 690,333
- ------------------------------------------------------------------------
</TABLE>

(b) To approve permitting the Board of Trustees to liquidate assets of the Fund,
or of its series or classes, and distribute the proceeds of such assets to the
holders of such shares representing such interests, without seeking shareholder
approval.

<TABLE>
<CAPTION>
For Against Abstentions
<S> <C> <C>
- ------------------------------------------------------------------------
24,556,782 2,138,398 468,823
- ------------------------------------------------------------------------
</TABLE>

FEDERATED STOCK TRUST

Growth of $25,000 Invested in Federated Stock Trust

[The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Shares of
Federated Stock Fund (the "Fund") are represented by a solid line. Standard &
Poor's 500 Index (S&P 500) is represented by a dotted line and the Lipper Growth
and Income Funds Average (LGIFA) is represented by a dashed 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 and the LGIFA. The "x" axis
reflects computation periods from 10/31/89 to 10/31/99. The "y" axis reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the S&P 500 and the LGIFA.
The right margin reflects the ending value of the hypothetical investment in the
Fund as compared to the S&P 500 and the LGIFA. The ending values were $102,467,
$128,585 and $93,482, respectively.]

<TABLE>
<CAPTION>
Average Annual Total Return for the Period Ended
October 31, 1999
<S> <C>
- ------------------------------------------------------------------------
1 Year 11.03%
- ------------------------------------------------------------------------
5 Years 20.55%
- ------------------------------------------------------------------------
10 Years 15.15%
- ------------------------------------------------------------------------
</TABLE>

The graph above illustrates the hypothetical investment of $25,0001 in the
Federated Stock Trust (the "Fund") from October 31, 1989 to October 31, 1999
compared to the Standard and Poor's 500 Index (S&P 500)2 and the Lipper Growth
and Income Funds Average (LGIFA)./3/

Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.

This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1999, and, together with financial statements contained therein,
constitutes the Fund's annual report.

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGIFA have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.

2 The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission (the "SEC") requires to be
reflected in the Fund's performance. This index is unmanaged.

3 The LGIFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales charges. However, these
total returns are reported net of expenses or other fees that the SEC requires
to be reflected in a fund's performance.

[Federated logo]

Federated Stock Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com

Federated Securities Corp., Distributor

Cusip 313900102
006682-ARS (12/99)

Federated is a registered mark of Federated Investors, Inc. 1999 (C)Federated
Investors, Inc.

[Recycled Paper Logo]

PROSPECTUS

Federated Stock Trust

A large capitalization value mutual fund seeking to provide growth of income and
capital by investing primarily in common stocks of high quality companies.

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

<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? 5
What are the Specific Risks of Investing in the Fund? 5
What do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 12
Report of Deloitte & Touche LLP,
Independent Auditors 24
</TABLE>

- ------------------
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
- ------------------

DECEMBER 31, 1999

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide growth of income and capital.
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?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

. Stock Market Risks. The value of equity securities in the Fund's portfolio
will fluctuate and, as a result, the Fund's share price may decline suddenly
or over a sustained period of time.

. Risks Relating To Investing For Value. The Fund generally uses a "value" style
of investing, so that the Fund's share price may lag that of other funds using
a different investment style.

. Sector Risks. Because the Fund may allocate relatively more assets to certain
industry sectors than others, the Fund's performance may be more susceptible
to any developments which affect the sectors emphasized by the Fund.

. Risks of Investing in American Depositary Receipts. Because the Fund may
invest in American Depositary Receipts ("ADRs") issued by foreign companies,
the Fund's share price may be more affected by foreign economic and political
conditions, taxation policies and accounting and auditing standards, than
would otherwise be the case.

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 Federated Stock Trust as of the calendar year-end for each
of ten years. The `y' axis reflects the "% Total Return" beginning with "-10%"
and increasing in increments of 10% up to 40%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
ten 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 1989 through 1998, The percentages noted are: 13.13%, (4.99%),
29.04%, 11.94%, 12.49%, (0.45%), 35.63%, 21.17%, 34.42%, and 17.26%.

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

The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value.

The Fund's total return for the nine-month period from January 1, 1999 to
September 30, 1999 was 1.01%.

Within the period shown in the Chart, the Fund's highest quarterly return was
16.48% (quarter ended December 31, 1998). Its lowest quarterly return was
(15.58%) (quarter ended September 30, 1990).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Standard & Poor's 500
(S&P 500), a broad based market index and Lipper Growth and Income Funds Average
(LGIFA), an average of funds with similar investment objectives. Total returns
for the indexes shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Fund S&P 500 LGIFA
<S> <C> <C> <C>
1 Year 17.26% 28.15% 15.61%
5 Years 20.86% 23.98% 18.35%
10 Years 16.24% 19.15% 15.53%
</TABLE>

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
returns.

What are the Fund's Fees and Expenses?

FEDERATED STOCK TRUST

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/........................................................................................................... 0.66%
Distribution (12b-1)
Fee.................................................................................................... None
Shareholder Services
Fee/3/................................................................................................. 0.25%
Other
Expenses..............................................................................................................
0.14%
Total Annual Fund Operating
Expenses........................................................................................ 1.05%
- ------------------------------------------------------------------------------------------------------------------------------------
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 ended
October 31, 1999.
Total Waiver of Fund
Expenses.............................................................................................. 0.10%
Total Actual Annual Fund Operating Expenses (after
waivers)................................................................ 0.95%
2 The maximum management services fee is 0.75% of the first $500 million in
average daily net assets, 0.675% of the second $500
million in average daily net assets, 0.60% of the third $500 million in
average daily net assets, 0.525% of the fourth $500 million in average daily
net assets, and 0.40% of average daily net assets in excess of $2 billion.
3 The shareholder services provider voluntarily waives a portion of the
shareholder services fee. The shareholder services provider
can terminate this voluntary waiver at any time. The shareholder services fee paid by the Fund (after the voluntary
waiver) was
0.15% for the fiscal year ended October 31, 1999.
</TABLE>

EXAMPLE

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

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

1 Year $ 107
3 Years $ 334
5 Years $ 579
10 Years $ 1,283
</TABLE>

What are the Fund's Investment Strategies?

The Fund pursues its investment objective by investing primarily in equity
securities of companies that are generally leaders in their industries, are
characterized by sound management and have the ability to finance expected
growth. The Adviser attempts to identify good long-term values through
disciplined investing and careful fundamental research. The Fund's holdings
ordinarily will be in large capitalization companies that are in the top 25% of
their industries with regard to revenues.

The Adviser ranks the future performance potential of companies, based on
valuation models which attempt to identify companies trading at low valuation
relative to their history, to the market and to their expected future growth. To
determine the timing of purchases and sales of portfolio securities, the Adviser
looks at recent stock price performance and the direction of current fiscal year
earning estimates. In addition, the Adviser performs traditional fundamental
analysis to select the most promising companies for the Fund's portfolio.

Companies with similar characteristics may be grouped together in broad
categories called sectors. In determining the amount to invest in a security,
the Adviser limits the Fund's exposure to each business sector that comprises
more than 5% of the S&P 500 Index. The Fund's allocation to a sector will not be
less than 50% or more than 200% of the Index's allocation to that sector.

PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact on the Fund's performance.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

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

Common Stocks

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

American Depositary Receipts

ADRs represent interests in underlying securities issued by a foreign company.
Depositary Receipts are not traded in the same market as the underlying
security. The foreign securities underlying ADRs are not 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.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

. The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio stocks
or general changes in stock valuations. Consequently, the Fund's share price
may decline.

. The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.

SECTOR RISKS
. Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the Adviser
allocates more of the Fund's portfolio holdings to a particular sector, the
Fund's performance will be more susceptible to any economic, business or other
developments which generally affect that sector.

RISKS RELATED TO INVESTING FOR VALUE

. Due to their relatively low valuations, value stocks are typically less
volatile than growth stocks. For instance, the price of a value stock may
experience a smaller increase on a forecast of higher earnings, a positive
fundamental development, or positive market development. Further, value stocks
tend to have higher dividends than growth stocks. This means they depend less
on price changes for returns and may lag behind growth stocks in an up market.

RISKS OF INVESTING IN AMERICAN DEPOSITARY RECEIPTS

. Because the Fund may invest in ADRs issued by foreign companies, the Fund's
share price may be more affected by foreign economic and political conditions,
taxation policies, and accounting and auditing standards, than would otherwise
be the case.

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 (as
described in the prospectus) it is processed at the next calculated net asset
value (NAV).

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 generally values 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).

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

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's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions 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.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.

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

By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE

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

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

By Check
Make your check payable to The Federated Funds, note your account number on the
check, and 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 CLEARING HOUSE (ACH)

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

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your 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 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

You may redeem Shares by calling the Fund at 1-800-341-7400 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 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.

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.

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 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
dividends and capital gains paid.

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

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

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 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 Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222- 3779.

The Adviser and other subsidiaries of Federated advise approximately 175
mutual funds and separate accounts, which totaled approximately $111 billion in
assets as of December 31, 1998. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

Michael P. Donnelly

Michael P. Donnelly has been the Fund's Portfolio Manager since November 1997.
He is Vice President of the Fund. Mr. Donnelly joined Federated in 1989 as an
Investment Analyst. He served as a Portfolio Manager from 1994 to 1998 and
became a Senior Portfolio Manager in 1998. He was a Vice President of the Fund's
Adviser from 1994 to 1999. In May 1999, Mr. Donnelly became a Senior Vice
President of the Fund's Adviser. Mr. Donnelly is a Chartered Financial Analyst
and received his M.B.A. from the University of Virginia.

Kevin R. McCloskey

Kevin R. McCloskey was named a Portfolio Manager of the Fund in October 1999.
Mr. McCloskey joined Federated in 1999 as a Portfolio Manager and is a Vice
President of the Fund's Adviser. From September 1994 to July 1999, he served as
a portfolio manager, and from January 1994 to September 1994, he served as an
investment/quantitative analyst at Killian Asset Management Corporation. Mr.
McCloskey is a Chartered Financial Analyst. He earned his M.B.A. with
concentrations in investment management and quantitative methods from the
University of Dayton.

ADVISORY FEES

The Adviser receives an annual investment advisory fee based on the Fund's
average daily net assets as shown in the chart below. The Adviser may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses.

<TABLE>
<CAPTION>
Advisory Fee as a
Percentage of Average
Average Daily Net Assets Daily Net Assets
<S> <C>
First $500 million 0.750%
Second $500 million 0.675%
Third $500 million 0.600%
Fourth $500 million 0.525%
Over $2 billion 0.400%
</TABLE>

Under the investment advisory contract, the Adviser will reimburse the Fund the
amount, limited to the amount of the advisory fee, by which the Fund's aggregate
annual operating expenses, including its investment advisory fee but excluding
interest, taxes, brokerage commissions, expenses of registering and qualifying
the Fund and its Shares under federal and state laws, expenses of withholding
taxes, and extraordinary expenses exceed 1.00% of its average daily net assets.
This does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities.

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 or experience other date- related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

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.

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.

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.

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. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.

This information has been audited by Deloitte & Touche 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 Independent Auditor's Report on page 24.
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C> <C>
Year Ended October 31 1999/1/ 1998 1997 1996
1995
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 38.07 $ 39.90 $ 34.38 $ 30.66 $
26.33
Income from Investment Operations:
Net investment income 0.37 0.37 0.36 0.53
0.47
Net realized and unrealized
gain
on investments 3.64 5.38 9.54 5.84
5.04
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.01 5.75 9.90 6.37
5.51
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from
net
investment income (0.36) (0.36) (0.38) (0.51)
(0.49)
Distributions from net realized
gain
on investments (3.89) (7.22) (4.00) (2.14)
(0.69)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (4.25) (7.58) (4.38) (2.65)
(1.18)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 37.83 $ 38.07 $ 39.90 $ 34.38 $
30.66
- --------------------------------------------------------------------------------------------------------------------------------
Total Return/2/ 11.03% 16.40% 32.27% 22.08%
21.98%
- --------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------------------------------------
Expenses/3/ 1.05% 1.07% 1.12% 1.14%
1.16%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income/3/ 0.88% 0.87% 0.86% 1.49%
1.56%
- --------------------------------------------------------------------------------------------------------------------------------
Expenses (after waivers) 0.95% 0.96% 0.99% 0.99%
1.01%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (after waivers) 0.98% 0.98% 0.99% 1.64%
1.71%
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period
(000 omitted) $1,659,250 $1,448,819 $1,174,018 $830,545
$632,069
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 25% 41% 71%
55% 42%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years were audited by other auditors.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS--97.4%
Basic Materials--1.5%
2,287,500 LTV Corp. $ 8,292,187
279,700 PPG Industries, Inc. 16,956,812
---------------
TOTAL 25,248,999
---------------
Capital Goods--10.8%
324,400 Allied-Signal, Inc. 18,470,525
350,500 Deere & Co. 12,705,625
299,900 Ingersoll-Rand Co. 15,669,775
301,000 Johnson Controls, Inc. 18,285,750
199,900 Koninklijke (Royal) Philips Electronics NV, ADR 20,777,106
276,500 Northrop Grumman, Corp. 15,172,937
459,400 Parker-Hannifin Corp. 21,046,262
777,100 Tenneco, Inc. 12,433,600
219,800 Textron, Inc. 16,965,812
517,944 Tyco International Ltd. 20,685,388
420,400 Waste Management, Inc. 7,724,850
---------------
TOTAL 179,937,630
---------------
Communication Services--6.6%
528,850 AT&T Corp. 24,723,737
272,800 Bell Atlantic Corp. 17,714,950
436,800 BellSouth Corp. 19,656,000
313,800 GTE Corp. 23,535,000
403,654 U.S. West, Inc. 24,648,122
---------------
TOTAL 110,277,809
---------------
Consumer Cyclicals--7.4%
316,000 Block (H&R), Inc. 13,449,750
775,000 Cooper Tire & Rubber Co. 13,029,687
445,579 Delphi Auto Systems Corp. 7,324,205
633,000 Dillards, Inc., Class A 11,947,875
298,400 General Motors Corp. 20,962,600
636,000 Hasbro, Inc. 13,117,500
982,900 /1/ K Mart Corp. 9,890,431
151,700 Knight-Ridder, Inc. 9,632,950
424,500 Wal-Mart Stores, Inc. $ 24,063,844
---------------
TOTAL 123,418,842
---------------
Consumer Staples--10.8%
563,400 Kimberly-Clark Corp. 35,564,625
460,700 /1/ King World Productions, Inc. 17,852,125
497,600 Nabisco Group Holdings Corp. 6,375,500
686,000 News Corp. Ltd., ADR 18,907,875
400,600 Philip Morris Cos., Inc. 10,090,112
854,000 Sara Lee Corp. 23,111,375
332,600 /1/ Tricon Global Restaurants, Inc. 13,366,362
572,200 UST, Inc. 15,842,787
221,628 Unilever N.V., ADR 14,779,817
493,000 /1/ Viacom, Inc., Class A 22,462,312
---------------
TOTAL 178,352,890
---------------
Energy--8.5%
476,900 Ashland, Inc. 15,737,700
136,900 Atlantic Richfield Co. 12,757,369
181,500 Chevron Corp. 16,573,219
815,800 ENSCO International, Inc. 15,806,125
245,800 Exxon Corp. 18,204,562
342,800 Royal Dutch Petroleum Co., ADR 20,546,575
531,900 Sunoco, Inc. 12,832,087
220,500 Texaco, Inc. 13,533,187
539,500 USX Corp. 15,712,938
---------------
TOTAL 141,703,762
---------------
Financials--19.4%
241,975 ABB AB, ADR 22,651,308
291,100 Allmerica Financial Corp. 16,647,281
616,900 Allstate Corp. 17,735,875
327,200 Bank One Corporation 12,290,450
353,700 Bank of America Corp 22,769,438
439,530 Bear Stearns Cos., Inc. 18,734,966
207,400 CIGNA Corp. 15,503,150
876,800 CIT Group, Inc., Class A 20,933,600
1,508,300 Conseco, Inc. 36,670,544
318,300 Hartford Financial Services Group, Inc. $ 16,491,919
414,800 Lincoln National Corp. 19,132,650
265,300 Loews Corp. 18,803,138
263,800 MBIA Insurance Corp. 15,053,088
252,750 Marsh & McLennan Cos., Inc. 19,983,047
225,000 Morgan Stanley, Dean Witter & Co. 24,820,313
650,200 Washington Mutual, Inc. 23,366,563
---------------
TOTAL 321,587,330
---------------
Health Care--9.9%
472,000 Abbott Laboratories 19,057,000
299,671 Baxter International, Inc. 19,441,156
1,882,100 /1/ Beverly Enterprises, Inc. 7,410,769
474,000 Bristol-Myers Squibb Co. 36,409,125
1,776,800 /1/ HEALTHSOUTH, Corp. 10,216,600
268,200 Merck & Co., Inc. 21,338,663
525,000 Pharmacia & Upjohn, Inc. 28,317,188
422,200 United Healthcare Corp. 21,822,463
---------------
TOTAL 164,012,964
---------------
Technology--16.2%
297,100 /1/ Computer Sciences Corp. 20,407,056
228,800 Eastman Kodak Co. 15,772,900
403,400 Electronic Data Systems Corp. 23,598,900
596,600 First Data Corp. 27,257,163
500,700 Galileo International, Inc. 15,052,294
250,300 International Business Machines Corp. 24,623,263
505,600 /1/ Lexmark Intl. Group, Class A 39,468,400
234,600 /1/ Novell, Inc. 4,706,663
469,000 /1/ Seagate Technology, Inc. 13,806,188
896,600 /1/ Storage Technology Corp. 14,121,450
653,900 /1/ Sun Microsystems, Inc. 69,190,794
---------------
TOTAL 268,005,071
---------------
Transportation--1.1%
49,800 Ryder Systems, Inc. 1,064,475
298,700 Union Pacific Corp. 16,652,525
---------------
TOTAL 17,717,000
---------------

Shares or
Principal
Amount Value
<S> <C> <C>
COMMON STOCKS--continued
Utilities--5.2%
688,000 Entergy Corp. $ 20,597,000
323,800 FPL Group, Inc. 16,291,188
584,000 P G & E Corp. 13,395,500
426,000 Public Service Enterprises Group, Inc. 16,853,625
692,500 Reliant Energy, Inc. 18,870,625
---------------
TOTAL 86,007,938
---------------
TOTAL COMMON STOCKS (IDENTIFIED COST $1,274,361,864) 1,616,270,235
===============

REPURCHASE AGREEMENT--2.7%/2/
$45,050,000 ABN AMRO, Inc., 5.34%, dated 10/29/1999, due 11/1/1999
(AT AMORTIZED COST) 45,050,000
---------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,319,411,864)/3/ $ 1,661,320,235
===============
</TABLE>

1 Non-income producing security.
2 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.
3 The cost of investments for federal tax purposes amounts to $1,319,411,864.
The net unrealized appreciation of investments on a federal tax basis amounts
to $341,908,371 which is comprised of $466,276,949 appreciation and
$124,368,578 depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($1,659, 250,350) at October 31, 1999.

The following acronym is 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, 1999

<TABLE>
<S> <C> <C>
Assets:
Total investments in securities, at value (identified and tax cost $1,319,411,864) $
1,661,320,235
Income receivable
1,691,773
Receivable for investments sold
2,160,901
Receivable for shares sold
1,695,350

- ----------------
TOTAL ASSETS
1,666,868,259

- ----------------
Liabilities:
Payable for investments purchased $ 4,529,109
Payable for shares redeemed 1,983,148
Payable to Bank 579,163
Payable for taxes withheld 9,928
Accrued expenses 516,561
-----------
TOTAL LIABILITIES
7,617,909

- ----------------
Net Assets for 43,861,278 shares outstanding $
1,659,250,350

- ----------------
Net Assets Consist of:
Paid in capital $
1,203,886,411
Net unrealized appreciation of investments1 341,908,371 Accumulated net realized
gain on investments 111,598,877 Undistributed net investment income 1,856,691

- ----------------
TOTAL NET ASSETS $
1,659,250,350

- ----------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$1,659,250,350 / 43,861,278 shares outstanding
$37.83
</TABLE>

1 Includes $3,853,453 of unrealized appreciation at December 14, 1998, related
to the tax-free transfer of assets from Cape Cod Trust, a Common Trust Fund
and $2,423,700 of unrealized appreciation at July 19, 1999, related to the
tax- free transfer of assets from Vermont National Bank, a Common Trust Fund.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1999

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C> <C>
Dividends (net of foreign taxes withheld of $293,785) $ 30,086,927
Interest 1,762,689
--------------
TOTAL INCOME 31,849,616
--------------
Expenses:
Investment advisory fee $ 10,913,624
Administrative personnel and services fee 1,244,700
Custodian fees 84,637
Transfer and dividend disbursing agent fees and expenses 700,006
Trustees' fees 18,652
Auditing fees 15,047
Legal fees 7,421
Portfolio accounting fees 158,419
Shareholder services fee 4,126,988
Share registration costs 68,985
Printing and postage 39,093
Insurance premiums 1,136
Miscellaneous 13,555
-------------
TOTAL EXPENSES 17,392,263
-------------
Waivers and Expense Reductions:
Waiver of shareholder services fee $ (1,743,240)
Fees paid indirectly from directed broker arrangements (49,919)
------------
TOTAL WAIVERS AND EXPENSE REDUCTIONS (1,793,159)
-------------
Net expenses 15,599,104
--------------
Net investment income 16,250,512
--------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments 111,628,083
--------------
Net change in unrealized appreciation of investments 28,045,263
--------------
Net realized and unrealized gain on investments 139,673,346
--------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 155,923,858
==============
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<S> <C> <C>
Year Ended October 31 1999 1998
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 16,250,512 $
13,484,228
Net realized gain on investments ($111,628,083 and $148,479,604, respectively,
as computed for federal tax purposes) 111,628,083
148,484,465
Net change in unrealized appreciation 28,045,263
34,385,883
----------------
- ----------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 155,923,858
196,354,576
----------------
- ----------------
Distributions to Shareholders:
Distributions from net investment income (15,491,074)
(12,886,475)
Distributions from net realized gains (148,430,859)
(216,135,366)
----------------
- ----------------
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (163,921,933)
(229,021,841)
----------------
- ----------------
Share Transactions:
Proceeds from sale of shares 682,935,698
632,560,746
Proceeds from shares issued in connection with the tax-free transfer of assets
from Cape Cod Trust, a Common Trust Fund
5,826,243 --

Proceeds from shares issued in connection with the tax-free transfer of assets
from Vermont National Bank, a Common Trust Fund
4,453,500 --
Net asset value of shares issued to shareholders in payment of
distributions declared 112,836,967
143,104,220
----------------
- ----------------
Cost of shares redeemed (587,623,382)
(468,196,162)
----------------
- ----------------
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 218,429,026
307,468,804
----------------
- ----------------
Change in net assets 210,430,951
274,801,539
----------------
- ----------------
Net Assets:
Beginning of period 1,448,819,399
1,174,017,860
----------------
- ----------------
End of period (including undistributed net investment income of $1,856,691 and
$1,097,253, respectively) $ 1,659,250,350 $
1,448,819,399
================
================
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

Federated Stock Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end management
investment company. The investment objective of the Trust is to provide growth
of income and capital by investing principally in a professionally managed and
diversified portfolio of common stock of high-quality companies.

On December 14, 1998, the Fund received a tax-free transfer of assets from
Cape Cod Trust, a Common Trust Fund as follows:

Fund Shares Issued 164,444
Common Trust Fund Net Assets Received $ 5,826,243
Unrealized Appreciation1 $ 3,853,453
</TABLE>

Also, on July 19, 1999, the Fund received a tax-free transfer of assets from
Vermont National Bank, a Common Trust Fund as follows:

Fund Shares Issued 105,709
Common Trust Fund Net Assets Received $ 4,453,500
Unrealized Appreciation1 $ 2,423,700
</TABLE>

1 Unrealized appreciation is included in the Common Trust Fund net assets
acquired above.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Trust 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. Securities for which no
quotations are readily available are valued at their fair value as determined in
good faith using methods approved by the Board of Trustees ("Trustees").

Repurchase Agreements

It is the policy of the Trust 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 Trust 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 Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Trust's adviser to be creditworthy pursuant to the guidelines and/ or
standards reviewed or established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Trust could receive less than the repurchase price
on the sale of collateral securities.

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.

Federal Taxes

It is the Trust'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 Trust may engage in when-issued or delayed delivery transactions. The Trust
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.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.

Other
Investment transactions are accounted for on the trade date.

SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:

<TABLE>
<CAPTION>
Year Ended October 31 1999
1998
<S> <C> <C>
Shares sold 17,620,456
16,935,050
Shares issued in connection with the tax-free transfer of assets from Cape Cod
Trust, a Common Trust Fund
164,444 --

Shares issued in connection with the tax-free transfer of assets from Vermont
National Bank, a Common Trust Fund
105,709 --

Shares issued to shareholders in payment of distributions declared 3,081,401
4,119,701
Shares redeemed (15,170,316)
(12,419,564)
-----------
- -----------
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 5,801,694
8,635,187
===========
===========
</TABLE>

Investment Advisory Fee and Other Transactions with Affiliates

Investment Advisory Fee

Federated Investment Management Company, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.75% of the first $500 million in average daily net assets, 0.675% of the
second $500 million in average daily net assets, 0.60% of the third $500 million
in average daily net assets, 0.525% of the fourth $500 million in average daily
net assets, and 0.40% of average daily net assets in excess of $2 billion. The
Adviser will waive, to the extent of its advisory fee, the amount, if any, by
which the Trust's aggregate annual operating expenses (excluding interest,
taxes, brokerage, commissions, and extraordinary expense) exceed 1% of average
daily net assets of the Trust.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Trust with administrative personnel and services. The
fee paid to FServ is based on the level of average aggregate daily net assets of
all funds advised by subsidiaries of Federated Investors, Inc. for the period.
The administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Trust will pay FSSC up to 0.25% of average daily
net assets of the Trust 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.

Transfer and Dividend Disbursing Agent Fees and Expenses

FServ, through its subsidiary, FSSC, serves as transfer and dividend disbursing
agent for the Trust. 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 Trust's accounting records for which it receives a fee. The
fee is based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.

Expense Reduction

The Trust directs certain portfolio trades to a broker, that, in turn, pays a
portion of the Trust's operating expenses. For the six-months ended October 31,
1999, the Trust's expenses were reduced by $49,919 under these arrangements.

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 and conversion
securities, for the year ended October 31, 1999, were as follows:

Purchases $465,828,442
Sales $403,542,504

</TABLE>

CHANGE OF INDEPENDENT AUDITORS (UNAUDITED)

On May 19, 1999, the Trust's Trustees, upon the recommendation of its Audit
Committee, requested and subsequently accepted the resignation of Ernst & Young
LLP ("E&Y") as the Trust's independent auditors. E&Y's reports on the Trust's
financial statements for the fiscal years ended October 31, 1997 and October 31,
1998 contained no adverse opinion or disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Trust's fiscal years ended October 31, 1997 and October 31, 1998: (i)
there were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of E&Y would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports on the financial statements for such years; and (ii) there were no
reportable events of the kind described in Items 304(a)(1)(v) of Regulation S-K
under the Securities Exchange Act of 1933, as amended. The Trust, by action of
its Trustees, upon the recommendation of the Audit Committee, has engaged
Deloitte & Touche LLP ("D&T") as the independent auditors to audit the Trust's
financial statements for the fiscal year ended October 31, 1999. During the
Trust's fiscal years ended October 31, 1997 and October 31, 1998, neither the
Trust nor anyone on its behalf has consulted D&T on items which (i) concerned
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Trust's financial statements, or (ii) concerned the subject of a
disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K)
of reportable events (as described in paragraph (a)(1)(v) of said Item 304).

YEAR 2000 (UNAUDITED)

Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust'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 Trust'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 Trust.

Report of Deloitte & Touche LLP,
Independent Auditors

TO THE TRUSTEES AND SHAREHOLDERS OF
FEDERATED STOCK TRUST:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Stock Trust (the "Trust")
as of October 31, 1999, and the related statement of operations, statement of
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended October 31, 1998, and the financial
highlights for the four years and the period ended October 31, 1998 were audited
by other auditors whose report dated December 21, 1998, expressed an unqualified
opinion on those statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to provide
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 the securities owned at
October 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
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 our audit provides a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Stock
Trust as of October 31, 1999, the results of its operations, the changes in its
net assets and its financial highlights for the year then ended in conformity
with generally accepted accounting principles.

Deloitte & Touche LLP
Boston, Massachusetts
December 17, 1999

[LOGO OF FEDERATED WORLD-CLASS INVESTMENT MANAGERS]

Federated Stock Trust

DECEMBER 31, 1999

A Statement of Additional Information (SAI) dated December 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
SemiAnnual Reports to shareholders as they become available. The Annual Report's
Management Discussion and Analysis discusses market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and other
information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

Investment Company Act File No. 811-3385
Cusip 313900102

8120102A (12/99)

Statement of Additional Information

FEDERATED STOCK TRUST

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Stock Trust (Fund), dated
December 31, 1999.

Obtain the prospectus and the Annual Report's Management Discussion & Analysis
without charge by calling 1-800-341-7400.

December 31, 1999

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.?
Addresses
Cusip 313900102

8120102B (12/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on December 30,
1981. The Fund's investment adviser is Federated Investment Management Company
(Adviser).

Effective March 31, 1999, Federated Management, former Adviser to the Fund,
became Federated Investment Management Company (formerly, Federated Advisers).

SECURITIES IN WHICH THE FUND INVESTS

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

SECURITIES DESCRIPTIONS AND TECHNIQUES
Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund may invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock. Preferred Stocks
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock. The Fund may also treat such redeemable preferred stock as a fixed
income security. Real Estate Investment Trusts (REITs) REITs are real
estate investment trusts that lease, operate and finance commercial real
estate. REITs are exempt from federal corporate income tax if they limit
their operations and distribute most of their income. Such tax requirements
limit a REIT's ability to respond to changes in the commercial real estate
market. Warrants Warrants give the Fund the option to buy the issuer's
equity securities at a specified price (the exercise price) at a specified
future date (the expiration date). The Fund may buy the designated
securities by paying the exercise price before the expiration date.
Warrants may become worthless if the price of the stock does not rise above
the exercise price by the expiration date. This increases the market risks
of warrants as compared to the underlying security. Rights are the same as
warrants, except companies typically issue rights to existing stockholders.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which the Fund may
invest.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks. Agency Securities Agency securities are issued or
guaranteed by a federal agency or other government sponsored entity acting
under federal authority (a GSE). The United States supports some GSEs with
its full faith and credit. 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. Agency securities are generally
regarded as having low credit risks, 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 risks, it does
not reduce the interest rate and prepayment risks of these mortgage backed
securities. Corporate Debt Securities Corporate debt securities are fixed
income securities issued by businesses. Notes, bonds, debentures and
commercial paper are the most prevalent types of corporate debt securities.
The Fund may also purchase interests in bank loans to companies. The credit
risks of corporate debt securities vary widely among issuers. In addition,
the credit risk of an issuer's debt security may vary based on its priority
for repayment. For example, higher ranking (senior) debt securities have a
higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event
of bankruptcy, holders of senior securities may receive amounts otherwise
payable to the holders of subordinated securities. Some subordinated
securities, such as trust preferred and capital securities notes, also
permit the issuer to defer payments under certain circumstances. For
example, insurance companies issue securities known as surplus notes that
permit the insurance company to defer any payment that would reduce its
capital below regulatory requirements.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default. The short maturity of commercial paper
reduces both the market and credit risks as compared to other debt
securities of the same issuer. Demand Instruments Demand instruments
are corporate debt securities that the issuer must repay upon demand.
Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The
Fund treats demand instruments as short-term securities, even though
their stated maturity may extend beyond one year.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate and credit risks
of a zero coupon security. There are many forms of zero coupon securities.
Some are issued at a discount and are referred to as zero coupon or capital
appreciation bonds. Others are created from interest bearing bonds by
separating the right to receive the bond's coupon payments from the right
to receive the bond's principal due at maturity, a process known as coupon
stripping. Treasury STRIPs, IOs and POs are the most common forms of
stripped zero coupon securities. In addition, some securities give the
issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These
are referred to as pay-in-kind or PIK securities. Bank Instruments Bank
instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in U.S.
dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-U.S. branches
of U.S. or foreign banks.
AMERICAN DEPOSITARY RECEIPTS
American Depositary Receipts represent interests in underlying securities issued
by a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are not traded in the United States. 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. Moreover, the Fund invests primarily in the ADRs of companies with
significant operations within the U.S. Foreign Securities Foreign securities are
securities of issuers based outside the United States. The Fund considers an
issuer to be based outside the United States if: o it is organized under the
laws of, or has a principal office located in, another country; o the principal
trading market for its securities is in another country; or o it (or its
subsidiaries) derived in its most current fiscal year at least 50% of its total
assets, capitalization,
gross revenue or profit from goods produced, services performed, or sales
made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are not traded in the United States. ADRs
provide a way to buy shares of foreign-based companies in the United States
rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. The foreign
securities underlying European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), and International Depositary Receipts (IDRs),
are traded globally or outside the United States. Depositary receipts
involve many of the same risks of investing directly in foreign securities,
including currency risks and risks of foreign investing.
Special Transactions
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser. The Fund's custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.

Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board, and the Board monitors the operation of
the program. Any inter-fund loan must comply with certain conditions set out in
the exemption, which are designed to assure fairness and protect all
participating funds.

For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.

INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

EQUITY SECURITIES INVESTMENT RISKS
Liquidity Risks
o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.
o Liquidity risk also refers to the possibility that the Fund may not be able
to sell a security when it wants to. If this happens, the Fund will be
required to continue to hold the security, and the Fund could incur losses.
Risks Related to Company Size
o Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.
o Companies with smaller market capitalizations also tend to have unproven
track records, a limited product or service base and limited access to
capital. These factors also increase risks and make these companies more
likely to fail than companies with larger market capitalizations.

FIXED INCOME SECURITIES INVESTMENT RISKS

Interest Rate Risks
o Prices of fixed income securities rise and fall in response to changes in
the interest rate paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may
cause the price of certain fixed income securities to fall while the prices
of other securities rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.
Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the Adviser's credit
assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for 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.
o Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement its investment strategy.
Call Risks
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market
price. An increase in the likelihood of a call may reduce the security's
price.
o 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
o Trading opportunities are more limited for fixed income securities that
have not received any credit ratings, have received ratings below
investment grade or are not widely held.
o These features may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.
o Liquidity risk also refers to the possibility that the Fund may not be able
to sell a security when it wants to. If this happens, the Fund will be
required to continue to hold the security, and the Fund could incur losses.
Risks Associated with Noninvestment Grade Securities
o Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively,
and their trading market may be more limited.

Fundamental INVESTMENT Objective

The investment objective of the Fund is to provide growth of income and capital.
The investment objective may not be changed by the Fund's Trustees without
shareholder approval.

INVESTMENT LIMITATIONS

Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.

Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.

Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.

Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.

Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.

Lending
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
For purposes of this restriction, the term concentration has the meaning set
forth in the 1940 Act, any rule or order thereunder, or any SEC staff
interpretation thereof. Government securities and municipal securities will not
be deemed to constitute an industry. To conform to the current view of the SEC
staff that only domestic bank instruments may be excluded from industry
concentration limitations, as a matter of non-fundamental policy, the Fund will
not exclude foreign bank instruments from industry concentration limitation
tests as long as the policy of the SEC remains in effect. In addition,
investments in bank instruments, and investments in certain industrial
development bonds funded by activities in a single industry, will be deemed to
constitute investment in an industry, except when held for temporary defensive
purposes. The investment of more than 25% of the value of the Fund's total
assets in any one industry will constitute `concentration.' The above
limitations cannot be changed by the Board of Trustees (Board) 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 limitations becomes effective.

Purchases on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.

Investing in Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.

Restricted Securities

The Trust may invest in restricted securities. Restricted securities are any
securities in which the Trust may invest pursuant to its investment objective
and policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Trust will limit their purchase, together
with other illiquid securities, to 15% of its net assets. Except with respect to
borrowing money, if any of the percentage limitations set forth are 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 nor will the Fund be required to make any changes in its portfolio
holdings.

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 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.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

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.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

Certain 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 Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund.

In the unlikely event a shareholder is held personally liable for the Fund's
obligations, the Fund is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Fund will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Fund. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Fund 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 Fund have equal voting rights.

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 Fund's outstanding shares.

As of December 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Charles Schwab & Co.,
Inc., San Francisco, CA, owned approximately 2,762,441 Shares (5.81%) and
National Financial Services (for the exclusive benefit of its customers), New
York, NY, owned approximately 6,185,333 Shares (13.02%).

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.

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 Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund's,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of December 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

<PAGE>

- ------------------------------------------------------------------------------------------------------------------------------------
Name Aggregate Total
Birth Date Compensation Compensation
Address From Fund From the Fund
Position With Fund Principal Occupations and Fund Complex
for Past Five Years

John F. Donahue*+# Chief Executive Officer and Director or Trustee of the $0 $0 for the
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Director, Federated Fund and
Federated Investors Tower Investors, Inc.; Chairman and Trustee, Federated 54 other investment
1001 Liberty Avenue Investment Management Company; Chairman and Director, companies
Pittsburgh, PA Federated Investment Counseling and Federated Global in the Fund Complex
CHAIRMAN AND TRUSTEE Investment Management Corp.; Chairman, Passport
Research, Ltd.

Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $1,925.13 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Fund and
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, 54 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, in the Fund Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.

John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $1,925.13 $125,264.48 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior Fund and
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., 54 other investment
Properties Corporation Realtors; Partner or Trustee in private real estate companies
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President, in the Fund Complex
Naples, FL Naples Property Management, Inc. and Northgate Village

TRUSTEE Development Corporation.

Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; $1,925.13 $47,958.02 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Fund and
175 Woodshire Drive construction, operations and technical services); 29 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex

John F. Cunningham Director or Trustee of some of the Federated Fund $1,439.67 $0 for the
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive Fund and
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business 46 other investment
Palm Beach, FL consulting) ; Trustee Associate, Boston College; companies
TRUSTEE Director, Iperia Corp. (communications/software); in the Fund Complex

formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).

Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.

Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $1,925.13 $113,860.22 for the
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical Fund and
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - 54 other investment
Suite 1111 Downtown; Hematologist, Oncologist, and Internist, companies
Pittsburgh, PA University of Pittsburgh Medical Center; Member, in the Fund Complex
TRUSTEE National Board of Trustees, Leukemia Society of America.

Peter E. Madden Director or Trustee of the Federated Fund Complex; $1,758.13 $113,860.22 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts Fund and
One Royal Palm Way General Court; President, State Street Bank and Trust 54 other investment
100 Royal Palm Way Company and State Street Corporation. companies
Palm Beach, FL in the Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.

Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $0 $0 for the Fund and
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External 50 other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies
Westhampton Beach, NY communications, technology and consulting).; formerly in the Fund Complex
Management Consultant.

TRUSTEE

Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.

John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $2,069.32 $113,860.22 for the
S.J.D.# President, Law Professor, Duquesne University; Fund
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and
President, Duquesne University Baker Corp. (engineering, construction, operations and 54 other investment
Pittsburgh, PA technical services). companies
TRUSTEE in the Fund Complex
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $1,925.13 $113,860.22 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Fund and
4905 Bayard Street 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies
TRUSTEE Company of America; television producer; business owner. in the Fund Complex

John S. Walsh Director or Trustee of some of the Federated Fund $509.72 $0 for the
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. Fund and
2007 Sherwood Drive (manufacturer of construction temporary heaters); 48 other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies
TRUSTEE (distributor of portable construction heaters); in the Fund Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.

Glen R. Johnson Staff member, Federated Securities Corp. $0 $0 for the
Birth Date: May 2, 1929 Fund and
Federated Investors Tower 8 other investment
1001 Liberty Avenue companies
Pittsburgh, PA in the Fund Complex
PRESIDENT

J. Christopher Donahue+* President or Executive Vice President of the Federated $0 $0 for the
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Fund and
Federated Investors Tower in the Federated Fund Complex; President, Chief 16 other investment
1001 Liberty Avenue Executive Officer and Director, Federated Investors, companies
Pittsburgh, PA Inc.; President and Trustee, Federated Investment in the Fund Complex
EXECUTIVE VICE PRESIDENT AND Management Company; President and Trustee, Federated
TRUSTEE Investment Counseling; President and Director, Federated
Global Investment Management Corp.; President,
Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.

<PAGE>

Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice Fund 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 company
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment in the Fund Complex
EXECUTIVE VICE PRESIDENT Management Company and Federated Investment Counseling,
Federated Global Investment Management 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 Federated $0 $0 for the
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and Fund and
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated 54 other investment
1001 Liberty Avenue Investment Management Company and Federated Investment companies
Pittsburgh, PA Counseling; Director, Federated Global Investment in the Fund Complex
EXECUTIVE VICE PRESIDENT and Management Corp, Federated Services Company and
SECRETARY Federated Securities Corp.

Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated Fund and
Federated Investors Tower Investors, Inc.; formerly: various management positions 54 other investment
1001 Liberty Avenue within Funds Financial Services Division of Federated companies
Pittsburgh, PA Investors, Inc. in the Fund Complex
TREASURER

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

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

Michael P. Donnelly Michael P. Donnelly has been the Fund's Portfolio $0 $0 for the
Birth Date: November 26, 1961 Manager since November 1997. He is Vice President of Fund and
Federated Investors Tower the Fund. Mr. Donnelly joined Federated in 1989 as an 1 other investment
1001 Liberty Avenue Investment Analyst. He served as a Portfolio Manager company
Pittsburgh, PA from 1994 to 1998 and became a Senior Portfolio Manager in the Fund Complex
VICE PRESIDENT in 1998. He was a Vice President of the Fund's Adviser
from 1994 to 1999. In May 1999, Mr. Donnelly became a
Senior Vice President of the Fund's Adviser. Mr.
Donnelly is a Chartered Financial Analyst and received
his M.B.A. from the University of Virginia.

</TABLE>

* An asterisk denotes a TRUSTEE who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President
of the Fund.
++Mr. Cunningham became of member of the Board of Trustees on January 1, 1999.
Messrs. Mansfield and Walsh became members of the Board of Trustees on
November 17,1999, respectively. They 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 ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to 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 Fund.

The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 1.00% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.

Other Related Services
Affiliates of the Adviser 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 Adviser looks for prompt execution of the order at a favorable
price. The Adviser 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 Adviser 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 Adviser 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 Adviser
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 Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser 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.

For the fiscal year ended, October 31, 1999, the Fund's Adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $29,561,987 for which the
Fund paid $58,562 in brokerage commissions.

On October 31, 1999, the Fund owned securities of the following regular
broker/dealers: $18,734,966 of securities of Bear, Stearns & Co., Inc. and
$24,820,313 of securities of Morgan Stanley, Dean Witter, Discover Co.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. 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 Adviser 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 Administrative Fee Average Aggregate Daily Net 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 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

The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31
1999 1998 1997

Advisory Fee Earned $10,913,624 $9,348,739 $7,175,722
Advisory Fee Reduction $0 $0 $0
Brokerage Commissions $58,562 $1,417,358 $1,735,722
Administrative Fee $1,244,700 $1,033,896 $766,339
Shareholder Services Fee $4,126,988 NA NA
</TABLE>

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.

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
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 are given for the one-year, five-year, and ten-year periods ended
October 31, 1999.

Yield is given for the 30-day period ended October 31, 1999.

30-Day Period 1 Year 5 Years 10 Years
Fund

Total Return NA 11.03% 20.55% 15.15%
Yield 1.08% NA NA NA

- -----------------------------------------------------------------------------------------------
</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.

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.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

To the extent 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:

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

o 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;

o 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 Fund; and

o 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:

o Lipper Analytical Services, Inc. Ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in offering price over a specific period
of time.

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

o Standard & Poor's Daily Stock Price Index Of 500 Common Stocks (S&P 500) A
composite index of common stocks in industry, transportation, and
financial and public utility companies. Can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the S&P'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 S&P figures.

o 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.

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, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 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 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 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, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 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 $209 billion.

Government Funds
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 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 $43.2 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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 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 $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

Federated Clients Overview

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

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.

<PAGE>

ADDRESSES

FEDERATED STOCK TRUST

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

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

Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116