FEDERATED AMERICAN LEADERS FUND INC, 497, 1998-06-01

FEDERATED AMERICAN LEADERS FUND INC
497, 1998-06-01

Previous: AMERICAN HOME PRODUCTS CORP, 8-K, 1998-06-01

Next: ANDREA ELECTRONICS CORP, PRE 14A, 1998-06-01

Federated 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.

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, 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, 1998,
with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To obtain
other information or make inquiries about the Fund, contact your financial
institution. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

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

Prospectus dated May 31, 1998

TABLE OF CONTENTS

Summary of Fund Expenses 1 Financial Highlights--Class A Shares 2 Financial
Highlights--Class B Shares 3 Financial Highlights--Class C Shares 4 General
Information 5 Calling the Fund 5 Year 2000 Statement 5 Investment Information 5
Investment Objective 5 Investment Policies 5 Investment Limitations 7 Net Asset
Value 7 Investing in the Fund 7 Purchasing Shares 8 Purchasing Shares Through a
Financial Intermediary 8 Purchasing Shares by Wire 8 Purchasing Shares by Check
8 Systematic Investment Program 9 Retirement Plans 9 Class A Shares 9 Class B
Shares 9 Class C Shares 10 Redeeming and Exchanging Shares 10 Redeeming or
Exchanging Shares Through a Financial Intermediary 10 Redeeming or Exchanging
Shares by Telephone 10 Redeeming or Exchanging Shares by Mail 10 Requirements
for Redemption 10 Requirements for Exchange 11 Systematic Withdrawal Program 11
Contingent Deferred Sales Charge 11 Account and Share Information 12
Confirmations and Account Statements 12 Dividends and Distributions 12 Accounts
with Low Balances 12 Fund Information 12 Management of the Fund 12 Distribution
of Shares 13 Administration of the Fund 14 Brokerage Transactions 14
Shareholder Information 14 Tax Information 15 Federal Income Tax 15 State and
Local Taxes 15 Performance Information 15 Other Classes of Shares 15

SUMMARY OF FUND EXPENSES

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of 5.50% None None
offering price)
Maximum Sales Charge Imposed on Reinvested Dividends (as a None None None
percentage of offering price)
Contingent Deferred Sales Charge (as a percentage of original None 5.50% 1.00%
purchase price or redemption proceeds, as applicable) (1)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)...
Exchange Fee None None None
<CAPTION>

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C> <C>
Management Fee 0.64% 0.64% 0.64%
12b-1 Fee None 0.75% 0.75%
Total Other Expenses 0.50% 0.50% 0.50%
Shareholder Services Fee 0.25% 0.25% 0.25%
Total Operating Expenses 1.14% 1.89%(2) 1.89%
</TABLE>

(1) For shareholders of Class B Shares, the contingent deferred sales charge is
5.50% in the first year declining to 1.00% in the sixth year and 0.00%
thereafter. For shareholders of Class C Shares, 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) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Purchasing 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 CLASS A CLASS B CLASS C

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return, (2) redemption at the end of each time period, and (3) payment of
the maximum sales charge
<S> <C> <C> <C>
1 Year $ 66 $ 76 $ 29
3 Years $ 89 $103 $ 59
5 Years $114 $125 $102
10 Years $185 $200 $220
</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

(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, 1998, on the Fund's
financial statements for the year ended March 31, 1998, and on the following
table for each of 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,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $21.40 $19.78 $15.66 $14.58 $14.90 $13.88 $13.18 $12.21 $13.04 $12.55
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.29 0.23 0.22 0.25 0.23 0.29 0.29 0.37 0.55 0.50
Net realized and 8.39 3.11 4.70 1.42 0.18 2.05 1.34 1.28 0.36 1.08
unrealized gain (loss)
on investments
Total from investment 8.68 3.34 4.92 1.67 0.41 2.34 1.63 1.65 0.91 1.58
operations
LESS DISTRIBUTIONS
Distributions from net (0.21) (0.21) (0.17) (0.24) (0.24) (0.28) (0.28) (0.38) (0.56) (0.50)
investment income
Distributions from net (3.23) (1.51) (0.63) (0.35) (0.49) (1.04) (0.65) (0.30) (1.18) (0.59)
realized gain on
investments
TOTAL DISTRIBUTIONS (3.44) (1.72) (0.80) (0.59) (0.73) (1.32) (0.93) (0.68) (1.74) (1.09)
NET ASSET VALUE, END OF $26.64 $21.40 $19.78 $15.66 $14.58 $14.90 $13.88 $13.18 $12.21 $13.04
PERIOD
TOTAL RETURN(A) 43.95% 17.40% 32.00% 11.87% 2.76% 18.31% 12.91% 14.17% 7.13% 13.23%
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.14% 1.17% 1.16% 1.23% 1.18% 1.13% 1.02% 1.02% 1.01% 1.01%
Net investment income 0.84% 0.95% 1.07% 1.71% 1.48% 2.07% 2.12% 3.06% 4.23% 3.85%
Expense -- 0.03% 0.07% -- -- 0.06% 0.16% 0.30% 0.35% 0.12%
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of $1,457,925$638,082 $455,867 $268,470 $226,857$202,866 $171,210 $149,360 $147,235$149,049
period (000 omitted)
Average commission $0.0488 $0.0500 -- -- -- -- -- -- -- --
rate paid(c)
Portfolio turnover 63% 88% 46% 34% 27% 39% 67% 57% 50% 27%
</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.

(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED MARCH 31, 1998, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.79 $15.67 $14.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.05 0.10 0.13
Net realized and unrealized gain (loss) on investments 8.41 3.12 4.70 0.92
Total from investment operations 8.47 3.17 4.80 1.05
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.12)
Distributions from net realized gain on investments (3.23) (1.51) (0.63) (0.23)
Total distributions (3.26) (1.56) (0.68) (0.35)
NET ASSET VALUE, END OF PERIOD $26.61 $21.40 $19.79 $15.67
TOTAL RETURN(B) 42.78% 16.49% 31.10% 7.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.89% 1.95% 1.93% 1.95%*
Net investment income 0.11% 0.18% 0.32% 1.09%*
Expense waiver/reimbursement (c) -- -- 0.05% 0.12%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,201,402 $540,995 $261,024 $46,671
Average commission rate paid(d) $0.0488 $0.0500 -- --
Portfolio turnover 63% 88% 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.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED MARCH 31, 1998, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.80 $15.66 $14.55 $14.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.14 0.12
Net realized and unrealized gain (loss) on investments 8.42 3.12 4.75 1.45 0.35
Total from investment operations 8.47 3.16 4.80 1.59 0.47
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.03) (0.13) (0.13)
Distributions from net realized gain on investments (3.23) (1.51) (0.63) (0.35) (0.49)
Total distributions (3.26) (1.56) (0.66) (0.48) (0.62)
NET ASSET VALUE, END OF PERIOD $26.61 $21.40 $19.80 $15.66 $14.55
TOTAL RETURN(B) 42.78% 16.42% 31.14% 11.23% 3.16%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.89% 1.95% 1.96% 2.04% 2.11%*
Net investment income 0.11% 0.18% 0.27% 0.91% 0.71%*
Expense waiver/reimbursement(c) -- -- 0.02% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $134,773 $69,990 $44,434 $20,055$11,895
Average commission rate paid(d) $0.0488 $0.0500 -- -- --
Portfolio turnover 63% 88% 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, 1998, 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. Shares of the Fund are offered in four classes of shares known as Class A
Shares, Class B Shares, Class C Shares and Class F Shares, which represent
interests in a single portfolio of securities. The Fund is 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. This prospectus relates to Class A Shares,
Class B Shares, and Class C Shares ("Shares") of the Fund.

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.

CALLING THE FUND

Call the Fund at 1-800-341-7400.

YEAR 2000 STATEMENT

Like other mutual funds and business organizations worldwide, the Fund's service
providers (among them, the adviser, distributor, administrator, and transfer
agent) must ensure that their computer systems are adjusted to properly process
and calculate date-related information from and after January 1, 2000. Many
software programs and, to a lesser extent, computer hardware in use today cannot
distinguish the year 2000 from the year 1900. This design flaw may have a
negative impact in the handling of securities trades, pricing and accounting
services. The Fund and its service providers are actively working on necessary
changes to computer systems to deal with the year 2000 and reasonably believe
that systems will be year 2000 compliant when required. The Fund is continuing
to analyze the financial impact of instituting a year 2000 compliant program on
its operations.

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. Unless otherwise noted, 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 ("S&P") or Fitch IBCA, 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);
* certain convertible securities; * warrants; and * American Depositary
Receipts.

Bonds rated "BBB" by S&P 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.

AMERICAN DEPOSITARY RECEIPTS

The Fund may invest in American Depositary Receipts ("ADRs") of
foreign-domiciled blue-chip companies. ADRs are trust receipts issued by
U.S. banks or trust companies representing ownership interests in the equity
securities of these companies. ADRs are U.S. dollar-denominated and traded
on U.S. securities exchanges or over-the-counter. The value of ADRs could be
affected by changes in foreign currency exchange rates.

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS (Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS (Preferred Equity Redemption Cumulative Stock, an
equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES (Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

REAL ESTATE INVESTMENT TRUSTS

The Fund may purchase interests in equity, mortgage, and hybrid real estate
investment trusts. Hybrid real estate investment trusts have characteristics of
and may have risks associated with both equity and mortgage real estate
investment trusts. Equity and mortgage real estate investment trusts are
dependent upon management skill and are not diversified. Therefore, they are
subject to the risk of financing single projects. Real estate investment trusts
are also subject to heavy cash flow dependency, defaults by borrowers, and
self-liquidation. Additionally, equity real estate investment trusts may be
affected by any changes in the value of the underlying property owned by the
trusts, and mortgage real estate investment trusts may be affected by the
quality of any credit extended. The investment adviser seeks to migrate these
risks by selecting real estate investment trusts diversified by sector (shopping
malls, apartment building complexes, and health care facilities) and geographic
location.

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 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.

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

All purchases, redemptions, and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time) every day the New York Stock Exchange is open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.
<TABLE>
<CAPTION>

Class A Class B Class C
<S> <C> <C> <C>
Minimum and
Subsequent
Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and
Subsequent
Investment Amount for
Retirement Plans $250/$100 $250/$100 $250/$100
Maximum Sales Charge 5.50%* None None
Maximum Contingent None 5.50+ 1.00%#
Deferred Sales Charge**
Conversion Feature No Yes++ No

* Class A Shares are sold at NAV, plus a sales charge as follows:

Sales Charge Dealer
as a Percentage of Concession as
Public Net a Percentage of
Offering Amount Public Offering
Amount of 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>

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

+ The following contingent deferred sales charge schedule applies to Class B
Shares:
<TABLE>
<CAPTION>

Year of Redemption Contingent 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 B Shares convert to Class A Shares (which pay
lower ongoing expenses) approximately eight years after purchase. See
"Conversion of Class B Shares."

# The contingent deferred sales charge is assessed on Shares redeemed within one
year of their purchase date.

PURCHASING 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 intermediary (such as a bank or broker/dealer) or by sending a wire or
check directly to the Fund. Financial intermediaries may impose different
minimum investment requirements on their customers. An account must be
established with a financial intermediary or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased. Shareholders in certain other funds advised and distributed by
affiliates of Federated Investors, Inc. ("Federated Funds") may exchange their
Shares for Shares of the corresponding class of the Fund. The Fund reserves the
right to reject any purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY

Orders placed through a financial intermediary are considered received when the
Fund is notified of the purchase order or when payment is converted into federal
funds. Purchase orders through a 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 intermediaries must be
received by the financial intermediary 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 intermediary's responsibility to transmit orders promptly.
Financial intermediaries may charge fees for their services.

The financial intermediary 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 intermediaries may be subject to reclaim by the
distributor for accounts transferred to financial intermediaries which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.

PURCHASING SHARES BY WIRE

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 02266-8600; 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.

PURCHASING SHARES BY CHECK

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).

SYSTEMATIC INVESTMENT PROGRAM

Under this program, funds in a minimum amount of $50 may be automatically
withdrawn periodically from the shareholder's checking account at an Automated
Clearing House ("ACH") member and invested in the Fund. Shareholders should
contact their financial intermediary 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.

CLASS A SHARES

Class A Shares are sold at NAV, plus a sales charge. However:

NO SALES CHARGE IS IMPOSED FOR CLASS A SHARES PURCHASED:

* through financial intermediaries that do not receive sales charge
dealer concessions;
* by Federated Life Members; or
* through "wrap accounts" or similar programs under which clients pay a fee
for services.

IN ADDITION, THE SALES CHARGE ON CLASS A SHARES CAN BE REDUCED OR ELIMINATED BY:

* purchasing in quantity;
* combining concurrent purchases of :

* Shares by you, your spouse, and your children under age 21, or * Shares
of two or more Federated Funds (other than money market funds);

* accumulating purchases. In calculating the sales charge on an
additional purchase, you may count the current value of previous Share
purchases still invested in the Fund;
* signing a letter of intent to purchase a specific dollar amount of
Shares within 13 months; or
* using the reinvestment privilege within 120 days of redeeming Shares of an
equal or lesser amount.

Consult a financial intermediary or Federated Securities Corp. for details on
these programs. In order to eliminate the sales charge or receive sales charge
reductions, Federated Securities Corp. must be notified by the shareholder in
writing or by a financial intermediary at the time of purchase.

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. 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 establishment of customer accounts
and purchases of Shares.

CLASS B SHARES

Class B Shares are sold at NAV. Under certain circumstances, a contingent
deferred sales charge will be assessed at the time of a redemption. Orders for
$250,000 or more of Class B Shares will automatically be invested in Class A
Shares.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares after eight full
years from the purchase date. Such conversion will be on the basis of the
relative NAVs per Share, without the imposition of any charges. 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.

CLASS C SHARES

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
Exchanges are made at NAV. Shareholders who desire to automatically exchange
Shares, of a like Share class, in a pre-determined amount on a monthly,
quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

REDEEMING OR EXCHANGING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of the Fund may be redeemed or exchanged by contacting your financial
intermediary before 4:00 p.m. (Eastern time). In order for these transactions to
be processed at that day's NAV, financial intermediaries (other than
broker/dealers) must transmit the request to the Fund before 4:00 p.m. (Eastern
time), while broker/dealers must transmit the request to the Fund before 5:00
p.m. (Eastern time). The financial intermediary is responsible for promptly
submitting transaction requests and providing proper written instructions.
Customary fees and commissions may be charged by the financial intermediary for
this service. Appropriate authorization forms for these transactions must be on
file with the Fund.

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms for these
transactions must be on file with the Fund. Shares held in certificate form must
first be returned to the Fund as described in the instructions under "Redeeming
or Exchanging Shares by Mail." Redemption proceeds will either 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.

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 or Exchanging Shares by Mail" should be considered. The
telephone transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

REDEEMING OR EXCHANGING SHARES BY MAIL

Shares may be redeemed in any amount, or exchanged, 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 must
accompany the written request. It is recommended that certificates be sent
unendorsed by registered or certified mail.

All written requests 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 of the transaction. An exchange
request should also state the name of the Fund into which the exchange is to be
made. All owners of the account must sign the request exactly as the Shares are
registered. A check for redemption proceeds is normally 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 or exchange request is processed.

REQUIREMENTS FOR REDEMPTION

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.

REQUIREMENTS FOR EXCHANGE

Shareholders must exchange Shares having an NAV equal to the minimum investment
requirements of the fund into which the exchange is being made. Contact your
financial intermediary directly or the Fund for free information on and
prospectuses for the Federated Funds into which your Shares may be exchanged.
Before the exchange, the shareholder must receive a prospectus of the fund for
which the exchange is being made.

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. Signature guarantees will be required to exchange
between fund accounts not having identical shareholder registrations. The
exchange privilege may be modified or terminated at any time. Shareholders will
be notified of the modification or termination of the exchange privilege.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder of not less than $100. To be
eligible to participate in this program, a shareholder must have an account
value of at least $10,000, other than retirement accounts subject to required
minimum distributions. A shareholder may apply for participation in this program
through his financial intermediary or by calling the Fund.

Because participation in this program may reduce, and eventually deplete, the
shareholder's investment in the Fund, payments under this program should not be
considered as yield or income. It is not advisable for shareholders to continue
to purchase Class A Shares subject to a sales charge while participating in this
program. A contingent deferred sales charge may be imposed on Class B and Class
C Shares.

SYSTEMATIC WITHDRAWAL PROGRAM ("SWP") ON CLASS B SHARES A contingent deferred
sales charge will not be charged on SWP redemptions of Class B Shares if:

* shares redeemed are 12% or less of the account value in a single year; *
the account is at least one year old; * all dividends and capital gains
distributions are reinvested; and * the account has at least a $10,000
balance when the SWP is established;
(multiple Class B Share accounts cannot be aggregated to meet this minimum
balance).

A contingent deferred sales charge will be charged on redemption amounts that
exceed the 12% annual limit. In measuring the redemption percentage, the account
is valued when the SWP is established and then annually at calander year-end.
Redemptions can be made only at a rate of 1% monthly, 3% quarterly, or 6%
semi-annually.

CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. 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. The contingent deferred sales charge will not be imposed with respect to
Shares acquired through the reinvestment of dividends or distributions of
long-term capital gains. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Shares received
through an exchange will include the period for which your original Shares were
held.

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

Upon written notification to Federated Securities Corp. or the transfer
agent, no contingent deferred sales charge will be imposed on redemptions:

* following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;
* representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age
of 701/2;
* which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;
* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;
* which are reinvested in the Fund under the reinvestment privilege;

* of Shares held by Directors, employees, and sales representatives of the
Fund, the distributor, or affiliates of the Fund or distributor, employees
of any financial intermediary that sells Shares of the Fund pursuant to a
sales agreement with the distributor, and their immediate family members to
the extent that no payments were advanced for purchases made by these
persons; and

p * 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 intermediary, to the extent that no payments were
advanced for purchases made through such entities.

For more information regarding the elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, or any of the above provisions,
contact your financial intermediary or the Fund. The Fund reserves the right to
discontinue or modify these provisions. Shareholders will be notified of such
action.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Net long-term capital gains realized by the Fund, if
any, will be distributed at least once every twelve months. Dividends and
distributions are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date NAV without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
close an account by redeeming all Shares and paying the proceeds to the
shareholder if the account balance falls below the applicable minimum investment
amount. Retirement plan accounts and accounts where the balance falls below the
minimum due to NAV changes will not be closed in this manner. Before an account
is closed, the shareholder will be notified and allowed 30 days to purchase
additional Shares to meet the minimum.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund is managed by a Board of Directors (the "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 0.55% 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.

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, Inc. All of the Class A (voting) shares of
Federated Investors, Inc. are owned by a trust, the trustees of which are John
F. Donahue, Chairman and Director of Federated Investors, Inc., Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Director of Federated Investors, Inc.

Federated Advisers and other subsidiaries of Federated Investors, Inc. 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 $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors, Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 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.

Scott B. Schermerhorn has been the Fund's portfolio manager since July 1996.
Mr. Schermerhorn joined Federated Investors, Inc. in 1996 as a Vice
President of the Fund's investment adviser. From 1990 through 1996, Mr.
Schermerhorn was a Senior Vice President and Senior Investment Officer at
J.W. Seligman & Co., Inc. Mr. Schermerhorn received his M.B.A. in Finance
and International Business from Seton Hall University.

Michael P. Donnelly has been the Fund's portfolio manager since July 1997.
Mr. Donnelly joined Federated in 1989 as an Investment Analyst and has been
a Vice President of the Fund's adviser since 1994. He served as an Assistant
Vice President of the Fund's adviser from 1992 to 1994. Mr. Donnelly is a
Chartered Financial Analyst and received his M.B.A. from the University of
Virginia.

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, Inc.

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 Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"), Class B Shares and Class C Shares
will pay a fee to the distributor in an amount computed at an annual rate of
0.75% 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 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 0.75% 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 Plan.

The 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, Inc., under
which the Fund may make payments up to 0.25% 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

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to 0.50% 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, 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, Inc., 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, Inc. as
specified below:

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

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

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.

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 5, 1998, Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL, for
the sole benefit of its customers, owned 27.49% of the voting securities of the
Fund's Class C 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, as amended, 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

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.

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 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 $250.

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 F Shares, investors may
call 1-800-341-7400 or contact their financial institution.

[Graphic]

Federated American Leaders Fund, Inc.

Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

MAY 31, 1998

An Open-End, Diversified Management Investment Company

FEDERATED AMERICAN
LEADERS FUND, INC.
CLASS A, CLASS B,
CLASS C SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

313914103
313914202
313914301
G01085-01 (5/98)

[Graphic]

FEDERATED AMERICAN LEADERS FUND, INC.

CLASS A SHARES

CLASS B SHARES

CLASS C SHARES

CLASS F 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, and the prospectus for Class
F Shares of Federated American Leaders Fund, Inc. (the "Fund"), each dated May
31, 1998. 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 1-800-341-7400.

FEDERATED AMERICAN LEADERS FUND, INC.
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated May 31, 1998

[Graphic]

Cusip 313914103
Cusip 313914202
Cusip 313914301
Cusip 313914400
8062808B (5/98)

[Graphic]

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE FUND 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types
of Investments 1 Convertible Securities 1 Real Estate Investment Trusts 1
Lending of Portfolio Securities 1 Repurchase Agreements 1 Reverse Repurchase
Agreements 2 Portfolio Turnover 2 INVESTMENT LIMITATIONS 2 Selling Short and
Buying on Margin 2 Borrowing Money 2 Pledging Assets 2 Diversification of
Investments 2 Investing in Securities of Other Investment Companies 2 Investing
in New Issuers 3 Investing in Issuers Whose Securities are Owned by Officers of
the Fund 3 Underwriting 3 Investing in Commodities or Real Estate 3 Lending
Cash or Securities 3 Acquiring Securities 3 Concentration of Investments 3
Issuing Senior Securities 3 Investing in Restricted Securities 3 FEDERATED
AMERICAN LEADERS FUND, INC. MANAGEMENT 3 Fund Ownership 7 Director Compensation
8 Director Liability 8 INVESTMENT ADVISORY SERVICES 8 Adviser to the Fund 8
Advisory Fees 8 BROKERAGE TRANSACTIONS 9 OTHER SERVICES 9 Fund Administration 9
Custodian and Portfolio Accountant 9 Transfer Agent 9 Independent Public
Accountants 9 PURCHASING SHARES 9 Quantity Discounts and Accumulated Purchases
10 Concurrent Purchases 10 Letter of Intent 10 Reinvestment Privilege 10
Conversion of Class B Shares 11 Conversion to Federal Funds 11 DISTRIBUTION
PLAN AND SHAREHOLDER SERVICES AGREEMENT 11 Purchases by Sales Representatives,
Fund Directors, and Employees 12 Exchanging Securities for Fund Shares 12
DETERMINING NET ASSET VALUE 12 Determining Market Value of Securities 12
REDEEMING SHARES 13 Redemption in Kind 13 Contingent Deferred Sales Charge 13
TAX STATUS 13 The Fund's Tax Status 13 Shareholders' Tax Status 13 TOTAL RETURN
14 YIELD 14 PERFORMANCE COMPARISONS 14 Economic and Market Information 15 ABOUT
FEDERATED INVESTORS, INC. 15 Mutual Fund Market 16 Institutional Clients 16
Bank Marketing 16 Broker/Dealers and Bank Broker/Dealer Subsidiaries 16
FINANCIAL STATEMENTS 16 APPENDIX 17

GENERAL INFORMATION ABOUT THE FUND

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. 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 four of the above-mentioned classes of Shares.

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,
convertible securities, notes, American Depositary Receipts, and warrants of
companies selected from "The Leaders List."

CONVERTIBLE SECURITIES

Dividend Enhanced Convertible Securities ("DECS"), or similar instruments
marketed under different names, offer a substantial dividend advantage with the
possibility of unlimited upside potential if the price of the underlying common
stock exceeds a certain level. DECS convert to common stock at maturity. The
amount received is dependent on the price of the common at the time of maturity.
DECS contain two call options at different strike prices. The DECS participate
with the common up to the first call price. They are effectively capped at that
point unless the common rises above a second price point, at which time they
participate with unlimited upside potential.

Preferred Equity Redemption Cumulative Stock ("PERCS"), or similar instruments
marketed under different names, offer a substantial dividend advantage, but
capital appreciation potential is limited to a predetermined level. PERCS are
less risky and less volatile than the underlying common stock because their
superior income mitigates declines when the common falls, while the cap price
limits gains when the common rises.

REAL ESTATE INVESTMENT TRUSTS

The Fund may purchase interests in equity, mortgage and hybrid real estate
investment trusts. Equity real estate investment trusts purchase or lease real
estate. They generate income primarily from rental income and realize capital
gains or losses from appreciated or depreciated property values. Mortgage real
estate investment trusts are interests in real estate mortgages and generate
income from interest payments on mortgage loans.

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 institutions 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,
1998 and 1997, the portfolio turnover rates were 63% and 88%, 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.

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 Director, Federated Investors, Inc., 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 of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

Director, Member of Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director or
Trustee of the Funds.

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; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

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, 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.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Director

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Director

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; 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; 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; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

President and Director, Federated Investors, Inc., 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.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Director, Federated Investors, Inc.; 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, Secretary, and Treasurer

Executive Vice President, Secretary, and Director, Federated Investors, Inc.;
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; Treasurer
of some of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Director, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee 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; 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 American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; 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 Investment Portfolios; Federated
Investment Trust; 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.; 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 Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
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; WesMark Funds; WCT Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Directors own less than 1% of the Fund's outstanding Shares.

As of May 5, 1998, no shareholder of record owned 5% or more of the outstanding
Class A Shares of the Fund:

As of May 5, 1998, no shareholder of record owned 5% or more of the outstanding
Class B Shares of the Fund:

As of May 5, 1998, the following shareholder of record owned 5% or more of the
outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL, for the sole benefit of its customers, owned approximately
1,464,132 Shares (27.49%).

As of May 5, 1998, the following shareholder of record owned 5% or more of the
outstanding Class F Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL, for the sole benefit of its customers, owned approximately
1,088,521 Shares (22.32%).

DIRECTOR 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 56 other investment companies in
the Fund Complex

Thomas G. Bigley, $2,253.82 $111,222 for the Fund and