FEDERATED AMERICAN LEADERS FUND INC, 497, 1996-05-31

FEDERATED AMERICAN LEADERS FUND INC
497, 1996-05-31

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FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS A SHARES
PROSPECTUS

The Class A Shares of Federated American Leaders Fund, Inc. (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) investing in common stocks and other securities of high quality
companies to achieve growth of capital and income.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISK INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in Class A Shares of the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares and Class F Shares dated May 31, 1996,
with the Securities and Exchange Commission. The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-245-4270. To obtain other
information or make inquiries about the Fund, contact your financial
institution.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated May 31, 1996

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Financial Highlights...........................................................2

General Information............................................................3

Investment Information.........................................................3
Investment Objective.........................................................3
Investment Policies..........................................................3
Investment Limitations.......................................................5

Net Asset Value................................................................5

How to Purchase Shares.........................................................6
Investing in Shares..........................................................6

Reducing or Eliminating the Sales Charge.....................................7
Purchasing Shares Through a Financial
Institution...............................................................8
Purchasing Shares by Wire....................................................9
Purchasing Shares by Check...................................................9
Special Purchase Features....................................................9

Exchange Privilege............................................................10
Requirements for Exchange...................................................10
Tax Consequences............................................................10
Making an Exchange..........................................................10

How To Redeem Shares..........................................................11
Redeeming Shares Through Your
Financial Institution....................................................11
Redeeming Shares by Telephone...............................................11
Redeeming Shares by Mail....................................................12
Special Redemption Features.................................................12
Contingent Deferred Sales Charge............................................13
Elimination of Contingent Deferred
Sales Charge.............................................................13

Account and Share Information.................................................14
Certificates and Confirmations..............................................14
Dividends...................................................................14
Capital Gains...............................................................14
Accounts with Low Balances..................................................14

Fund Information..............................................................15
Management of the Fund......................................................15
Distribution of Shares......................................................16
Administration of the Fund..................................................17
Brokerage Transactions......................................................17

Shareholder Information.......................................................18

Voting Rights...............................................................18

Tax Information...............................................................19
Federal Income Tax..........................................................19
State and Local Taxes.......................................................19

Performance Information.......................................................19

Other Classes of Shares.......................................................20

Addresses.....................................................................21

SUMMARY OF FUND EXPENSES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
<TABLE>
<S> <C> <C>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................ 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................................................ None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1)........................................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................... None
Exchange Fee................................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee............................................................................................... 0.65%
12b-1 Fee.................................................................................................... None
Total Other Expenses......................................................................................... 0.51%
Shareholder Services Fee (after waiver) (2).................................................. 0.18%
Total Operating Expenses (3)....................................................................... 1.16%
</TABLE>

(1) Shareholders who purchased shares with the proceeds of a redemption of
shares of an unaffiliated investment company purchased and redeemed with a
sales charge and not distributed by Federated Securities Corp. may be
charged a contingent deferred sales charge of 0.50 of 1% for redemptions
made within one year of purchase. See "Contingent Deferred Sales Charge."

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 1.23% absent the voluntary
waiver of a portion of the shareholder services fees.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period............................. $71 $90 $115 $188
You would pay the following expenses on the same investment, assuming no
redemption................................................................ $66 $90 $115 $188
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS--CLASS A SHARES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated May 15, 1996, on the Fund's
financial statements for the year ended March 31, 1996, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.66 $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.22 0.25 0.23 0.29 0.29 0.37 0.55 0.50
- -------------------------------------
Net realized and unrealized gain
(loss) on investments 4.70 1.42 0.18 2.05 1.34 1.28 0.36 1.08
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 4.92 1.67 0.41 2.34 1.63 1.65 0.91 1.58
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Distributions from net investment
income (0.17) (0.24) (0.24) (0.28) (0.28) (0.38) (0.56) (0.50)
- -------------------------------------
Distributions from net realized gain
on investments (0.63) (0.35) (0.49) (1.04) (0.65) (0.30) (1.18) (0.59)
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.80) (0.59) (0.73) (1.32) (0.93) (0.68) (1.74) (1.09)
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 19.78 $ 15.66 $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 32.00% 11.87% 2.76% 18.31% 12.91% 14.17% 7.13% 13.23%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 1.16% 1.23% 1.18% 1.13% 1.02% 1.02% 1.01% 1.01%
- -------------------------------------
Net investment income 1.07% 1.71% 1.48% 2.07% 2.12% 3.06% 4.23% 3.85%
- -------------------------------------
Expense waiver/reimbursement (b) 0.07% -- -- 0.06% 0.16% 0.30% 0.35% 0.12%
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000
omitted) $455,867 $268,470 $226,857 $202,866 $171,210 $149,360 $147,235 $149,049
- -------------------------------------
Portfolio turnover 46% 34% 27% 39% 67% 57% 50% 27%
- -------------------------------------

<CAPTION>
<S> <C> <C>
1988 1987
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.21 $ 13.64
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.45 0.46
- -------------------------------------
Net realized and unrealized gain
(loss) on investments (1.21) 1.81
- ------------------------------------- --------- ---------
Total from investment operations (0.76) 2.27
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Distributions from net investment
income (0.43) (0.47)
- -------------------------------------
Distributions from net realized gain
on investments (0.47) (1.23)
- ------------------------------------- --------- ---------
Total distributions (0.90) (1.70)
- ------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.55 $ 14.21
- ------------------------------------- --------- ---------
TOTAL RETURN (A) (5.32%) 18.38%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 1.00% 1.00%
- -------------------------------------
Net investment income 3.35% 3.44%
- -------------------------------------
Expense waiver/reimbursement (b) 0.11% 0.12%
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000
omitted) 158,818 157,999
- -------------------------------------
Portfolio turnover 65% 28%
- -------------------------------------
</TABLE>

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1996, which can be obtained free of charge.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. At a meeting of the Board of Directors (the "Directors") held on February
26, 1996, the Directors approved an amendment to the Articles of Incorporation
to change the name of American Leaders Fund, Inc. to Federated American Leaders
Fund, Inc. The Articles of Incorporation permit the Fund to offer separate
series of shares of beneficial interest representing interests in separate
portfolios of securities. The shares in any one portfolio may be offered in
separate classes. With respect to this Fund, as of the date of this prospectus,
Directors have established four classes of shares, known as Class A Shares,
Class B Shares, Class C Shares and Class F Shares. This prospectus relates only
to the Class A Shares ("Shares") of the Fund.

Class A Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. A minimum initial
investment of $500 is required, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The investment objective and the policies and limitations
described below cannot be changed without approval of shareholders.

INVESTMENT POLICIES

The Fund's investment approach is based upon the conviction that over the longer
term, the economy will continue to expand and develop and that this economic
growth will be reflected importantly in the growth of major corporations. The
Fund pursues this investment objective by investing at least 65% of its assets
in a portfolio of securities issued by the one hundred companies contained in
"The Leaders List." Generally, the Fund's management makes portfolio selections
utilizing fundamental analysis, with emphasis on earning power, financial
condition, and valuation. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.

ACCEPTABLE INVESTMENTS
The Fund invests primarily in securities of companies selected from "The Leaders
List" by the Fund's investment adviser on the basis of traditional fundamental
research techniques and standards. The securities in which the Fund invests
include, but are not limited to:

common stocks;

preferred stocks;

domestic issues of corporate debt obligations rated, at the time of purchase,
"Baa" or better

by Moody's Investors Service, Inc. ("Moody's") or "BBB" or better by Standard &
Poor's Ratings Group ("Standard & Poor's") or Fitch Investors Service, Inc.
("Fitch") or, if not rated, are determined by the Fund's investment adviser to
be of comparable quality. If a security loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to drop the
security from the portfolio, but will consider doing so. (A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information); and

warrants.

Bonds rated "BBB" by Standard & Poor's or Fitch or "Baa" by Moody's have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds.

The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

THE LEADERS LIST
"The Leaders List" is a trade name which represents a list of 100 blue chip
companies selected by the Fund's investment adviser principally on the basis of
fundamental research techniques and standards. Shareholders can obtain a copy of
"The Leaders List" by contacting the Fund. In the opinion of the investment
adviser, securities of these companies represent diversified and highly
marketable investments. The list is subject to continuous review and
modification. A number of standards and fundamental research factors are used in
determining "The Leaders List." "The Leaders List" includes leading companies in
their industries determined in terms of sales, earnings, and/or market
capitalization.

REPURCHASE AGREEMENTS

The acceptable investments in which the Fund invests may be purchased pursuant
to repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
or other securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price.

ILLIQUID SECURITIES

The Fund may acquire securities which are subject to legal or contractual
delays, restrictions, and costs on resale. Because of time limitations, the Fund
might not be able to dispose of these securities at reasonable prices or at
times advantageous to the Fund. Where the Fund considers these securities to be
illiquid, it intends to limit the purchase of them together with other
securities considered to be illiquid, including repurchase agreements providing
for settlement in more than seven days after notice, to not more than 10% of its
net assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities on a short-term or long-term basis up to one-third the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Directors and will receive
collateral equal to at least 100% of the value of the securities loaned.

There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. The adviser to the Fund does not anticipate that portfolio turnover
will result in adverse tax consequences. Any such trading will increase the
Fund's portfolio turnover rate and transaction costs.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements (arrangements in
which the Fund sells a portfolio instrument for a percentage of its cash value
with an agreement to buy it back on a set date) except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets;

invest more than 5% of its total assets in securities of one issuer (except
U.S. government securities) or purchase more than 10% of any class of voting
securities of any one issuer;

invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or

purchase restricted securities if immediately thereafter more than 15% of the
net assets of the Fund would be invested in such securities.

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class A Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class A Shares in the liabilities of the Fund and those attributable to the
Class A Shares, and dividing the remainder by the total number of Class A Shares
outstanding. The net asset value for Class A Shares may differ from that of
Class B Shares, Class C Shares and Class F Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; or (iii) the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.

HOW TO PURCHASE SHARES

Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased as described below, either through a financial institution (such as
a bank or broker/dealer which has a sales agreement with the distributor) or by
wire or by check directly to the Fund, with a minimum initial investment of
$500. Additional investments can be made for as little as $100. The minimum
initial and subsequent investment for retirement plans is only $50. (Financial
institutions may impose different minimum investment requirements on their
customers.)

In connection with the sale of Shares, Federated Securities Corp. may, from time
to time, offer certain items of nominal value to any shareholder or investor.
The Fund reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

INVESTING IN SHARES

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE DEALER
SALES CHARGE AS A CONCESSION
AS A PERCENTAGE AS A
AMOUNT OF PERCENTAGE OF NET PERCENTAGE
TRANSACTION OF PUBLIC AMOUNT OF PUBLIC
PRICE OFFERING PRICE INVESTED OFFERING
<S> <C> <C> <C>
Less than
$50,000 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000 2.50% 2.56% 2.25%
$500,000 but
less than $1
million 2.00% 2.04% 1.80%
$1 million or
greater 0.00% 0.00% 0.25%*
</TABLE>

*See sub-section entitled "Dealer Concession."

No sales charge is imposed for Shares purchased through bank financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Shares through a trust department, investment adviser, or
other financial intermediary may be charged a service or other fee by the
financial intermediary. Additionally, no sales charge is imposed on shareholders
designated as Liberty Life Members or on Shares purchased through "wrap
accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

For sales of Shares, a dealer will normally receive up to 90% of the applicable
sales charge. Any portion of the sales charge which is not paid to the dealer
will be retained by the distributor. However, the distributor may offer to pay
dealers up to 100% of the sales charge retained by it. Such payments may take
the form of cash or promotional incentives, such as reimbursement of certain
expenses of qualified employees and their spouses to attend informational
meetings about the Fund or other special events at recreational-type
facilities, or of items of material value. In some instances, these incentives
will be made available only to dealers whose employees have sold or may sell
significant amount of Shares. On purchases of $1 million or more, the investor
pays no sales charge, however, the distributor will make twelve monthly
payments to the dealer totaling 0.25% of the public offering price over the
first year following the purchase. Such payments are based on the original
purchase price of shares outstanding at each month end.

The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.

REDUCING OR ELIMINATING THE SALES CHARGE

The sales charge can be reduced on the purchase of Shares through:

quantity discounts and accumulated purchases;
concurrent purchases;

signing a 13-month letter of intent;
using the reinvestment privilege; or

purchases with proceeds from redemptions of unaffiliated investment companies.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table above, larger purchases reduce the sales charge paid. The
Fund will combine purchases of Shares made on the same day by the investor, the
investor's spouse, and the investor's children under age 21 when it calculates
the sales charge. In addition, the sales charge, if applicable, is reduced for
purchases made at one time by a trustee or fiduciary for a single trust estate
or a single fiduciary account.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $90,000 and he
purchases $10,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 3.75%,
not 4.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of Class A Shares of two or more
funds for which affiliates of Federated Investors serve as investment adviser or
principal underwriter (the "Federated Funds"), the purchase price of which
includes a sales charge. For example, if a shareholder concurrently invested
$30,000 in the Class A Shares of one of the other Federated Funds with a sales
charge, and $20,000 in this Fund, the sales charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $50,000 of Class A Shares of
Federated Funds (excluding money market funds) over the next 13 months, the
sales charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold up to 5.50% of the total amount intended to be purchased in
escrow (in shares) until such purchase is completed.

The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of Federated
Funds, excluding money market funds, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

REINVESTMENT PRIVILEGE

If Shares in the Fund have been redeemed, the shareholder has the privilege,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his Shares in the Fund, there may be tax consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES

Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an unaffiliated investment company
that were purchased or sold with a sales charge or commission and were not
distributed by Federated Securities Corp. The purchase must be made within 60
days of the redemption, and Federated Securities Corp. must be notified by the
investor in writing, or by his financial institution, at the time the purchase
is made. From time to time, the Fund may offer dealers a payment of .50 of 1.00%
for Shares purchased under this program. If Shares are purchased in this manner,
redemptions of those Shares will be subject to a contingent deferred sales
charge for one year from the date of purchase. Shareholders will be notified
prior to the implementation of any special offering as described above.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when converted into federal funds. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly. Financial institutions may charge
additional fees for their services.

PURCHASING SHARES BY WIRE

Once an account has been established, Shares may be purchased by Federal Reserve
wire by calling the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund Number--this
number can be found on the account statement or by contacting the Fund); Account
Number; Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.

PURCHASING SHARES BY CHECK

Once an account has been established, Shares may be purchased by mailing a check
made payable to the name of the Fund (designate class of Shares and account
number) to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received).

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
applicable sales charges. Shareholders should contact their financial
institution or the Fund to participate in this program.

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact the Fund and consult a tax adviser.

EXCHANGE PRIVILEGE

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other Federated Funds at net asset value. Neither the Fund nor any of the
Federated Funds imposes any additional fees on exchanges. Shareholders in
certain other Federated Funds may exchange all or some of their shares for Class
A Shares.

Please contact your financial institution directly or Federated Securities Corp.
at 1-800-245-5051 for information on and prospectuses for the Federated Funds
into which your Shares may be exchanged free of charge.

Shareholders of Class A Shares who have been designated Liberty Life Members are
exempt from sales charges on future purchases in and exchanges between the Class
A Shares of any Federated Fund, as long as they maintain a $500 balance in one
of the Federated Funds.

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.

This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.

MAKING AN EXCHANGE

Instructions for exchanging may be given in writing or by telephone. Written
instructions may require a signature guarantee. Shareholders of the Fund may
have difficulty in making exchanges by telephone through brokers and other
financial institutions during times of drastic economic or market changes. If a
shareholder cannot contact his broker or financial institution by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail to: Federated Shareholder Services Company, 1099 Hingham Street, Rockland,
MA 02370-3317.

TELEPHONE INSTRUCTIONS

Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600 and deposited to the shareholder's account before being
exchanged. Telephone exchange instructions are recorded and will be binding upon
the shareholder. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Fund before that time for Shares to be
exchanged the same day. Shareholders exchanging into a fund will begin
receiving dividends the following business day. This privilege may be modified
or terminated at any time.

HOW TO REDEEM SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
as described below.

REDEEMING SHARES THROUGH YOUR FINANCIAL INSTITUTION

Shares may be redeemed by calling your financial institution to request the
redemption. Shares will be redeemed at the net asset value, less any applicable
contingent deferred sales charge, next determined after the Fund receives the
redemption request from the financial institution. Redemption requests through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. Redemption requests through other financial institutions (such as banks)
must be received by the financial institution and transmitted to the Fund before
4:00 p.m. (Eastern time) in order for Shares to be redeemed at that day's net
asset value. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions.
Customary fees and commissions may be charged by the financial institution for
this service.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds will be mailed in the form of a check to
the shareholder's address of record or wire-transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. The minimum amount for a wire transfer is $1,000. Proceeds from
redeemed Shares purchased by check or through ACH will not be wired until that
method of payment has cleared. Proceeds from redemption requests received on
holidays when wire transfers are restricted will be wired the following
business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares by Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company Fund Name, Fund Class, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: the Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the Shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after receipt of a proper written redemption request. Dividends are
paid up to and including the day that a redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder.

Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program
through his financial institution. Due to the fact that Shares are sold with a
sales charge, it is not advisable for shareholders to continue to purchase
Shares while participating in this program.

CONTINGENT DEFERRED SALES CHARGE

Shares purchased under a periodic special offering with the proceeds of a
redemption of Shares of an unaffiliated investment company purchased or redeemed
with a sales charge and not distributed by Federated Securities Corp. may be
charged a contingent deferred sales charge of .50 of 1% for redemptions made
within one full year of purchase. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption.

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than one
full year from the date of purchase. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than one full year from the
date of purchase; (3) Shares held for less than one full year from the date of
purchase on a first-in, first-out basis. A contingent deferred sales charge is
not assessed in connection with an exchange of Fund Shares for Shares of other
Federated Funds in the same class (see "Exchange Privilege"). Any contingent
deferred sales charge imposed at the time the exchanged-for Shares are redeemed
is calculated as if the shareholder had held the Shares from the date on which
he became a shareholder of the exchanged-from Shares. Moreover, the contingent
deferred sales charge will be eliminated with respect to certain redemptions
(see "Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other retirement plan to a shareholder who has
attained the age of 70-1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on redemptions
of Shares held by Directors, employees and sales representatives of the Fund,
the distributor, or affiliates of the Fund or distributor, and their immediate
family members; employees of any financial institution that sells Shares of the
Fund pursuant to a sales agreement with the distributor; and spouses and
children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940 or retirement plans where
the third party administrator has entered into certain arrangements with
Federated Securities Corp. or its affiliates, or any other financial
institution, to the extent that no payments were advanced for purchases made
through such entities. The Directors reserve the right to discontinue
elimination of the contingent deferred sales charge. Shareholders will be
notified of such elimination. Any Shares purchased prior to the termination of
such waiver would have the contingent deferred sales charge eliminated as
provided in the Fund's prospectus at the time of the purchase of the Shares.
If a shareholder making a redemption qualifies for an elimination of the
contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that he is entitled to such
elimination.

ACCOUNT AND SHARE
INFORMATION

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.

DIVIDENDS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales charge, unless shareholders request cash
payments on the new account form or by writing to the transfer agent. All
shareholders on the record date are entitled to the dividend. If Shares are
redeemed or exchanged prior to the record date or purchased after the record
date, those Shares are not entitled to that quarter's dividend.

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value
of $500. This requirement does not apply, however, if the balance falls below
$500 because of changes in the Fund's net asset value. Before Shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Shares to meet the minimum requirement.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund is managed by a Board of Directors. The Directors are responsible for
managing the Fund's business affairs and for exercising all the Fund's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Directors handles the Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Advisers (the
"Adviser"), the Fund's investment adviser, subject to direction by the
Directors. The Adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual fee from the Fund.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to .55 of 1% of the
Fund's average daily net assets, plus 4.50% of the Fund's gross income
(excluding any capital gains or losses). Gross income includes, in general,
discount earned on U.S. Treasury bills and agency discount notes, interest
earned on all interest-bearing obligations, and dividend income recorded on the
ex-dividend date but does not include capital gains or losses or reduction for
expenses. The Adviser may voluntarily choose to waive a portion of its fee or
reimburse the Funds for certain operating expenses. The Adviser can terminate
this voluntary reimbursement of expenses at any time at its sole discretion.
The Adviser has also undertaken to reimburse the Fund for operating expenses
in excess of limitations established by certain states.

ADVISER'S BACKGROUND

Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of December 31,
1995, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,800 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.

Peter R. Anderson has been the Fund's portfolio manager since December, 1989.
Mr. Anderson joined Federated Investors in 1972 as, and is presently, a Senior
Vice President of the Fund's investment adviser. Mr. Anderson is a Chartered
Financial Analyst and received his M.B.A. in Finance from the University of
Wisconsin.

Timothy E. Keefe has been the Fund's portfolio manager since February, 1995. Mr.
Keefe joined Federated Investors in 1987, and has been a Vice President of the
Fund's investment adviser since 1995. Mr. Keefe served as an Assistant Vice
President of the Fund's investment adviser between 1993 and 1995, and as an
Investment Analyst from 1991 until 1993. Mr. Keefe is a Chartered Financial
Analyst and received his M.B.A. in Business Administration from the University
of Pittsburgh.

Both the Fund and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

SHAREHOLDER SERVICES

The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25 of 1% of the average daily net asset value of the
Fund on behalf of Class A Shares to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts ("shareholder
services"). Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon Shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to .50 of 1% of the net asset value
of Class A Shares purchased by their clients or customers under certain
qualified plans as approved by Federated Securities Corp. (Such payments are
subject to a reclaim from the financial institution should the assets leave the
program within 12 months after purchase.)

Furthermore, in addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder Services, from
their own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Adviser or its
affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by affiliates of Federated Investors as
specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

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. In working with dealers, 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. 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 Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.

SHAREHOLDER INFORMATION

VOTING RIGHTS

As a Maryland Corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.

As of May 6, 1996, Merrill Lynch, Pierce, Fenner & Smith, Jacksonville, FL,
owned 37.11% of the voting securities of the Fund's Class C Shares and 25.56% of
the voting securities of the Fund's Class F Shares and, therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for Class A
Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in Class A Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yield of Class A Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
A Shares over a thirty-day period by the maximum offering price per share of
Class A Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Class A Shares, and therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The performance information reflects the effect of non-recurring charges, such
as the maximum sales charge and contingent deferred sales charges, which, if
excluded, would increase the total return and yield.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Class F Shares.

From time to time, advertisements for Class A Shares, Class B Shares, Class C
Shares, and Class F Shares of the Fund may refer to ratings, rankings, and other
information in certain financial publications and/or compare the performance of
Class A Shares, Class B Shares, Class C Shares, and Class F Shares to certain
indices.

OTHER CLASSES OF SHARES

The Fund also offers other classes of shares called Class B Shares, Class C
Shares, and Class F Shares which are all sold primarily to customers of
financial institutions subject to certain differences.

Class B Shares are sold at net asset value and are subject to a 12b-1 Plan, a
Shareholder Services Agreement and a minimum initial investment of $1,500,
unless the investment is in a retirement account, in which the minimum
investment is $50. A contingent deferred sales charge is imposed on certain
Shares which are redeemed within six full years of purchase.

Class C Shares are sold at net asset value and are subject to a 12b-1 Plan, a
Shareholder Services Agreement and a minimum initial investment of $1,500,
unless the investment is in a retirement account, in which the minimum
investment is $50. A contingent deferred sales charge of 1.00% is imposed on
assets redeemed within the first full 12 months following purchase.

Class F Shares are sold subject to a front-end sales charge of 1.00%, a
contingent deferred sales charge, a Shareholder Services Agreement and a minimum
initial investment of $1,500, unless the investment is in a retirement account,
in which the minimum investment is $50.

Class A Shares, Class B Shares, Class C Shares and Class F Shares are subject to
certain of the same expenses, however, the front-end sales charge for Class F
Shares is lower than that for Class A Shares. Expense differences between Class
A Shares, Class B Shares, Class C Shares and Class F Shares may affect the
performance of each class.

To obtain more information and a prospectus for Class B Shares and Class C
Shares, investors may call 1-800-245-4770 or contact their financial
institution.

To obtain more information and a prospectus for Class F Shares, investors may
call 1-800-245-5051 or contact their financial institution.

ADDRESSES

- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated American Leaders Fund, Inc.
Class A Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

FEDERATED AMERICAN
LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS A SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company
May 31, 1996

Cusip 027128107
8062808A-A (5/96)

FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

The shares of Federated American Leaders Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) investing in common stocks and other securities of high quality companies
to achieve growth of capital and income.

This prospectus contains the information you should read and know before you
invest in Class A Shares, Class B Shares and Class C Shares of the Fund. Keep
this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares and Class F Shares dated May 31, 1996,
with the Securities and Exchange Commission. The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-245-4770. To obtain other
information or make inquiries about the Fund, contact your financial
institution.

TABLE OF CONTENTS

Summary of Fund Expenses--

Class A Shares.............................................................. 1

Summary of Fund Expenses--

Class B Shares.............................................................. 2

Summary of Fund Expenses--

Class C Shares.............................................................. 3

Financial Highlights--Class A Shares.......................................... 4

Financial Highlights--Class B Shares.......................................... 5

Financial Highlights--Class C Shares.......................................... 6

General Information........................................................... 7

Investment Information........................................................ 7
Investment Objective........................................................ 7
Investment Policies......................................................... 7
Investment Limitations...................................................... 9

Net Asset Value...............................................................10

Investing in the Fund.........................................................10

How to Purchase Shares........................................................11
Investing in Class A Shares.................................................11
Investing in Class B Shares.................................................14
Investing in Class C Shares.................................................14
Special Purchase Features...................................................15

Exchange Privilege............................................................16

How to Redeem Shares..........................................................17
Special Redemption Features.................................................18
Contingent Deferred Sales Charge............................................19
Elimination of Contingent Deferred
Sales Charge.............................................................20

Account and Share Information.................................................21
Fund Information..............................................................22
Management of the Fund......................................................22
Distribution of Shares......................................................23
Administration of the Fund..................................................24
Brokerage Transactions......................................................25

Shareholder Information.......................................................26
Voting Rights...............................................................26

Tax Information...............................................................26
Federal Income Tax..........................................................26
State and Local Taxes.......................................................26

Performance Information.......................................................27

Other Classes of Shares.......................................................27

Addresses.....................................................................28

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee.................................................................................................. 0.65%
12b-1 Fee....................................................................................................... None
Total Other Expenses............................................................................................ 0.51%
Shareholder Services Fee (after waiver) (2)..................................................... 0.18%
Total Operating Expenses (3).......................................................................... 1.16%
</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 1.23% absent the voluntary
waiver of a portion of the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class A Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period............................. $71 $90 $115 $188
You would pay the following expenses on the same investment, assuming no
redemption................................................................ $66 $90 $115 $188
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

SUMMARY OF FUND EXPENSES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
<TABLE>
<S> <C> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)......................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)...................................................... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................... 0.65%
12b-1 Fee........................................................................................................ 0.75%
Total Other Expenses............................................................................................. 0.53%
Shareholder Services Fee (after waiver) (2)....................................................... 0.20%
Total Class B Shares Operating Expenses (3)(4).......................................................... 1.93%
</TABLE>

(1) The contingent deferred sales charge is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge").

(2) The maximum shareholder services fee is 0.25%.

(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(4) The total operating expenses would have been 1.98% absent the voluntary
waiver of a portion of the shareholder service fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class B Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.

Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period...................................................... $76 $104 $127 $205
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $20 $ 61 $104 $205
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

SUMMARY OF FUND EXPENSES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
<TABLE>
<S> <C> <C>
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)......................... None
Contingent Deferred Sales Charge (as a percentage of original
price or redemption proceeds, as applicable) (1)............................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................... 0.65%
12b-1 Fee........................................................................................................ 0.75%
Total Other Expenses............................................................................................. 0.56%
Shareholder Services Fee (after waiver) (2)....................................................... 0.23%
Total Operating Expenses (3)............................................................................ 1.96%
</TABLE>

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within one
year of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge".

(2) ]The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 1.98% absent the voluntary
waiver of a portion of the shareholder service fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class C Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.

Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period...................................................... $30 $62 $106 $229
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $20 $62 $106 $229
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS--CLASS A SHARES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated May 15, 1996, on the Fund's
financial statements for the year ended March 31, 1996, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.66 $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.22 0.25 0.23 0.29 0.29 0.37 0.55 0.50
- -------------------------------------
Net realized and unrealized gain
(loss) on investments 4.70 1.42 0.18 2.05 1.34 1.28 0.36 1.08
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 4.92 1.67 0.41 2.34 1.63 1.65 0.91 1.58
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Distributions from net investment
income (0.17) (0.24) (0.24) (0.28) (0.28) (0.38) (0.56) (0.50)
- -------------------------------------
Distributions from net realized gain
on investment transactions (0.63) (0.35) (0.49) (1.04) (0.65) (0.30) (1.18) (0.59)
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.80) (0.59) (0.73) (1.32) (0.93) (0.68) (1.74) (1.09)
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 19.78 $ 15.66 $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 32.00% 11.87% 2.76% 18.31% 12.91% 14.17% 7.13% 13.23%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 1.16% 1.23% 1.18% 1.13% 1.02% 1.02% 1.01% 1.01%
- -------------------------------------
Net investment income 1.07% 1.71% 1.48% 2.07% 2.12% 3.06% 4.23% 3.85%
- -------------------------------------
Expense waiver/reimbursement (b) 0.07% -- -- 0.06% 0.16% 0.30% 0.35% 0.12%
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000
omitted) $455,867 $268,470 $226,857 $202,866 $171,210 $149,360 $147,235 $149,049
- -------------------------------------
Portfolio turnover 46% 34% 27% 39% 67% 57% 50% 27%
- -------------------------------------

<CAPTION>
<S> <C> <C>
1988 1987
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.21 $ 13.64
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.45 0.46
- -------------------------------------
Net realized and unrealized gain
(loss) on investments (1.21) 1.81
- ------------------------------------- --------- ---------
Total from investment operations (0.76) 2.27
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Distributions from net investment
income (0.43) (0.47)
- -------------------------------------
Distributions from net realized gain
on investment transactions (0.47) (1.23)
- ------------------------------------- --------- ---------
Total distributions (0.90) (1.70)
- ------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.55 $ 14.21
- ------------------------------------- --------- ---------
TOTAL RETURN (A) (5.32%) 18.38%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 1.00% 1.00%
- -------------------------------------
Net investment income 3.35% 3.44%
- -------------------------------------
Expense waiver/reimbursement (b) 0.11% 0.12%
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000
omitted) $158,818 $157,999
- -------------------------------------
Portfolio turnover 65% 28%
- -------------------------------------
</TABLE>

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1996, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS B SHARES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated May 15, 1996, on the Fund's
financial statements for the year ended March 31, 1996, and on the following
table for the period presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
<S> <C> <C>
1996 1995(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.67 $ 14.97
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.10 0.13
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 4.70 0.92
- -------------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 4.80 1.05
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Distributions from net investment income (0.05) (0.12)
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain on investment transactions (0.63) (0.23)
- -------------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.68) (0.35)
- -------------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 19.79 $ 15.67
- -------------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 31.10% 7.28%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.93% 1.95%*
- --------------------------------------------------------------------------------------------------
Net investment income 0.32% 1.09%*
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.05% 0.12%*
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $261,024 $46,671
- --------------------------------------------------------------------------------------------------
Portfolio turnover 46% 34 %
- --------------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from July 25, 1994 (date of initial
public investment) to March 31, 1995.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1996, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS C SHARES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated May 15, 1996, on the Fund's
financial statements for the year ended March 31, 1996, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C>
1996 1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.66 $ 14.55 $ 14.70
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.05 0.14 0.12
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 4.75 1.45 0.35
- ---------------------------------------------------------------------------------------- --------- --------- -----------
Total from investment operations 4.80 1.59 0.47
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Distributions from net investment income (0.03) (0.13) (0.13)
- ----------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.63) (0.35) (0.49)
- ---------------------------------------------------------------------------------------- --------- --------- -----------
Total distributions (0.66) (0.48) (0.62)
- ---------------------------------------------------------------------------------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 19.80 $ 15.66 $ 14.55
- ---------------------------------------------------------------------------------------- --------- --------- -----------
TOTAL RETURN (B) 31.14% 11.23% 3.16%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.96% 2.04% 2.11%*
- ----------------------------------------------------------------------------------------
Net investment income 0.27% 0.91% 0.71%*
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.02% -- --
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $44,434 $20,555 $11,895
- ----------------------------------------------------------------------------------------
Portfolio turnover 46% 34% 27%
- ----------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 21, 1993 (date of initial
public investment) to March 31, 1994.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1996, which can be obtained free of charge.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. At a meeting of the Board of Directors ("Directors") held on February 26,
1996, the Directors approved an amendment to the Articles of Incorporation to
change the name of American Leaders Fund, Inc. to Federated American Leaders
Fund, Inc. The Articles of Incorporation permit the Fund to offer separate
series of shares representing interests in separate portfolios of securities. As
of the date of this prospectus, the Directors have established four classes of
shares for the Fund, known as Class A Shares, Class B Shares, Class C Shares and
Class F Shares. This prospectus relates only to the Class A Shares, Class B
Shares and Class C Shares of the Fund (individually and collectively as the
context requires, "Shares").

Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. The minimum
initial investment for Class A Shares is $500. The minimum initial investment
for Class B Shares and Class C Shares is $1500. However, the minimum initial
investment for a retirement account in any class is $50. Subsequent investments
in any class must be in amounts of at least $100, except for retirement plans
which must be in amounts of at least $50.

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Fund invests primarily in securities of companies selected from "The Leaders
List" by the Fund's investment adviser on the basis of traditional fundamental
research techniques and standards. The securities in which the Fund invests
include, but are not limited to:

common stocks;

preferred stocks;

domestic issues of corporate debt obligations rated, at the time of purchase,
"Baa" or better

warrants.

The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

THE LEADERS LIST

"The Leaders List" is a trade name which represents a list of 100 blue chip
companies selected by the Fund's investment adviser principally on the basis of
fundamental research techniques and standards. Shareholders can obtain a copy of
"The Leaders List" by contacting the Fund. In the opinion of the investment
adviser, securities of these companies represent diversified and highly
marketable investments. The list is subject to continuous review and
modification. A number of standards and fundamental research factors are used in
determining "The Leaders List." "The Leaders List" includes leading companies in
their industries determined in terms of sales, earnings, and/or market
capitalization.

REPURCHASE AGREEMENTS

ILLIQUID SECURITIES

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities on a short-term or a long-term basis up to one-third the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Directors and will receive
collateral equal to at least 100% of the value of the securities loaned.

There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

PORTFOLIO TURNOVER

INVESTMENT LIMITATIONS

The Fund will not:

invest more than 5% of its total assets in securities of one issuer (except
U.S. government securities) or purchase more than 10% of any class of voting
securities of any one issuer;

invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or

purchase restricted securities if immediately thereafter more than 15% of the
net assets of the Fund would be invested in such securities.

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.

INVESTING IN THE FUND

The Fund offers investors three classes of Shares that carry sales charges and
contingent deferred sales charges in different forms and amounts and which bear
different levels of expenses:

CLASS A SHARES

An investor who purchases Class A Shares pays a maximum sales charge of 5.50% at
the time of purchase. As a result, Class A Shares are not subject to any charges
when they are redeemed (except for special programs offered under "Purchases
with Proceeds From Redemptions of Unaffiliated Investment Companies.") Certain
purchases of Class A Shares qualify for reduced sales charges. See "Reducing the
Sales Charge--Class A Shares." Class A Shares have no conversion feature.

CLASS B SHARES

Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares will automatically convert into Class A
Shares, based on relative net asset value, on or around the fifteenth of the
month eight full years after the purchase date. Class B Shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made, but (until conversion) will have a higher expense
ratio and pay lower dividends than Class A Shares due to the 12b-1 fee.

CLASS C SHARES

Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to their 12b-1 fee. Class C Shares have no conversion feature.

HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. The minimum initial and subsequent investment for retirement
plans is only $50. (Financial institutions may impose different minimum
investment requirements on their customers.)

In connection with any sale, Federated Securities Corp., may from time to time,
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

INVESTING IN CLASS A SHARES

Class A Shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES DEALER
SALES CHARGE CHARGE CONCESSION
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF PUBLIC OF NET OF PUBLIC
AMOUNT OF OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less
than $100,000 4.50% 4.71% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.80%
$1 million or
greater 0.00% 0.00% 0.25%*
</TABLE>

*See sub-section entitled "Dealer Concession."

No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Class A Shares through a trust department, investment
adviser, or other financial intermediary may be charged a service or other fee
by the financial intermediary. Additionally, no sales charge is imposed on
shareholders designated as Liberty Life Members or on Class A Shares purchased
through "wrap accounts" or similar programs, under which clients pay a fee for
services.

DEALER CONCESSION

For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor, may offer
to pay dealers up to 100% of the sales charge retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end.

REDUCING OR ELIMINATING
THE SALES CHARGE

The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:

quantity discounts and accumulated purchases;

concurrent purchases;

signing a 13-month letter of intent;

using the reinvestment privilege; or

purchases with proceeds from redemptions of unaffiliated investment company
shares.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table above, larger purchases reduce the sales charge paid. The
Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge. In addition, the sales charge, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary for a single
trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.

CONCURRENT PURCHASES

LETTER OF INTENT

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

REINVESTMENT PRIVILEGE

If Class A Shares in the Fund have been redeemed, the shareholder has the
privilege, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems his Class A Shares in the Fund, there may be tax
consequences.

PURCHASES WITH PROCEEDS FROM
REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES

Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or sold with a sales charge or commission
and were not distributed by Federated Securities Corp. The purchase must be made
within 60 days of the redemption, and Federated Securities Corp. must be
notified by the investor in writing, or by his financial institution, at the
time the purchase is made. From time to time, the Fund may offer dealers a
payment of .50 of 1.00% for Shares purchased under this program. If Shares are
purchased in this manner, redemptions of these Shares will be subject to a
contingent deferred sales charge for one year from the date of purchase.
Shareholders will be notified prior to the implementation of any special
offering as described above.

INVESTING IN CLASS B SHARES

Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales
Charge--Class B Shares," a contingent deferred sales charge may be applied by
the distributor at the time Class B Shares are redeemed.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and will no longer be subject to a fee under the Fund's Distribution Plan
(see "Distribution of Shares"). Such conversion will be on the basis of the
relative net asset values per Share, without the imposition of any sales charge,
fee or other charge. Class B Shares acquired by exchange from Class B Shares of
another Federated Fund will convert into Class A Shares based on the time of the
initial purchase. For purposes of conversion to Class A Shares, Shares purchased
through the reinvestment of dividends and distributions paid on Class B Shares
will be considered to be held in a separate sub-account. Each time any Class B
Shares in the shareholder's account (other than those in the sub-account)
convert to Class A Shares, an equal pro rata portion of the Class B Shares in
the sub-account will also convert to Class A Shares. The conversion of Class B
Shares to Class A Shares is subject to the continuing availability of a ruling
from the Internal Revenue Service or an opinion of counsel that such conversions
will not constitute taxable events for federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the conversion of
Class B Shares to Class A Shares will not occur if such ruling or opinion is not
available. In such event, Class B Shares would continue to be subject to higher
expenses than Class A Shares for an indefinite period.

Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.

INVESTING IN CLASS C SHARES

Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on assets
redeemed within the first full 12 months following purchase. For a complete
description of this charge see "Contingent Deferred Sales Charge--Class C
Shares."

PURCHASING SHARES THROUGH A
FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when payment is converted into federal funds. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services.

The financial institution which maintains investor accounts in Class B Shares or
Class C Shares with the Fund must do so on a fully disclosed basis unless it
accounts for share ownership periods used in calculating the contingent
deferred sales charge (see "Contingent Deferred Sales Charge"). In addition,
advance payments made to financial institutions may be subject to reclaim by
the distributor for accounts transferred to financial institutions which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.

PURCHASING SHARES BY WIRE

PURCHASING SHARES BY CHECK

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales charge, if applicable. Shareholders should contact their financial
institution or the Fund to participate in this program.

RETIREMENT PLANS

Fund Shares can be purchased as an investment for retirement plans or IRA
accounts. For further details, contact the Fund and consult a tax adviser.

EXCHANGE PRIVILEGE

CLASS A SHARES

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for Class B Shares
of other Federated Funds. (Not all Federated Funds currently offer Class B
Shares. Contact your financial institution regarding the availability of Class B
Shares of the Federated Funds). Exchanges are made at net asset value without
being assessed a contingent deferred sales charge on the exchanged Shares. To
the extent that a shareholder exchanges Shares for Class B Shares of other
Federated Funds, the time for which the exchanged-for Shares are to be held will
be added to the time for which exchanged-from Shares were held for purposes of
satisfying the applicable holding period.

CLASS C SHARES

Class C shareholders may exchange all or some of their Shares for Class C Shares
of other Federated Funds at net asset value without a contingent deferred sales
charge. (Not all Federated Funds currently offer Class C Shares. Contact your
financial institution regarding the availability of Class C Shares of the
Federated Funds.) To the extent that a shareholder exchanges Shares for Class C
Shares of other Federated Funds, the time for which the exchanged-for Shares are
to be held will be added to the time for which exchanged-from Shares were held
for purposes of satisfying the applicable holding period. For more information,
see "Contingent Deferred Sales Charge."

REQUIREMENTS FOR EXCHANGE

This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE

TELEPHONE INSTRUCTIONS

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600, and deposited to the shareholder's account before
being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the Fund before that time for Shares
to be exchanged the same day. Shareholders exchanging into a Fund will begin
receiving dividends the following business day. This privilege may be modified
or terminated at any time.

HOW TO REDEEM SHARES

REDEEMING SHARES THROUGH YOUR
FINANCIAL INSTITUTION

Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less any
applicable contingent deferred sales charge next determined after the Fund
receives the redemption request from the financial institution. Redemption
requests through a registered broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to be redeemed at that
day's net asset value. Redemption requests through other financial institutions
(such as banks) must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp.

Proceeds will be mailed in the form of a check to the shareholder's address of
record or wire-transferred to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. The minimum amount for a
wire transfer is $1,000. Proceeds from redeemed Shares purchased by check or
through ACH will not be wired until that method of payment has cleared. Proceeds
from redemption requests received on holidays when wire transfers are restricted
will be wired the following business day. Questions about telephone redemptions
on days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, Fund Name, Fund Class, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the Shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after receipt of a proper written redemption request. Dividends are
paid up to and including the day that a redemption request is processed.

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account value
of at least $10,000. A shareholder may apply for participation in this program
through his financial institution. Due to the fact that Class A Shares are sold
with a sales charge, it is not advisable for shareholders to continue to
purchase Class A Shares while participating in this program. A contingent
deferred sales charge may be imposed on Class B and C Shares.

CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

CLASS A SHARES

Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of Shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of .50 of 1.00% for
redemptions made within one full year of purchase. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.

CLASS B SHARES

Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
</TABLE>

CLASS C SHARES

Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor of 1.00%. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.

CLASS A SHARES, CLASS B SHARES,
AND CLASS C SHARES

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than six
full years from the date of purchase with respect to Class B Shares and one full
year from the date of purchase with respect to Class C Shares and applicable
Class A Shares. Redemptions will be processed in a manner intended to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge. In computing the amount of the applicable contingent deferred
sales charge, redemptions are deemed to have occurred in the following order:
(1) Shares acquired through the reinvestment of dividends and long-term
capital gains; (2) Shares held for more than six full years from the date of
purchase with respect to Class B Shares and one full year from the date of
purchase with respect to Class C Shares and applicable Class A Shares; (3)
Shares held for fewer than six years with respect to Class B Shares and for
less than one full year from the date of purchase with respect to Class C
Shares and applicable Class A Shares on a first-in, first-out basis.
A contingent deferred sales charge is not assessed in connection with an
exchange of Fund Shares for Shares of other Federated Funds in the same class
(see "Exchange Privilege"). Any contingent deferred sales charge imposed at
the time the exchanged-for Shares are redeemed is calculated as if the
shareholder had held the Shares from the date on which he became a shareholder
of the exchanged-from Shares. Moreover, the contingent deferred sales charge
will be eliminated with respect to certain redemptions (see "Elimination of
Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other retirement plan to a shareholder who has
attained the age of 70-1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on redemptions
of Shares held by Directors, employees and sales representatives of the Fund,
the distributor, or affiliates of the Fund or distributor, and their immediate
family members; employees of any financial institution that sells Shares of the
Fund pursuant to a sales agreement with the distributor; and spouses and
children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940 or retirement plans where
the third party administrator has entered into certain arrangements with
Federated Securities Corp. or its affiliates, or any other financial
institution, to the extent that no payments were advanced for purchases made
through such entities. The Directors reserve the right to discontinue
elimination of the contingent deferred sales charge. Shareholders will be
notified of such elimination. Any Shares purchased prior to the termination of
such waiver would have the contingent deferred sales charge eliminated as
provided in the Fund's prospectus at the time of the purchase of the Shares. If
a shareholder making a redemption qualifies for an elimination of the contingent
deferred sales charge, the shareholder must notify Federated Securities Corp. or
the transfer agent in writing that he is entitled to such elimination.

ACCOUNT AND SHARE
INFORMATION
CERTIFICATES AND CONFIRMATIONS

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.

DIVIDENDS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales charge, unless shareholders request cash
payments on the new account form or by contacting the transfer agent. All
shareholders on the record date are entitled to the dividend. If Shares are
redeemed or exchanged prior to the record date or purchased after the record
date, those Shares are not entitled to that quarter's dividend.

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the Class A Shares required
minimum value of $500 or the required minimum value of $1,500 for Class B Shares
and Class C Shares. This requirement does not apply, however, if the balance
falls below the required minimum value because of changes in the net asset value
of the respective Share class. Before Shares are redeemed to close an account,
the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS
The Fund is managed by a Board of Directors. The Directors are responsible for
managing the Fund's business affairs and for exercising all the Fund's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Directors handles the Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to .55 of 1% of the
Fund's average daily net assets, plus 4.50% of the Fund's gross income
(excluding any capital gains or losses). Gross income includes, in general,
discount earned on U.S. Treasury bills and agency discount notes, interest
earned on all interest-bearing obligations, and dividend income recorded on the
ex-dividend date but does not include capital gains or losses or reduction for
expenses. The Adviser may voluntarily choose to waive a portion of its fee or
reimburse the Funds for certain operating expenses. The Adviser can terminate
this voluntary reimbursement of expenses at any time at its sole discretion. The
Adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states.

ADVISER'S BACKGROUND

DISTRIBUTION OF SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

The distributor may offer to pay financial institutions an amount up to 1% of
the net asset value of Class C Shares purchased by their clients or customers at
the time of purchase. These payments will be made directly by the distributor
from its assets, and will not be made from assets of the Fund. Financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.

The distributor will pay dealers an amount equal to 5.50% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.

DISTRIBUTION PLAN (CLASS B SHARES
AND CLASS C SHARES ONLY) AND
SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), Class B Shares and Class C Shares will pay a
fee to the distributor in an amount computed at an annual rate of .75% of the
average daily net assets of each class of Shares to finance any activity which
is principally intended to result in the sale of Shares subject to the
Distribution Plan. For Class C Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers. With respect to Class
B Shares, because distribution fees to be paid by the Fund to the distributor
may not exceed an annual rate of .75% of each class of Shares' average daily net
assets, it will take the distributor a number of years to recoup the expenses it
has incurred for its sales services and distribution and distribution-related
support services pursuant to the Distribution Plan.

The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25 of 1% of the average daily net asset value
of Class A Shares, Class B Shares, and Class C Shares to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
in addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Adviser or its
affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by affiliates of Federated Investors as
specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million
</TABLE>

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. In working with dealers, 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. 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 Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.

SHAREHOLDER INFORMATION

VOTING RIGHTS

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

As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for each class
of Shares including Class F Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in each class of Shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.

The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each class of Shares over a thirty-day period by the maximum offering price
per Share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by each class of Shares, and therefore, may not correlate
to the dividends or other distributions paid to shareholders.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Class F Shares.

From time to time, advertisements for Class A Shares, Class B Shares, Class C
Shares and Class F Shares of the Fund may refer to ratings, rankings, and other
information in certain financial publications and/or compare the performance of
Class A Shares, Class B Shares, Class C Shares and Class F Shares to certain
indices.

OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Class F Shares. Class F
Shares are sold primarily to customers of financial institutions subject to a
front-end sales charge, a contingent deferred sales charge, a Shareholder
Services Agreement, and a minimum initial investment of $1,500, unless the
investment is in a retirement account, in which the minimum investment is $50.

To obtain more information and a prospectus for Class F Shares, investors may
call 1-800-245-5051 or contact their financial institution.

ADDRESSES

- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated American Leaders Fund, Inc.
Class A Shares Federated Investors Tower
Class B Shares Pittsburgh, PA 15222-3779
Class C Shares
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Advisers Federated Investors Tower
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 Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

FEDERATED AMERICAN
LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)

CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company

May 31, 1996

027128107
027128404
027128206

G01085-01 (5/96)
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)

PROSPECTUS

The Class F Shares of Federated American Leaders Fund, Inc. (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) investing in common stocks and other securities of high quality
companies to achieve growth of capital and income.

This prospectus contains the information you should read and know before you
invest in Class F Shares of the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares and Class F Shares dated May 31, 1996,
with the Securities and Exchange Commission. The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-245-5051. To obtain other
information, or make inquiries about the Fund contact your financial
institution.

Prospectus dated May 31, 1996

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Financial Highlights...........................................................2

General Information............................................................3

Net Asset Value................................................................5

Investing in Class F Shares....................................................6
Share Purchases..............................................................6
Minimum Investment Required..................................................7
What Shares Cost.............................................................7

Eliminating the Sales Charge.................................................7

Systematic Investment Program................................................9
Exchange Privileges..........................................................9
Certificates and Confirmations..............................................10
Dividends...................................................................10
Capital Gains...............................................................10

Redeeming Class F Shares......................................................10
Through a Financial Institution.............................................10
Redeeming Shares By Telephone...............................................11
Redeeming Shares By Mail....................................................11
Contingent Deferred Sales Charge............................................12
Systematic Withdrawal Program...............................................12
Accounts with Low Balances..................................................13

Fund Information..............................................................13
Management of the Fund......................................................13
Distribution of Class F Shares..............................................14
Administration of the Fund..................................................15
Brokerage Transactions......................................................16

Shareholder Information.......................................................16
Voting Rights...............................................................16

Tax Information...............................................................17
Federal Income Tax..........................................................17
State and Local Taxes.......................................................17

Performance Information.......................................................17

Other Classes of Shares.......................................................18

Addresses.....................................................................19

SUMMARY OF FUND EXPENSES
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
<TABLE>
<S> <C> <C>
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................................................ 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1).................................................. 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................... None
Exchange Fee................................................................................................. None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee............................................................................................... 0.65%
12b-1 Fee.................................................................................................... None
Total Other Expenses......................................................................................... 0.56%
Shareholder Services Fee (after waiver) (2).................................................. 0.23%
Total Operating Expenses (3)....................................................................... 1.21%
</TABLE>

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
four years of their purchase dates. For a more complete description, see
"Contingent Deferred Sales Charge."

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 1.23% absent the voluntary
waiver of a portion of the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class F Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class F Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period............................. $32 $59 $76 $155
You would pay the following expenses on the same investment, assuming no
redemption................................................................ $22 $48 $76 $155
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS--CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated May 15, 1996, on the Fund's
financial statements for the year ended March 31, 1996, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C>
1996 1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.66 $ 14.58 $ 14.95
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.19 0.25 0.16
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 4.72 1.42 (0.20)
- --------------------------------------------------------------------------------------- --------- ----------- -----------
Total from investment operations 4.91 1.67 (0.04)
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
Distributions from net investment income (0.16) (0.24) (0.16)
- ---------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.63) (0.35) (0.17)
- --------------------------------------------------------------------------------------- --------- ----------- -----------
Total distributions (0.79) (0.59) (0.33)
- --------------------------------------------------------------------------------------- --------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 19.78 $ 15.66 $ 14.58
- --------------------------------------------------------------------------------------- --------- ----------- -----------
TOTAL RETURN (B) 31.95% 11.80% (0.30%)
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 1.21% 1.27% 1.35%*
- ---------------------------------------------------------------------------------------
Net investment income 1.02% 1.69% 1.51%*
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.02% -- --
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $55,329 $28,495 $15,282
- ---------------------------------------------------------------------------------------
Portfolio turnover 46% 34% 27%
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from July 27, 1993 (date of initial
public investment) to March 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1996, which can be obtained free of charge.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. At a meeting of the Board of Directors ("Directors") held on February 26,
1996, the Directors approved an amendment to the Articles of Incorporation to
change the name of American Leaders Fund, Inc. to Federated American Leaders
Fund, Inc. and to change the name of Fortress Shares to Class F Shares. The
Articles of Incorporation permit the Fund to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. With respect
to this Fund, as of the date of this prospectus, the Directors have established
four classes of shares, known as Class A Shares, Class B Shares, Class C Shares
and Class F Shares. This prospectus relates only to the Class F Shares ("Shares"
or "Class F Shares," as the context requires) of the Fund.

Class F Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.

Shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value. However, a contingent deferred sales charge is
imposed on Shares, other than Shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase dates.

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

common stocks;

preferred stocks; and

domestic issues of corporate debt obligations rated, at the time of purchase,
"Baa" or better

warrants.

The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

THE LEADERS LIST

REPURCHASE AGREEMENTS

ILLIQUID SECURITIES

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities on a short-term or a long-term basis up to one-third the value or its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Fund's Directors and will
receive collateral equal to at least 100% of the value of the securities loaned.

There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in
the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

PORTFOLIO TURNOVER

INVESTMENT LIMITATIONS

The Fund will not:

invest more than 5% of its total assets in securities of one issuer (except
U.S. government securities) or purchase more than 10% of any class of voting
securities of any one issuer;

invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or

purchase restricted securities if immediately thereafter more than 15% of the
net assets of the Fund would be invested in such securities.

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class F Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class F Shares in the liabilities of the Fund and those attributable to the
Class F Shares, and dividing the remainder by the total number of Class F Shares
outstanding. The net asset value for Class F Shares may differ from that of
Class A Shares, Class B Shares, and Class C Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

INVESTING IN CLASS F SHARES

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased as described below, either through a financial institution (such as
a bank or broker/dealer which has a sales agreement with the distributor) or by
wire or by check directly to the Fund, with a minimum initial investment of
$1,500. Additional investments can be made for as little as $100. The minimum
initial and subsequent investment for retirement plans is only $50. (Financial
institutions may impose different minimum investment requirements on their
customers.)

THROUGH A FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders through a financial
institution are considered received when the Fund is notified of the purchase
order. Purchase orders through a registered broker/dealer must be received by
the broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker
to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased
at that day's price. Purchase orders through other financial institutions must
be received by the financial institution and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price. It
is the financial institution's responsibility to transmit orders promptly.
Financial institutions may charge additional fees for their services.

The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Supplemental Payments to Financial Institutions").

DIRECTLY BY MAIL

To purchase Shares by mail directly from Federated Securities Corp.:

complete and sign the new account form available from the Fund;

enclose a check made payable to Federated American Leaders Fund, Inc.--Class F
Shares; and

mail both to Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600.

Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company, ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.

DIRECTLY BY WIRE

Once an account has been established, Shares may be purchased by Federal
Reserve wire by calling the Fund. All information needed will be taken over
the telephone, and the order is considered received when State Street Bank
receives payment by wire. Federal funds should be wired as follows: Federated
Shareholder Services Company, c/o State Street Bank and Trust Company, Boston,
MA; Attention: EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund
Number); Account Number; Trade Date and Order Number; Group Number or Dealer
Number; Nominee or Institution Name; and ABA Number 011000028. Shares cannot
be purchased by wire on holidays when wire transfers are restricted. Questions
on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $1,500, except for an IRA account,
which requires a minimum initial investment of $50. Subsequent investments must
be in amounts of at least $100, except for an IRA account, which must be in
amounts of at least $50.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales charge for purchases of $1 million or
more. In addition, no sales charge is imposed for Shares purchased through bank
trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Advisers, and
Federated Securities Corp., or their affiliates, and their immediate family
members, or any investment dealer who has a sales agreement with Federated
Securities Corp., their spouses and children under age 21, or any trusts or
pension or profit-sharing plans for these persons, or retirement plans where the
third party administrator has entered into certain arrangements with Federated
Securities Corp. or its affiliates. Unaffiliated institutions through whom
Shares are purchased may charge fees for services provided which may be related
to the ownership of Fund Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to services provided, the fees charged for these services, and any restrictions
and limitations imposed.

Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.

DEALER CONCESSION

For sales of Shares, broker/dealers will normally receive 100% of the applicable
sales charge. Any portion of the sales charge which is not paid to a
broker/dealer will be retained by the distributor. However, from time to time,
and at the sole discretion of the distributor, all or part of that portion may
be paid to a dealer. The sales charge for Shares sold other than through
registered broker/dealers will be retained by Federated Securities Corp.
Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of Shares.

ELIMINATING THE SALES CHARGE

The sales charge can be eliminated on the purchase of Shares through:
quantity discounts and accumulated purchases;

signing a 13-month letter of intent;

using the reinvestment privilege; or

concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

There is no sales charge for purchases of $1 million or more. The Fund will
combine purchases made on the same day by the investor, his spouse, and his
children under age 21 when it calculates the sales charge. In addition, the
sales charge, if applicable, is reduced for purchases made at one time by a
trustee or fiduciary for a single trust estate or a single fiduciary account.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
sales charge on the additional purchase. The Fund will also combine purchases
for the purpose of reducing the contingent deferred sales charge imposed on some
Share redemptions. For example, if a shareholder already owns Shares having
current value at the public offering price of $1 million and purchases an
additional $1 million at the current public offering price, the applicable
contingent deferred sales charge would be reduced to .50% of those additional
Shares. For more information on the levels of contingent deferred sales charges
and holding periods, see the section entitled "Contingent Deferred Sales
Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by the shareholder's financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or reduce the contingent
deferred sales charge after it confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $1 million of Class F Shares over
the next 13 months, the sales charge may be reduced by signing a letter of
intent to that effect. This letter of intent includes a provision for a sales
charge elimination depending on the amount actually purchased within the
13-month period and a provision for the Fund's custodian to hold 1.00% of the
total amount intended to be purchased in escrow (in Shares) until such purchase
is completed.

The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more of Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales charge.

This letter of intent also includes a provision for reductions in the contingent
deferred sales charge and holding period depending on the amount actually
purchased within the 13-month period. For more information on the various levels
of contingent deferred sales charges and holding periods, see the section
entitled "Contingent Deferred Sales Charge."

This letter of intent will not obligate the shareholder to purchase Class F
Shares. The letter may be dated as of a prior date to include any purchases made
within the past 90 days (purchases within the prior 90 days may be used to
fulfill the requirements of the letter of intent; however, the sales charge on
such purchases will not be adjusted to reflect a lower sales charge).

REINVESTMENT PRIVILEGE

If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds at the next-determined net asset value
without any sales charge. Federated Securities Corp. must be notified by the
shareholder in writing or by his financial institution of the reinvestment in
order to receive this elimination of the sales load. If the shareholder redeems
his Shares, there may be tax consequences.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge elimination, a shareholder has the
privilege of combining concurrent purchases of Class F Shares of two or more
funds for which affiliates of Federated Investors serve as investment adviser or
prinicipal underwriter (the "Federated Funds"), the purchase prices of which
include a sales charge. For example, if a shareholder concurrently invested
$400,000 in Class F Shares of one of the other Federated Funds and $600,000 in
Shares, the sales charge would be eliminated. (Not all Federated Funds currently
offer Class F Shares. Contact your financial institution regarding the
availability of other Federated Class F Shares).

To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will eliminate the sales charge
after it confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund, plus
the 1.00% sales charge for purchases under $1 million. A shareholder may apply
for participation in this program through Federated Securities Corp. or his
financial institution.

EXCHANGE PRIVILEGES

Class F Shareholders may exchange all or some of their Shares, at net asset
value for Class F Shares of other Federated Funds. Exchanges are made at net
asset value without being assessed a contingent deferred sales charge on the
exchanged Shares. To the extent that a shareholder exchanges Shares for Class F
Shares of other Federated Funds, the time for which the exchanged-for Shares are
to be held will be added to the time for which exchanged-from Shares were held
for purposes of satisfying the applicable holding period.

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Shareholders who desire to automatically exchange Class F Shares
of a predetermined amount on a monthly, quarterly, or annual basis may take
advantage of a systematic exchange privilege.

Further information on these exchange privileges is available by calling
Federated Securities Corp. or the shareholder's financial institution. The
exchange privilege is available to shareholders residing in any state in which
the shares being acquired may be legally sold.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested on the application or by contacting Federated Shareholder Services
Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly statements are sent to report dividends paid during that
quarter.

DIVIDENDS

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
REDEEMING CLASS F SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
through a financial institution or directly from the Fund by written request.

THROUGH A FINANCIAL INSTITUTION

Shares of the Fund may be redeemed by calling your financial institution (such
as a bank or an investment dealer) to request the redemption. Shares will be
redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. Redemption requests through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. Redemption requests through other financial institutions (such as banks)
must be received by the financial institution and transmitted to the Fund before
4:00 p.m. (Eastern time) in order for Shares to be redeemed at that day's net
asset value. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The financial institution may charge customary fees and commissions for
this service. If, at any time, the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders will be promptly
notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept redemption
requests by telephone must first be completed. In the event of drastic economic
or market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such as
"Redeeming Shares by Mail," should be considered.

Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent instructions.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds will be mailed in the form of a check, to
the shareholder's address of record or by wire transfer to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. The minimum amount for a wire transfer is $1,000. Proceeds from redeemed
Shares purchased by check or through an Automated Clearing House will not be
wired until that method of payment has cleared. Proceeds from redemption
requests received on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.

The written request should state: the Fund name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the Shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

CONTINGENT DEFERRED SALES CHARGE

Shareholders redeeming Class F Shares from their Fund account within certain
periods of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
price or the net asset value of the Shares redeemed as follows:
<TABLE>
<CAPTION>
Contingent
Deferred
Amount of Purchase Shares Held Sales Charge
<S> <C> <C>
4 years or
Up to $1,999,999 less 1%
2 years or
$2,000,000 to $4,999,999 less .50%
$5,000,000 or more 1 year or less .25%
</TABLE>

To the extent that a shareholder exchanges between or among Class F Shares in
other Federated Funds the time for which the exchanged-for Shares were held will
be added, or "tacked," to the time for which the exchanged-from Shares were held
for purposes of satisfying the one-year holding period.

In instances in which Shares have been acquired in exchange for Class F Shares
in other Federated Funds, (i) the purchase price is the price of the Shares when
originally purchased and (ii) the time period during which the Shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on Shares acquired through the reinvestment of
dividends or distributions of long-term capital gains. In computing the amount
of contingent deferred sales charge for accounts with Shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: 1) first of Shares acquired through the reinvestment of dividends and
long-term capital gains, 2) second of purchases of Shares occurring prior to the
number of years necessary to satisfy the applicable holding period, and 3)
finally of purchases of Shares occurring within the current holding period. For
accounts with Shares subject to multiple share holding periods, the redemption
sequence will be determined first, with reinvested dividends and long-term
capital gains, and second, on a first-in, first-out basis.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account after the beneficial owner
attains age 59-1/2; or (iii) from the death or disability of the beneficial
owner. The exemption from the contingent deferred sales charge for qualified
plans, an IRA, Keogh Plan, or a custodial account does not extend to account
transfers, rollovers, and other redemptions made for purposes of reinvestment.
Contingent deferred sales charges are not charged in connection with exchanges
of Shares for shares in other Federated Funds, or in connection with redemptions
by the Fund of accounts with low balances. Shares of the Fund originally
purchased through a bank trust department, investment adviser registered under
the Investment Advisers Act of 1940 or retirement plans where the third party
administrator has entered into certain arrangements with Federated Securities
Corp. or its affiliates, are not subject to the contingent deferred sales
charge, to the extent that no payment was advanced for purchases made by such
entities.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal
amount is $100. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to
Shares, and the fluctuation of the net asset value of Shares redeemed under
this program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund.
To be eligible to participate in this program, a shareholder must have
invested at least $10,000 in the Fund (at current offering price).

A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge and
contingent deferred sales charge, it is not advisable for shareholders to be
purchasing Shares while participating in this program.

A contingent deferred sales charge is charged for Shares redeemed through this
program within four years of their purchase dates.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000. This
requirement does not apply, however, if the balance falls below $1,000 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

INVESTMENT ADVISER

Investment decisions for the Fund are made by the Fund's investment adviser,
Federated Advisers (the "Adviser"), subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase and sale of portfolio instruments, for which
it receives an annual fee from the Fund.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to .55 of 1% of the
Fund's average daily net assets, plus 4.5% of the Fund's gross income (excluding
any capital gains or losses). Gross income includes, in general, discount earned
on U.S. Treasury bills and agency discount notes, interest earned on all
interest-bearing obligations, and dividend income recorded on the ex-dividend
date but does not include capital gains or losses or reduction for expenses. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse the
Funds for certain operating expenses. The Adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion. The Adviser has
also undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.

ADVISER'S BACKGROUND

Peter R. Anderson has been the Fund's portfolio manager since December 1989. Mr.
Anderson joined Federated Investors in 1972 as, and is presently, a Senior Vice
President of the Fund's investment adviser. Mr. Anderson is a Chartered
Financial Analyst and received his M.B.A. in Finance from the University of
Wisconsin.

DISTRIBUTION OF CLASS F SHARES

Federated Securities Corp. is the principal distributor for Class F Shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

SHAREHOLDER SERVICES

The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25 of 1% of the average daily net asset value of the
Fund on behalf of Class F Shares, to obtain certain personal services for
shareholders and to provide the maintenance of shareholder accounts
("shareholder services"). Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

The distributor will pay financial institutions, for distribution and/or
administrative services, an amount equal to 1.00% of the offering price of the
Shares acquired by their clients or customers on purchases up to $1,999,999,
.50% of the offering price on purchases of $2,000,000 to $4,999,999, and .25% of
the offering price on purchases of $5,000,000 or more. (This fee is in addition
to the 1.00% sales charge on purchases of less than $1 million.) The financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.

Furthermore, in addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder Services, from
their own accounts, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Adviser or its
affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

Each Share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All shares of each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only shares of that particular portfolio
or class are entitled to vote.
As a Maryland Corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.

TAX INFORMATION

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for Class F
Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in Class F Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yield of Class F Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
F Shares over a thirty-day period by the maximum offering price per share of
Class F Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Class F Shares, and therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The performance information reflects the effect of the maximum sales charge and
contingent deferred sales charges, which, if excluded, would increase the total
return and yield.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Class F Shares.

From time to time, advertisements for the Class A Shares, Class B Shares, Class
C Shares and Class F Shares of the Fund may refer to ratings, rankings, and
other information in certain financial publications and/or compare the
performance of Class A Shares, Class B Shares, Class C Shares and Class F Shares
to certain indices.

OTHER CLASSES OF SHARES
The Fund also offers other classes of shares called Class A Shares, Class B
Shares and Class C Shares which are all sold primarily to customers of financial
institutions subject to certain differences.

Class A Shares are sold subject to a front-end sales charge and a Shareholder
Services Agreement. Investments in Class A Shares are subject to a minimum
initial investment of $500, unless the investment is in a retirement account, in
which the minimum investment is $50.

Class A Shares, Class B Shares, Class C Shares, and Class F Shares are subject
to certain of the same expenses; however, the front-end sales charge for Class F
Shares is lower than that for Class A Shares. Expense differences between Class
A Shares, Class B Shares, Class C Shares and Class F Shares may affect the
performance of each class.

To obtain more information and a prospectus for Class A Shares, Class B Shares
and Class C Shares, investors may call 1-800-245-4770 or contact their financial
institution.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Federated American Leaders Fund, Inc.
Class F Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

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

FEDERATED AMERICAN
LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)

PROSPECTUS

An Open-End, Diversified
Management Investment Company

May 31, 1996

Cusip 027128305
8062808A-FS (5/96)

FEDERATED AMERICAN LEADERS FUND, INC.
(FORMERLY, AMERICAN LEADERS FUND, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus for Class A Shares, Class B Shares, and Class C Shares, the
prospectus for Class F Shares, and the stand-alone prospectus for Class
A Shares of Federated American Leaders Fund, Inc. (the "Fund") each
dated May 31, 1996. This Statement is not a prospectus itself. You may
request a copy of either prospectus or a paper copy of this Statement,
if you have received it electronically, free of charge by calling 1-
800-245-4770.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated May 31, 1996

Federated Securities Corp is the distributor of the Fund and is a
subsidiary of Federated Investors
CUSIP 027128107
CUSIP 027128404
CUSIP 027128206
CUSIP 027128305
8062808B (5/96)

GENERAL INFORMATION ABOUT THE FUND 4

INVESTMENT OBJECTIVE AND POLICIES 4

TYPES OF INVESTMENTS 4
LENDING OF PORTFOLIO SECURITIES 4
REPURCHASE AGREEMENTS 5
REVERSE REPURCHASE AGREEMENTS 5
PORTFOLIO TURNOVER 6
INVESTMENT LIMITATIONS 6

FEDERATED AMERICAN LEADERS FUND, INC. MANAGEMENT 10

FUND OWNERSHIP 19
DIRECTORS COMPENSATION 20
DIRECTOR LIABILITY 22
INVESTMENT ADVISORY SERVICES 22

ADVISER TO THE FUND 22
ADVISORY FEES 22
BROKERAGE TRANSACTIONS 23

OTHER SERVICES 24

FUND ADMINISTRATION 24
CUSTODIAN AND PORTFOLIO ACCOUNTANT 25
TRANSFER AGENT 25
INDEPENDENT PUBLIC ACCOUNTANTS 25
PURCHASING SHARES 26

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES 26

PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND
EMPLOYEES 27
EXCHANGING SECURITIES FOR FUND SHARES 28
DETERMINING NET ASSET VALUE 29

DETERMINING MARKET VALUE OF SECURITIES 29
EXCHANGE PRIVILEGE 30

REDUCED SALES CHARGE 30
REQUIREMENTS FOR EXCHANGE 30
TAX CONSEQUENCES 31
MAKING AN EXCHANGE 31
REDEEMING SHARES 32

REDEMPTION IN KIND 32
TAX STATUS 33

THE FUND'S TAX STATUS 33
SHAREHOLDERS' TAX STATUS 33
TOTAL RETURN 33

YIELD 35

PERFORMANCE COMPARISONS 35

ECONOMIC AND MARKET INFORMATION 38
ABOUT FEDERATED INVESTORS 38

MUTUAL FUND MARKET 39
INSTITUTIONAL CLIENTS 39
TRUST ORGANIZATIONS 39
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES 40

FINANCIAL STATEMENTS 40

APPENDIX 40

GENERAL INFORMATION ABOUT THE FUND

The Fund was incorporated under the laws of the State of Maryland on July
22, 1968. On April 20, 1993, the shareholders of the Fund voted to permit
the Fund to offer separate series and classes of Shares. At a meeting of
the Board of Directors (the "Directors") held on February 26, 1996, the
Directors approved an amendment to the Articles of Incorporation to change
the name of American Leaders Fund, Inc. to Federated American Leaders Fund,
Inc. and to change the name of Fortress Shares to Class F Shares.
Shares of the Fund are offered in four classes known as Class A Shares,
Class B Shares, Class C Shares and Class F Shares (individually and
collectively referred to as "Shares" as the context may require). This
Statement of Additional Information relates to all classes of Shares of the
Fund.
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The investment objective cannot be changed without
shareholder approval.
TYPES OF INVESTMENTS
The Fund invests primarily in common stocks, preferred stocks, corporate
bonds, notes, and warrants of companies selected from "The Leaders List."
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject

to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan. The
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institution's sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. The Fund or its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks or other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy,
pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to

another person, such as an institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable the
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not engage in short-term trading but may dispose of
securities held for a short period if, after examination of their value,
management believes such disposition to be advisable. In determining
whether or not to sell portfolio securities, consideration will be given
among other factors to the effect on shareholders of the resultant tax
liability. Nevertheless changes will be made whenever, in the judgment of
management, they will contribute to the attainment of the Fund's investment
objective, even though such changes may result in realization of capital
gains. For the fiscal years ended March 31, 1996 and 1995, the portfolio
turnover rates were 46% and 34%, respectively.
INVESTMENT LIMITATIONS

The Fund will not change any of the investment limitations described below
without approval of shareholders.

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin.
BORROWING MONEY
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets. In addition, the Fund
may enter into reverse repurchase agreements and otherwise borrow up
to one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. This latter practice is not for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or
disadvantageous.
Interest paid on borrowed funds will not be available for investment
and will reduce net income. The Fund will liquidate any such
borrowings as soon as possible and may not purchase any portfolio
securities while the borrowings are outstanding. However, during the
period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio
instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its securities.

DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of its total assets in the
securities of any one issuer, except U.S. government securities, and
will not purchase more than 10% of any class of voting securities of
any one issuer.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies,
except by purchase in the open market involving only customary
brokerage commissions or as part of a merger or consolidation.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in securities of issuers with a record of less than three years of
continuous operation, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if
the officers and Directors of the Fund or its investment adviser,
owning individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
UNDERWRITING
The Fund will not underwrite or engage in agency distribution of
securities, except as it may be deemed to be an underwriter, if it
purchases and sells restricted securities as permitted.
INVESTING IN COMMODITIES OR REAL ESTATE
The Fund will not invest in commodities, commodity contracts, or real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities.
(This shall not prevent the purchase or holding of bonds, debentures,

notes, certificates of indebtedness or other debt securities of an
issuer, repurchase agreements, or other transactions which are
permitted by the Fund's investment objective and policies or Articles
of Incorporation.)
ACQUIRING SECURITIES
The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund may invest in up
to 10% of the voting securities of any one issuer and may exercise its
voting powers consistent with the best interests of the Fund. In
addition, the Fund, other companies advised by the Fund's investment
adviser, and other affiliated companies may together buy and hold
substantial amounts of voting stock of a company and may vote together
in regard to such company's affairs. In some such cases, the Fund and
its affiliates might collectively be considered to be in control of
such company. In some cases, the Directors and other persons
associated with the Fund and its affiliates might possibly become
directors of companies in which the Fund holds stock.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of the value of its total
assets in any one industry.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase restricted securities if immediately
thereafter more than 15% of the net assets of the Fund, taken at
market value, would be invested in such securities. (In order to
comply with certain state requirements, the Fund will not invest more
than 5% of its total assets in restricted securities. If state

requirements change, this policy may be revised without notice to
shareholders.)
In addition, in order to comply with certain state restrictions, the Fund
will not invest in real estate limited partnerships or oil, gas, or other
mineral leases. Also, the Fund will not invest more than 5% of its net
assets in warrants. No more than 2% of the Fund's net assets, to be
included within the overall 5% limit on investments in warrants, may be
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange. If state requirements change, these restrictions
may be revised without notice to shareholders.
Except when borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
The Fund did not borrow money, invest in reverse repurchase agreements, or
purchase restricted securities in excess of 5% of the value of its total or
net assets during the last fiscal year and has no present intent to do so
in the coming fiscal year. Restricted securities are generally not
available from companies comprising "The Leader's List."

FEDERATED AMERICAN LEADERS FUND, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with Federated American Leaders Fund, Inc., and principal
occupations.

John F. Donahue@*

Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
President and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President and Director of the Company.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director

President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director or Trustee of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Director
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and

Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, President and
Director of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty

Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926

Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

John W. McGonigle
Federated Investors Tower

Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947

Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; Treasurer of some of the Funds.

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated ARMs Fund;
Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund
for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Master Trust;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;

Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Liquid Cash Trust;
Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.
As of May 7, 1996, no shareholder of record owned 5% or more of the
outstanding Class A Shares of the Fund:
As of May 7, 1996, no shareholder of record owned 5% or more of the
outstanding Class B Shares of the Fund:
As of May 7, 1996, the following shareholder of record owned 5% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierch Fenner &
Smith, Jacksonville, FL, owned approximately 882,896 Shares (37.11%).
As of May 7, 1996, the following shareholder of record owned 5% or more of
the outstanding Class F Shares of the Fund: Merrill Lynch Pierch Fenner &
Smith, Jacksonville, FL, owned approximately 755,567 Shares (25.56%).

DIRECTORS COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND* FROM FUND COMPLEX +

John F. Donahue, $ 0 $0 for the Fund and
President and Director 54 other investment companies in the Fund
Complex
Thomas G. Bigley,++ $1,401.95 $86,331 for the Fund and
Director 54 other investment companies in the Fund
Complex
John T. Conroy, Jr., $1,523.24 $115,760 for the Fund and
Director 54 other investment companies in the Fund
Complex
William J. Copeland, $1,523.24 $115,760 for the Fund and
Director 54 other investment companies in the Fund
Complex
J. Christopher Donahue, $ 0 $0 for the Fund and
Executive Vice President 16 other investment companies in the Fund
Complex
and Director

James E. Dowd, $1,523.24 $115,760 for the Fund and

Director 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr., $1,523.24 $115,760 for the Fund and
Director 54 other investment companies in the Fund
Complex
Peter E. Madden, $1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex
Gregor F. Meyer, $1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex
Wesley W. Posvar,$1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex
Marjorie P. Smuts, $1,401.95 $104,898 for the Fund and
Director 54 other investment companies in the Fund
Complex

* Information is furnished for the fiscal year ended March 31, 1996.
+ The information is provided for the last calendar year.

++ Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Director or Trustee on 15 additional Federated Funds.
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasence, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the "Adviser"). It is
a subsidiary of Federated Investors. All the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund or any 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.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the respective prospectuses. During the fiscal
years ended March 31, 1996, 1995, and 1994, the Adviser earned $3,637,755,
$2,010,685, and $1,549,057, respectively, which were reduced by $0, $0, and
$0, respectively, because of undertakings to limit the Fund's expenses.

STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of average
net assets, 2% per year of the next $70 million of average net assets,
and 1-1/2% per year of the remaining average net assets, the Adviser
will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant 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 brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the
fiscal years ended March 31, 1996, 1995, and 1994, the Fund paid total
brokerage commissions of $677,135, $277,942, and $140,868, respectively.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the respective prospectuses. From March 1, 1994, to March 1, 1996,
Federated Adminstrative Services served as the Fund's Adminstrator. Prior
to March 1, 1994, Federated Administrative Services, Inc. served as the
Fund's administrator. Both former Administrators are subsidiaries of

Federated Investors. For purposes of this Statement of Additional
Information, Federated Services Company, Federated Administrative Services
and Federated Administrative Services, Inc. may hereinafter collectively be
referred to as the "Administrators." For the fiscal years ended March 31,
1996, 1995, and 1994, the Administrators earned $423,163, $223,061, and
$441,948, respectively. Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, holds approximately 20%, of the
outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-of-
pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based on the
size, type and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accounts for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.

PURCHASING SHARES

Except under certain circumstances described in the respective
prospectuses, Shares are sold at their net asset value (plus a sales charge
on Class A Shares and Class F Shares only) on days the New York Stock
Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectuses under "How to Purchase Shares" and
"Investing in Class F Shares."
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

With respect to Class B Shares and Class C Shares, the Fund has adopted a
Distribution Plan in accordance with Investment Company Act Rule 12b-1.
Additionally, the Fund has adopted a Shareholder Services Agreement with
respect to all classes of Shares.
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan (Class B Shares and Class C Shares only),
the Directors expect that the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions.

This will facilitate more efficient portfolio management and assist the
Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in
rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended March 31, 1996 the Class B Shares and Class C
Shares incurred $971,408 and $226,754, respectively, in distribution
services fees, none of which were waived. In addition, for the fiscal year
ended March 31, 1996, the Class A Shares, Class B Shares, Class C Shares
and Class F Shares paid shareholder services fees in the amount of
$898,781, $323,803, $75,585, and $100,110, respectively, of which $243,794,
$70,191, $4,805, and $8,009, respectively, were waived.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp., or their affiliates and their
immediate family members, or any investment dealer who has a sales
agreement with Federated Securities Corp., and their spouses and children
under 21, may buy Shares at net asset value without a sales charge. Shares
may also be sold without a sales charge to trusts or pension or profit-
sharing plans for these persons.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.

EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange convertible securities they already own for Shares,
or they may exchange a combination of convertible securities and cash for
Shares. Any securities to be exchanged must meet the investment objective
and policies of the Fund, must have a readily ascertainable market value,
must be liquid, and must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for
acceptance and furnish this list to brokers upon request. The Fund reserves
the right to reject any security, even though it appears on the list, and
the right to amend the list of acceptable securities at any time without
notice to brokers or investors.
An investment broker acting for an investor should forward the securities
in negotiable form with an authorized letter of transmittal to Federated
Securities Corp. Federated Securities Corp. will determine that transmittal
papers are in good order and forward to the Fund's custodian, State Street
Bank and Trust Company. The Fund will notify the broker of its acceptance
and valuation of the securities within five business days of their receipt
by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net
asset value of Shares on the day the securities are valued. One Share will
be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, conversion, or other rights attached to the securities become
the property of the Fund, along with the securities.

TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Shares, a gain or loss may be realized by the investor.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the respective
prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
o according to the last sale price on a national securities exchange, if
available;
o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices and for bonds
and other fixed income securities, as determined by an independent
pricing service; or
o for short-term obligations, according to the prices as furnished by an
independent pricing service or for short-term obligations with
remaining maturities of 60 days or less at the time of purchase, at
amortized cost or at fair value as determined in good faith by the
Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.

EXCHANGE PRIVILEGE

This section relates only to Class F Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares, Class B Shares, and
Class C Shares of the Fund, please see the prospectus for these classes of
Shares.
The Securities and Exchange Commission has issued an order exempting the
Fund from certain provisions of the Investment Company Act of 1940. As a
result, Fund shareholders are allowed to exchange all or some of their
Class F Shares for Class F Shares in other Federated Funds (which are sold
with a sales charge different from that of the Fund or with no sales charge
and which are advised by subsidiaries or affiliates of Federated Investors)
without the assessment of a contingent deferred sales charge on the
exchanged Shares.
The order also allows certain other funds that are not advised by
susidiaries or affiliates of Federated Investors, which do not have a sales
charge, to exchange their shares for Class F Shares on a basis other than
their current offering price. These exchanges may be made to the extent
that such shares were acquired in a prior exchange, at net asset value, for
shares of a Federated Fund carrying a sales charge.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Class F Shares having a net
asset value equal to the minimum investment requirements of the fund into

which the exchange is being made. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which
the fund shares being acquired may be sold. Upon receipt of proper
instructions and required supporting documents, shares submitted for
exchange are redeemed and the proceeds invested in shares of the other
fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a short-term or long-term
capital gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for certain Federated Funds may be given in
writing or by telephone. Written instructions may require a signature
guarantee.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if
a telephone authorization form completed by the investor is on file
with the Fund or its agents. If the instructions are given by a
broker, a telephone authorization form completed by the broker must be
on file with the Fund or its agents. Shares may be exchanged between
two funds by telephone only if the two funds have identical
shareholder registrations.
Telephoned exchange instructions may be recorded. They must be
received by the transfer agent before 4:00 p.m. (Eastern time) for
shares to be exchanged that day. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized
or fraudulent telephone instructions.

REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to
a contingent deferred sales charge. Redemption procedures are explained in
the respective prospectuses under "How to Redeem Shares" or "Redeeming
Class F Shares." Although the transfer agent does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Directors determine to
be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Fund is obligated to redeem Shares for any
shareholder in cash up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.

TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. The Fund's dividends, and any
short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund shares.
TOTAL RETURN

The Fund's average annual total returns for Class A Shares for the one-
year, five-year, and ten-year periods ended March 31, 1996, were 24.75%,
13.81% and 11.48%, respectively.

The Fund's average annual total returns for Class B Shares for the one-year
period ended March 31, 1996, and for the period from July 24, 1994 (date of
initial public offering) to March 31, 1996, were 25.40% and 19.85%,
respectively.
The Fund's average annual total returns for Class C Shares for the one-year
period ended March 31, 1996, and for the period from April 21, 1993 (date
of initial public offering) to March 31, 1996, were 30.08% and 15.06%,
respectively.
The Fund's average annual total returns for Class F Shares for the one-year
period ended March 31, 1996, and for the period from July 27, 1993 (date of
initial public offering) to March 31, 1996, were 29.56% and 14.75%,
respectively.
The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of Shares owned at the end of the period by the net asset value 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 quarterly reinvestment of all
dividends and distributions. Any applicable contingent deferred sales
charge is deducted from the ending value of the investment based on the
lesser of the original purchase price or the offering price of Shares
redeemed. Occasionally, total return which does not reflect the effect of
the sales charge may be quoted in advertising.

YIELD

The Fund's yields for Class A Shares, Class B Shares, Class C Shares, and
Class F Shares were 0.92%, 0.20%, 0.19% and 0.95 %, respectively, for the
thirty-day period ended March 31, 1996.
The yield for each class of Shares of the Fund is determined by dividing
the net investment income per share (as defined by the SEC) earned by the
class of Shares over a thirty-day period by the maximum offering price per
share of the respective class on the last day of the period. This value is
then annualized using semi-annual compounding. This means that the amount
of income generated during the thirty-day period is assumed to be generated
each month over a 12-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Fund
because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
class of Shares, the performance will be reduced for those shareholders
paying those fees.
PERFORMANCE COMPARISONS

The performance of each class of Shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's or a class of Shares' expenses; and
o various other factors.

The Fund's performance fluctuates on a daily basis largely because net
earnings and net asset value per Share fluctuate daily. Both net earnings
and net asset value per Share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
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 net asset value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the growth and income funds
category in advertising and sales literature.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") --represents share prices of
selected blue-chip industrial corporations as well as public utility
and transportation companies. The DJIA indicates daily changes in the
average price of stocks in any of its categories. It also reports
total sales for each group of industries. Because it represents the
top corporations of America, the DJIA index is a leading economic
indicator for the stock market as a whole.
o STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON
STOCKS--a composite index of common stocks in industry,
transportation, and financial and public utility companies, compares

total returns of funds whose portfolios are invested primarily in
common stocks. In addition, the Standard & Poor's index assumes
reinvestment of all dividends paid by stocks listed on the index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in the Standard & Poor's figures.
o MORNINGSTAR, INC.--an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertisements and sales literature for all four classes of Shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of Shares based on quarterly reinvestment of
dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of either class of Shares using charts, graphs, and
descriptions, compared to federally insured bank products including
certificates of deposit and time deposits and to money market funds using
the Lipper Analytical Services money market instruments average.
Advertisements may quote performance information which does not reflect the
effect of various sales charges on Class A Shares, Class B Shares, Class C
Shares, and Class F Shares.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in

which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Funds. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
In the equity sector, Federated Investors has more than 25 years
experience. As of December 31, 1995, Federated Investors managed 22 equity
funds totaling approximately $5.4 billion in assets across growth, value,
equity income, international, index and sector (i.e. utility) styles.
Federated Investor's value-oriented management style combines quantitative

and qualitative analysis and features a structured, computer-assisted
composite modeling system that was developed in the 1970s.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients
is headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 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 Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended March 31, 1996, are
incorporated herein by reference to the Annual Report of the Fund dated
March 31, 1996 (File Nos. 2-29786 and 811-1704). A copy of the Report may
be obtained without charge by contacting the Fund.

*source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS DEFINITIONS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may

be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds