FEDERATED EQUITY FUNDS, 485BPOS, 1997-05-30

FEDERATED EQUITY FUNDS
485BPOS, 1997-05-30

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1933 Act File No. 2-91090
1940 Act File No. 811-4017

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ........................

Post-Effective Amendment No. 35 .......................... X
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---

Amendment No. 29 ...................................... X
---- ---

FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
X on May 30, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

<PAGE>

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:

X filed the Notice required by that Rule on December 20, 1996; or
intends to file the Notice required by that Rule on or about
__________________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of
1940, and, pursuant to Rule 24f-2(b)(2), need not file the
Notice.

Copy to:

Charles H. Morin, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037

<PAGE>

CROSS-REFERENCE SHEET

This amendment to the Registration Statement of Federated Equity
Funds (formerly, Federated Growth Trust), which is comprised of four
portfolios: (1) Federated Growth Strategies Fund consisting of three
classes of shares, (a) Class A Shares, (b) Class B Shares, and (c)
Class C Shares; (2) Federated Small Cap Strategies Fund consisting of
three classes of shares, (a) Class A Shares, (b) Class B Shares, and
(c) Class C Shares; (3) Federated Capital Appreciation Fund consisting
of three classes of shares, (a) Class A Shares, (b) Class B Shares,
and (c) Class C Shares, and (4) Federated Aggressive Growth Fund
consisting of three classes of shares, (a) Class A Shares, (b) Class B
Shares, and (c) Class C Shares, relates only to Federated Aggressive
Growth Fund and is comprised of the following (the remaining
references to other portfolios have been kept for easier
cross-reference):

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)
<S> <C> <C>
Item 1. Cover Page..................................(1-4) Cover Page.
----------
Item 2. Synopsis....................................(1-4) Summary of Fund Expenses.
--------
Item 3. Condensed Financial
Information (1) Financial Highlights.
Item 4. General Description of
Registrant..................................(1-4) General Information; 1-4) Investment
Information; (1-4) Investment Objective; (1-4)
Investment Policies; (1-4) Investment Limitations;
(1-4) Performance Information; (1,3,4)Portfolio
Turnover.

Item 5. Management of the Fund......................(1-4) Trust Information; (1-4) Management of the
----------------------
Trust; (1-4) Distribution of Shares; (1-4)
Administration of the Fund; (1(a),(b),(c)-4)
Expenses of the Fund and Class A Shares, Class B
Shares, and Class C Shares; (1-4) Brokerage
Transactions.
Item 6. Capital Stock and Other
Securities..................................(1-4) Shareholder Information; (1-4) Voting Rights;
(1-4) Tax Information; (1-4) Federal Income Tax;
(1-4) State and Local Taxes.

<PAGE>

Item 7. Purchase of Securities Being
Offered.....................................(1-4)
Net
Asset
Value;
(1-4)
Investing
in the
Fund;
(1(a),(b),(c)-4)
How to
Purchase
Shares;
(1(a))What
Shares
Cost;
(1(a),(b),(c)-4)
Investing
in Class
A
Shares;
(1(a),(b),(c)-4)
Investing
in Class
B
Shares;
(1(a),(b),(c)-4)
Investing
in Class
C
Shares;
(1-4)
Special
Purchase
Features;
(1-4)
Exchange
Privilege.

Item 8. Redemption or Repurchase....................(1-4) How to Redeem Shares; (1-4) Special
------------------------
Redemption Features; (1-4) Contingent Deferred
Sales Charge; (1-4) Elimination of Contingent
Deferred Sales Charge.

Item 9. Pending Legal Proceedings None.

<PAGE>

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page..................................(1-4) Cover Page.
----------
Item 11. Table of Contents...........................(1-4) Table of Contents.
-----------------
Item 12. General Information and
History.....................................(1-4) General Information About the Fund; (1-4)
About Federated Investors; (1,4) Massachusetts
Partnership Law.
Item 13. Investment Objectives and
Policies....................................(1-4) Investment Objective and Policies.
Item 14. Management of the Fund (1-4) Federated Equity Funds Management.
Item 15. Control Persons and Principal
Holders of Securities (1-4) Fund Ownership.
Item 16. Investment Advisory and Other
Services....................................(1-4) Investment Advisory Services; (1-4) Other
Services; (1-4) Fund Administration; (1-3) Transfer
Agent; (1-3) Custodian; (1-3) Independent Auditors;
(1-4) Distribution Plan and Shareholder Services
Agreement.
Item 17. Brokerage Allocation........................(1-4) Brokerage Transactions.
--------------------
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered ....................................(1-4) Purchasing Shares; (1-4) Determining Net
Asset Value; (1-4) Redeeming Shares; (1-4)
Exchanging Securities for Shares; (3) Current
Distributions.
Item 20. Tax Status..................................(1-4) Tax Status.
----------
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data........................................(1-4) Total Return; (1-4) Yield; (1-4) Performance
Comparisons; (1-4) Appendix.
Item 23. Financial Statements........................(1-3) Incorporated by reference to each portfolio's
--------------------
Annual Report dated October 31, 1996, pursuant to
Rule 411 under the Securities Act of 1933. (File
Nos. 2-91090 and 811-4017); (4) Filed in Part A.

</TABLE>

- --------------------------------------------------------------------------------
FEDERATED
- --------------------------------------------------------------------------------
AGGRESSIVE
- --------------------------------------------------------------------------------
GROWTH
- --------------------------------------------------------------------------------
FUND
- --------------------------------------------------------------------------------
CLASS A, B AND C SHARES

SEMI-ANNUAL REPORT AND
SUPPLEMENT TO PROSPECTUS
DATED NOVEMBER 15, 1996

MAY 30, 1997

[LOGO] FEDERATED INVESTORS

------------------------
Federated Securities Corp., Distributor
------------------------
Cusip 314172875
Cusip 314172867 ------------------------
Cusip 314172859 [LOGO] RECYCLE
G02072-01 (5/97) ------------------------

FEDERATED AGGRESSIVE GROWTH FUND
(A PORTFOLIO OF FEDERATED EQUITY FUNDS)
CLASS A, B AND C SHARES
SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE PROSPECTUS DATED NOVEMBER 15, 1996

A. Please insert the following "Financial Highlights" tables as pages 4, 5 and 6
of the Prospectus. In addition, please add the heading "Financial Highlights"
to the Table of Contents page.

FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
APRIL 30, 1997(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------
Net investment income (0.03)
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.76)
- ----------------------------------------------------------------------------------- ------------
Total from investment operations (0.79)
- ----------------------------------------------------------------------------------- ------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------
Distributions from net investment income (0.01)
- ----------------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.20
- ----------------------------------------------------------------------------------- ------------
TOTAL RETURN (B) (7.93%)
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------
Expenses 1.71%*
- -----------------------------------------------------------------------------------
Net investment income (0.39%)*
- -----------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 16.62%*
- -----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $933
- -----------------------------------------------------------------------------------
Average commission rate paid (d) $0.0402
- -----------------------------------------------------------------------------------
Portfolio turnover 67%
- -----------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 25, 1996 (date of
initial public investment) to April 30, 1997

(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.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
APRIL 30, 1997(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income (0.04)
- -------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.76)
- ------------------------------------------------------------------------- ------------
Total from investment operations (0.80)
- ------------------------------------------------------------------------- ------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Distributions from net investment income 0.00(b)
- ------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.20
- ------------------------------------------------------------------------- ------------
TOTAL RETURN (C) (7.96%)
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 2.55%*
- -------------------------------------------------------------------------
Net investment income (1.59%)*
- -------------------------------------------------------------------------
Expense waiver/reimbursement (d) 17.04%*
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,930
- -------------------------------------------------------------------------
Average commission rate paid (e) $0.0402
- -------------------------------------------------------------------------
Portfolio turnover 67%
- -------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 25, 1996 (date of
initial public investment) to April 30, 1997

(b) Less than one cent per share.

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

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

(e) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
APRIL 30, 1997(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income (0.06)
- -------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.78)
- ------------------------------------------------------------------------- ------------
Total from investment operations (0.84)
- ------------------------------------------------------------------------- ------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Distributions from net investment income 0.00(b)
- ------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.16
- ------------------------------------------------------------------------- ------------
TOTAL RETURN (C) (8.37%)
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 2.59%*
- -------------------------------------------------------------------------
Net investment income (1.59%)*
- -------------------------------------------------------------------------
Expense waiver/reimbursement (d) 17.90%*
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $136
- -------------------------------------------------------------------------
Average commission rate paid (e) $0.0402
- -------------------------------------------------------------------------
Portfolio turnover 67%
- -------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 25, 1996 (date of
initial public investment) to April 30, 1997

(b) Less than one cent per share.

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

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

(e) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged.

(See Notes which are an integral part of the Financial Statements)

B. Please insert the following financial statements after the section entitled
"Performance Information" on page 29 of the Prospectus. In addition, please
add the heading "Financial Statements" to the Table of Contents page after
the heading "Performance Information."

FEDERATED AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--95.8%
- ------------------------------------------------------------------------------------
BASIC INDUSTRY--4.4%
--------------------------------------------------------------------
400 Avery Dennison Corp. $ 14,700
--------------------------------------------------------------------
400 (a) Cytec Industries, Inc. 15,050
--------------------------------------------------------------------
500 Dekalb Genetics Corp., Class B 31,500
--------------------------------------------------------------------
800 (a) Fibreboard Corp. 29,400
--------------------------------------------------------------------
500 Fuller (H.B.) Co. 26,813
--------------------------------------------------------------------
1,600 Methanex Corp. 14,800
-------------------------------------------------------------------- ----------
Total 132,263
-------------------------------------------------------------------- ----------
CONSUMER DURABLES--3.4%
--------------------------------------------------------------------
1,800 (a) Equity Marketing, Inc. 31,500
--------------------------------------------------------------------
600 Ethan Allen Interiors, Inc. 26,550
--------------------------------------------------------------------
1,400 Excel Industries, Inc. 24,850
--------------------------------------------------------------------
1,200 (a) Furniture Brands International, Inc. 17,700
-------------------------------------------------------------------- ----------
Total 100,600
-------------------------------------------------------------------- ----------
CONSUMER NON-DURABLES--7.2%
--------------------------------------------------------------------
700 (a) Blyth Industries, Inc. 27,650
--------------------------------------------------------------------
1,000 Church and Dwight, Inc. 25,500
--------------------------------------------------------------------
500 (a) Fruit of the Loom, Inc., Class A 18,000
--------------------------------------------------------------------
400 Gucci Group NV, ADR 27,750
--------------------------------------------------------------------
400 Kimberly-Clark Corp. 20,500
--------------------------------------------------------------------
400 Liz Claiborne, Inc. 18,100
--------------------------------------------------------------------
1,000 (a) Nautica Enterprise, Inc. 22,125
--------------------------------------------------------------------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
--------------------------------------------------------------------
500 Nike, Inc., Class B $ 28,125
--------------------------------------------------------------------
2,000 (a) North Face, Inc. 28,250
-------------------------------------------------------------------- ----------
Total 216,000
-------------------------------------------------------------------- ----------
ENERGY MINERALS--2.5%
--------------------------------------------------------------------
400 Camco International, Inc. 17,750
--------------------------------------------------------------------
300 (a) Energy Ventures, Inc. 20,063
--------------------------------------------------------------------
900 (a) Marine Drilling Cos., Inc. 14,175
--------------------------------------------------------------------
500 (a) Reading & Bates Corp. 11,188
--------------------------------------------------------------------
300 (a) Seacor Holdings, Inc. 12,900
-------------------------------------------------------------------- ----------
Total 76,076
-------------------------------------------------------------------- ----------
FINANCE--14.4%
--------------------------------------------------------------------
1,850 Aames Financial Corp 28,444
--------------------------------------------------------------------
900 Ahmanson (H.F.) & Co. 34,313
--------------------------------------------------------------------
900 (a) Americredit Corp. 12,938
--------------------------------------------------------------------
300 Amsouth Bancorporation 15,825
--------------------------------------------------------------------
400 Astoria Financial Corp. 15,650
--------------------------------------------------------------------
600 Conseco, Inc. 24,825
--------------------------------------------------------------------
600 Deposit Guaranty Corp. 18,375
--------------------------------------------------------------------
600 Executive Risk, Inc. 27,150
--------------------------------------------------------------------
1,200 (a) FIRSTPLUS Financial Group, Inc. 26,550
--------------------------------------------------------------------
600 Federal Realty Investment Trust 15,450
--------------------------------------------------------------------
600 First Industrial Realty Trust 17,700
--------------------------------------------------------------------
600 General Growth Properties, Inc. 19,125
--------------------------------------------------------------------
1,000 (a) Golf Trust of America, Inc. 25,500
--------------------------------------------------------------------
300 Greenpoint Financial Corp. 16,613
--------------------------------------------------------------------
600 JDN Realty Corp. 16,800
--------------------------------------------------------------------
1,100 (a) Kilroy Realty Corp. 25,850
--------------------------------------------------------------------
600 Money Stores, Inc. 12,975
--------------------------------------------------------------------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
FINANCE--CONTINUED
--------------------------------------------------------------------
300 Providian Corp. $ 17,325
--------------------------------------------------------------------
600 Star Banc Corp. 25,500
--------------------------------------------------------------------
750 Synovus Financial Corp. 18,188
--------------------------------------------------------------------
300 Travelers Group, Inc. 16,613
-------------------------------------------------------------------- ----------
Total 431,709
-------------------------------------------------------------------- ----------
HEALTH CARE--10.0%
--------------------------------------------------------------------
350 (a) Agouron Pharmaceuticals, Inc. 22,400
--------------------------------------------------------------------
1,200 (a) BioChem Pharma, Inc. 21,581
--------------------------------------------------------------------
300 CRA Managed Care, Inc. 10,575
--------------------------------------------------------------------
1,600 (a) FPA Medical Management, Inc. 26,000
--------------------------------------------------------------------
600 HBO & Co. 32,100
--------------------------------------------------------------------
500 (a) Lincare Holdings, Inc. 19,625
--------------------------------------------------------------------
200 Merck & Co., Inc. 18,100
--------------------------------------------------------------------
1,600 (a) NABI, Inc. 9,600
--------------------------------------------------------------------
600 Omnicare, Inc. 14,625
--------------------------------------------------------------------
1,200 (a) Parexel International Corp. 33,600
--------------------------------------------------------------------
1,000 (a) Respironics, Inc. 18,625
--------------------------------------------------------------------
1,200 (a) Rotech Medical Corp. 18,900
--------------------------------------------------------------------
1,500 (a) Safeskin Corp. 33,563
--------------------------------------------------------------------
400 Teva Pharmaceutical Industries, Ltd., ADR 20,300
-------------------------------------------------------------------- ----------
Total 299,594
-------------------------------------------------------------------- ----------
PRODUCER MANUFACTURING--6.3%
--------------------------------------------------------------------
700 (a) American Power Conversion Corp. 13,475
--------------------------------------------------------------------
500 Belden, Inc. 15,375
--------------------------------------------------------------------
450 Diebold, Inc. 15,075
--------------------------------------------------------------------
1,200 (a) Lexmark Intl. Group, Class A 27,900
--------------------------------------------------------------------
1,000 Miller Herman, Inc. 32,375
--------------------------------------------------------------------
900 (a) Tower Automotive, Inc. 33,300
--------------------------------------------------------------------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
PRODUCER MANUFACTURING--CONTINUED
--------------------------------------------------------------------
800 (a) U.S. Filter Corp. $ 24,300
--------------------------------------------------------------------
500 (a) U.S. Office Products Co. 12,750
--------------------------------------------------------------------
600 Watsco, Inc. 14,925
-------------------------------------------------------------------- ----------
Total 189,475
-------------------------------------------------------------------- ----------
RETAIL TRADE--7.7%
--------------------------------------------------------------------
1,000 (a) Borders Group, Inc. 21,250
--------------------------------------------------------------------
1,000 (a) Buckle, Inc. 14,750
--------------------------------------------------------------------
700 (a) Cole National Corp., Class A 23,100
--------------------------------------------------------------------
1,100 (a) Finish Line, Inc., Class A 11,344
--------------------------------------------------------------------
1,600 (a) Genesco, Inc. 18,600
--------------------------------------------------------------------
1,600 (a) Just For Feet, Inc. 25,400
--------------------------------------------------------------------
1,200 Lands' End, Inc. 32,100
--------------------------------------------------------------------
900 (a) Pacific Sunwear of California 28,125
--------------------------------------------------------------------
427 (a) Safeway, Inc. 19,068
--------------------------------------------------------------------
600 Smith's Food & Drug Centers, Inc., Class B 20,100
--------------------------------------------------------------------
400 Tiffany & Co. 15,850
-------------------------------------------------------------------- ----------
Total 229,687
-------------------------------------------------------------------- ----------
SERVICES--7.4%
--------------------------------------------------------------------
1,200 (a) All American Communications, Inc. 14,850
--------------------------------------------------------------------
700 Amresco, Inc. 10,194
--------------------------------------------------------------------
800 (a) Boston Chicken, Inc. 19,100
--------------------------------------------------------------------
1,250 CKE Restaurants, Inc. 24,531
--------------------------------------------------------------------
800 (a) Consolidated Graphics, Inc. 19,500
--------------------------------------------------------------------
600 (a) Corestaff, Inc. 10,425
--------------------------------------------------------------------
900 G & K Services, Inc., Class A 26,100
--------------------------------------------------------------------
1,500 (a) Garden Fresh Restaurant Corp. 15,750
--------------------------------------------------------------------
600 Norrell Corp. 15,825
--------------------------------------------------------------------
1,800 (a) Philip Environmental, Inc. 28,350
--------------------------------------------------------------------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
SERVICES--CONTINUED
--------------------------------------------------------------------
1,000 (a) Renaissance Solutions, Inc. $ 21,750
--------------------------------------------------------------------
400 (a) Robert Half International, Inc. 15,700
-------------------------------------------------------------------- ----------
Total 222,075
-------------------------------------------------------------------- ----------
TECHNOLOGY--30.3%
--------------------------------------------------------------------
500 (a) ADC Telecommunications, Inc. 13,063
--------------------------------------------------------------------
700 Adobe System, Inc. 27,388
--------------------------------------------------------------------
400 (a) Altera Corp. 19,825
--------------------------------------------------------------------
1,100 Anadigics, Inc. 31,075
--------------------------------------------------------------------
600 (a) Applied Magnetics Corp. 15,075
--------------------------------------------------------------------
700 (a) Ascend Communications 32,025
--------------------------------------------------------------------
1,900 (a) BA Merchant Services, Inc., Class A 26,600
--------------------------------------------------------------------
400 (a) BMC Software, Inc. 17,300
--------------------------------------------------------------------
500 (a) Baan Co. NV 26,875
--------------------------------------------------------------------
300 (a) CBT Group PLC, ADR 14,588
--------------------------------------------------------------------
400 (a) Cadence Design Systems, Inc. 12,800
--------------------------------------------------------------------
1,100 (a) Cambridge Technology Partners, Inc. 29,288
--------------------------------------------------------------------
1,200 (a) Cognos, Inc. 30,450
--------------------------------------------------------------------
400 (a) Compaq Computer Corp. 34,150
--------------------------------------------------------------------
600 (a) Compuware Corp. 22,650
--------------------------------------------------------------------
500 (a) Comverse Technology, Inc. 19,625
--------------------------------------------------------------------
400 (a) Dell Computer Corp. 33,475
--------------------------------------------------------------------
400 (a) Dupont Photomasks, Inc. 19,150
--------------------------------------------------------------------
2,100 (a) Harmonic Lightwaves, Inc. 34,650
--------------------------------------------------------------------
200 Intel Corp. 30,625
--------------------------------------------------------------------
1,600 (a) Mastech Corp. 18,400
--------------------------------------------------------------------
800 (a) Micron Electronics, Inc. 16,300
--------------------------------------------------------------------
900 (a) National Semiconductor Corp. 22,500
--------------------------------------------------------------------
300 OY Nokia AB, Class A, ADR 19,388
--------------------------------------------------------------------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
--------------------------------------------------------------------
1,000 (a) P-COM, Inc. $ 28,625
--------------------------------------------------------------------
1,200 (a) Pairgain Technologies, Inc. 31,200
--------------------------------------------------------------------
500 (a) Perceptron, Inc. 14,125
--------------------------------------------------------------------
400 Perkin-Elmer Corp. 29,050
--------------------------------------------------------------------
1,000 (a) Project Software & Development, Inc. 13,375
--------------------------------------------------------------------
700 (a) Proxim, Inc. 14,088
--------------------------------------------------------------------
1,000 (a) SPSS, Inc. 26,500
--------------------------------------------------------------------
600 (a) Sanmina Corp. 30,000
--------------------------------------------------------------------
1,400 (a) Scopus Technology, Inc. 37,450
--------------------------------------------------------------------
800 Storage Technology Corp. 28,100
--------------------------------------------------------------------
1,000 (a) Sun Microsystems, Inc. 28,813
--------------------------------------------------------------------
500 (a) Western Digital Corp. 30,813
--------------------------------------------------------------------
1,250 (a) Wind River Systems, Inc. 28,750
-------------------------------------------------------------------- ----------
Total 908,154
-------------------------------------------------------------------- ----------
TRANSPORTATION--1.4%
--------------------------------------------------------------------
300 (a) UAL Corp. 22,313
--------------------------------------------------------------------
1,100 (a) Yellow Corp. 21,175
-------------------------------------------------------------------- ----------
Total 43,488
-------------------------------------------------------------------- ----------
UTILITIES--0.8%
--------------------------------------------------------------------
1,000 (a) Premiere Technologies, Inc. 23,875
-------------------------------------------------------------------- ----------
TOTAL COMMON STOCKS (IDENTIFIED COST $2,925,804) 2,872,996
-------------------------------------------------------------------- ----------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- ----------
<C> <S> <C> <C>
(B) REPURCHASE AGREEMENT--7.2%
- --------------------------------------------------------------------------------------
$215,000 BT Securities Corporation, 5.43%, dated 4/30/1997, due 5/1/1997 (AT
AMORTIZED COST) 215,000
-------------------------------------------------------------------- ----------
TOTAL INVESTMENTS (IDENTIFIED COST $3,140,804)(C) $3,087,996
-------------------------------------------------------------------- ----------
</TABLE>

(a) Non-income producing security.

(b) The repurchase agreement is fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio. The investment in the repurchase agreement
is through participation in a joint account with other Federated
funds.

(c) The cost of investments for federal tax purposes amounts to
$3,140,804. The net unrealized depreciation of investments on a
federal tax basis amounts to $52,808 which is comprised of
$179,476 appreciation and $232,284 depreciation at April 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($2,999,359) at April 30, 1997.

The following acronyms are used throughout this portfolio:

<TABLE>
<S> <C>
ADR -- American Depositary Receipt
PLC -- Public Limited Company
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $3,140,804) $3,087,996
- -------------------------------------------------------------------------------------------
Cash 445
- -------------------------------------------------------------------------------------------
Income receivable 431
- -------------------------------------------------------------------------------------------
Receivable for investments sold 6,384
- -------------------------------------------------------------------------------------------
Receivable for shares sold 26,558
- ------------------------------------------------------------------------------------------- ----------
Total assets 3,121,814
- -------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $97,564
- ---------------------------------------------------------------------------------
Accrued expenses 24,891
- --------------------------------------------------------------------------------- -------
Total liabilities 122,455
- ------------------------------------------------------------------------------------------- ----------
Net Assets for 326,217 shares outstanding $2,999,359
- ------------------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------
Paid in capital $3,207,161
- -------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (52,808)
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (142,407)
- -------------------------------------------------------------------------------------------
Distributions in excess of net investment income (12,587)
- ------------------------------------------------------------------------------------------- ----------
Total Net Assets $2,999,359
- ------------------------------------------------------------------------------------------- ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------
CLASS A SHARES:
- -------------------------------------------------------------------------------------------
Net Asset Value Per Share ($933,430 / 101,492 shares outstanding) $9.20
- ------------------------------------------------------------------------------------------- ----------
Offering Price Per Share (100/94.50 of $9.20)* $9.74
- ------------------------------------------------------------------------------------------- ----------
Redemption Proceeds Per Share $9.20
- ------------------------------------------------------------------------------------------- ----------
CLASS B SHARES:
- -------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,929,550 / 209,839 shares outstanding) $9.20
- ------------------------------------------------------------------------------------------- ----------
Offering Price Per Share $9.20
- ------------------------------------------------------------------------------------------- ----------
Redemption Proceeds Per Share (94.50/100 of $9.20)** $8.69
- ------------------------------------------------------------------------------------------- ----------
CLASS C SHARES:
- -------------------------------------------------------------------------------------------
Net Asset Value Per Share ($136,379 / 14,886 shares outstanding) $9.16
- ------------------------------------------------------------------------------------------- ----------
Offering Price Per Share $9.16
- ------------------------------------------------------------------------------------------- ----------
Redemption Proceeds Per Share (99.00/100 of $9.16)** $9.07
- ------------------------------------------------------------------------------------------- ----------
</TABLE>

* See "How to Purchase Shares" in the Prospectus.

** See "Contingent Deferred Sales Charge" in the Prospectus.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED APRIL 30, 1997* (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------
Dividends $
9,228
- ---------------------------------------------------------------------------------------------
Interest
3,939
- ---------------------------------------------------------------------------------------------
- ---------
Total income
13,167
- ---------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $ 11,364
- --------------------------------------------------------------------------------
Administrative personnel and services fee 82,609
- --------------------------------------------------------------------------------
Custodian fees 14,576
- --------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 21,891
- --------------------------------------------------------------------------------
Legal fees 1,119
- --------------------------------------------------------------------------------
Portfolio accounting fees 28,917
- --------------------------------------------------------------------------------
Distribution services fee--Class B Shares 3,487
- --------------------------------------------------------------------------------
Distribution services fee--Class C Shares 405
- --------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 1,543
- --------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 1,162
- --------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 135
- --------------------------------------------------------------------------------
Share registration costs 27,866
- --------------------------------------------------------------------------------
Printing and postage 11,037
- --------------------------------------------------------------------------------
Insurance premiums 2,313
- --------------------------------------------------------------------------------
Taxes 2,313
- --------------------------------------------------------------------------------
Miscellaneous 4,563
- -------------------------------------------------------------------------------- ---------
Total expenses 215,300
- --------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------
Waiver of investment advisory fee $ (11,364)
- --------------------------------------------------------------------
Reimbursement of other operating expenses (180,112)
- -------------------------------------------------------------------- ---------
Total waivers and reimbursements (191,476)
- -------------------------------------------------------------------------------- ---------
Net expenses
23,824
- ---------------------------------------------------------------------------------------------
- ---------
Net operating loss
(10,657)
- ---------------------------------------------------------------------------------------------
- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------
Net realized loss on investments
(142,407)
- ---------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments
(52,808)
- ---------------------------------------------------------------------------------------------
- ---------
Net realized and unrealized loss on investments
(195,215)
- ---------------------------------------------------------------------------------------------
- ---------
Change in net assets resulting from operations $
(205,872)
- ---------------------------------------------------------------------------------------------
- ---------
</TABLE>

* For the period from November 25, 1996 (date of initial public
investment) to April 30, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
APRIL 30, 1997*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net operating loss $ (10,657)
- ---------------------------------------------------------------------------
Net realized gain (loss) on investments ($142,407 net loss as computed for
federal tax purposes) (142,407)
- ---------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (52,808)
- --------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations (205,872)
- --------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------------------
Class A Shares (1,722)
- ---------------------------------------------------------------------------
Class B Shares (165)
- ---------------------------------------------------------------------------
Class C Shares (43)
- --------------------------------------------------------------------------- ---------------
Change in net assets resulting from distributions to shareholders (1,930)
- --------------------------------------------------------------------------- ---------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 6,061,015
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 391
- ---------------------------------------------------------------------------
Cost of shares redeemed (2,854,245)
- --------------------------------------------------------------------------- ---------------
Change in net assets resulting from share transactions 3,207,161
- --------------------------------------------------------------------------- ---------------
Change in net assets 2,999,359
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------- ---------------
End of period $ 2,999,359
- --------------------------------------------------------------------------- ---------------
</TABLE>

* For the period from November 25, 1996 (date of initial public
investment) to April 30, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

(1) ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Trust consists of four portfolios.
The financial statements included herein are only those of Federated
Aggressive Growth Fund (the "Fund"), a diversified portfolio. The
financial statements of the other portfolios are presented separately.
The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.

The Fund offers three classes of shares: Class A Shares, Class B
Shares and Class C Shares. The investment objective of the Fund is to
provide appreciation of capital.

(2) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.

INVESTMENT VALUATIONS--Listed equity securities are valued at the
last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS--It is the policy of the Fund to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.

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

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

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.

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

OTHER--Investment transactions are accounted for on the trade
date.

(3) SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value) for each class of shares.

Transactions in shares were as follows:

<TABLE>
<CAPTION>
APRIL 30, 1997*
-----------------------
CLASS A SHARES SHARES AMOUNT
- --------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Shares sold 369,553 $ 3,677,371
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 19 184
- ---------------------------------------------------------------------
Shares redeemed (268,080) (2,686,314)
- --------------------------------------------------------------------- -------- -----------
Net change resulting from Class A share transactions 101,492 $ 991,241
- --------------------------------------------------------------------- -------- -----------
</TABLE>

<TABLE>
<CAPTION>
APRIL 30, 1997*
-----------------------
CLASS B SHARES SHARES AMOUNT
- --------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Shares sold 215,310 $ 2,125,003
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 17 164
- ---------------------------------------------------------------------
Shares redeemed (5,488) (54,594)
- --------------------------------------------------------------------- -------- -----------
Net change resulting from Class B share transactions 209,839 $ 2,070,573
- --------------------------------------------------------------------- -------- -----------
</TABLE>

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
APRIL 30, 1997*
-----------------------
CLASS C SHARES SHARES AMOUNT
- --------------------------------------------------------------------- -------- -----------
<S> <C> <C>
Shares sold 26,163 $ 258,641
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 4 43
- ---------------------------------------------------------------------
Shares redeemed (11,281) (113,337)
- --------------------------------------------------------------------- -------- -----------
Net change resulting from Class C share transactions 14,886 $ 145,347
- --------------------------------------------------------------------- -------- -----------
Net change resulting from share transactions 326,217 3,207,161
- --------------------------------------------------------------------- -------- -----------
</TABLE>

*For the period from November 25, 1996 (date of initial public
investment) to April 30, 1997.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its
fee and reimburse certain operating expenses of the Fund. The Adviser
can modify or terminate this voluntary waiver and reimbursement at any
time at its sole discretion.

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

DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The
Plan provides that the Fund may incur distribution expenses annually
according to the following schedule.

<TABLE>
<CAPTION>
SHARE CLASS NAME % OF AVG. DAILY NET ASSETS OF CLASS
- ------------------ --------------------------------------
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

The Class A Shares have no present intention of paying or accruing the
12b-1 fee during the fiscal year ending October 31, 1997.

SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), each class of
shares will pay FSS up to 0.25% of its average daily net assets for

FEDERATED AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

the period. The fee paid to FSS is used to finance certain services for
shareholders and to maintain shareholder accounts.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ,
through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.

ORGANIZATIONAL EXPENSES--Organizational expenses of $67,311 were borne
initially by the Adviser.

The Fund has agreed to reimburse the Adviser for the organizational
expenses during the five year period following the Fund's effective
date. For the period ended April 30, 1997, the Fund paid $0 pursuant
to this agreement.

GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.

(5) INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities,
for the period ended April 30, 1997, were as follows:

<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $4,753,602
- -------------------------------------------------------------------------------- ----------
SALES $1,685,028
- -------------------------------------------------------------------------------- ----------
</TABLE>

<TABLE>
<S> <C>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President,
Wesley W. Posvar Secretary and Treasurer
Marjorie P. Smuts Richard B. Fisher
Vice President
S. Elliott Cohan
Assistant Secretary
</TABLE>

Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.

This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses and other information.

FEDERATED AGGRESSIVE GROWTH FUND
(A PORTFOLIO OF FEDERATED EQUITY FUNDS)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS

The shares of Federated Aggressive Growth Fund (the "Fund") represent
interests in a diversified portfolio of Federated Equity Funds (the
"Trust"), an open-end management investment company (a mutual fund).
The Fund seeks appreciation of capital by investing primarily in
equity securities of companies with prospects for above-averge
appreciation.

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 CLASS A
SHARES, CLASS B SHARES OR CLASS C SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The Fund has also filed a Statement of Additional Information dated
November 15, 1996, 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 to make inquiries about the Fund, contact your
financial intermediary. 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 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 November 15, 1996

- - -------------------------------------------------------
- - -------------------------------------------------------

TABLE OF CONTENTS

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

General Information.......................................................... 4

Investment Information....................................................... 4
Investment Objective....................................................... 4
Investment Policies........................................................ 4
Investment Limitations..................................................... 9
Hub and Spoke(R) Option.................................................... 10

Net Asset Value.............................................................. 11

Investing in the Fund........................................................ 11

How to Purchase Shares....................................................... 12
Investing in Class A Shares................................................ 13
Investing in Class B Shares................................................ 15
Investing in Class C Shares................................................ 16
Special Purchase Features.................................................. 17

Exchange Privilege........................................................... 17

How to Redeem Shares......................................................... 19
Special Redemption Features................................................ 20
Contingent Deferred Sales Charge........................................... 20
Elimination of Contingent Deferred
Sales Charge............................................................ 21

Account and Share Information................................................ 22

Trust Information............................................................ 23
Management of the Trust.................................................... 23
Distribution of Shares..................................................... 24
Administration of the Fund................................................. 26
Expenses of the Fund and
Class A Shares, Class B Shares,
and Class C Shares...................................................... 26

Brokerage Transactions....................................................... 27

Shareholder Information...................................................... 28
Voting Rights.............................................................. 28

Tax Information.............................................................. 28
Federal Income Tax......................................................... 28
State and Local Tax........................................................ 28

Performance Information...................................................... 29

- - ------------------------------------------------------
- - ------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED AGGRESSIVE GROWTH FUND
<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
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(2)........................................................... 0.65%
12b-1 Fee(3)............................................................................... 0.00%
Total Other Expenses....................................................................... 1.10%
Shareholder Services Fee...................................................... 0.25%
Total Operating Expenses(4)....................................................... 1.75%
</TABLE>

(1) Class A Shares purchased 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 0.50% for redemptions made within one
full year of purchase. See "Contingent Deferred Sales Charge."

(2) The estimated management fee has been reduced to reflect the
anticipated voluntary waiver of the management fee. The adviser
can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 1.00%.

(3) The Class A Shares have no present intention of paying or accruing the 12b-1
fee during the fiscal year ending October 31, 1997. If the Class A Shares
were paying or accruing the 12b-1 fee, the Class A Shares would be able to
pay up to 0.25% of its average daily net assets for the 12b-1 fee. See
"Trust Information."

(4) The operating expenses are estimated to be 2.10% absent the
anticipated voluntary waiver of the management fee.

* Total operating expenses in the table above are estimated based on
average expenses expected to be incurred during the period ending
October 31, 1997. During the course of this period, expenses may be
more or less than the average amount shown.

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 "Trust Information."
Wire--transferred redemptions of less than $5,000 may be subject to
additional fees.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------ -------
<S> <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........ $ 72 $ 107
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS A SHARES' FISCAL YEAR ENDING
OCTOBER 31, 1997.

- - ------------------------------------------------------
- - ------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED AGGRESSIVE GROWTH FUND
<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
</TABLE>

ANNUAL SHARES OPERATING EXPENSES
(As a percentage of projected average net assets)*
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(2)........................................................... 0.65%
12b-1 Fee.................................................................................. 0.75%
Total Other Expenses....................................................................... 1.10%
Shareholder Services Fee...................................................... 0.25%
Total Operating Expenses(3)(4).................................................... 2.50%
</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."

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

(4) The operating expenses are estimated to be 2.85% absent the
anticipated voluntary waiver of the management fee.

* Total Class B Shares operating expenses in the table above are
estimated based on average expenses expected to be incurred during
the period ending October 31, 1997. During the course of this
period, expenses may be more or less than the average amount shown.

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 "Trust 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
------ -------
<S> <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........ $ 82 $ 121
You would pay the following expenses on the same investment,
assuming no redemption........................................................ $ 25 $ 78
</TABLE>

- - ------------------------------------------------------
- - ------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED AGGRESSIVE GROWTH FUND
<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 purchase price or redemption
proceeds, as applicable)(1).............................................................. 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)......................... None
Exchange Fee............................................................................... None
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(2)........................................................... 0.65%
12b-1 Fee.................................................................................. 0.75%
Total Other Expenses....................................................................... 1.10%
Shareholder Services Fee...................................................... 0.25%
Total Operating Expenses(3)....................................................... 2.50%
</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."

(3) The operating expenses are estimated to be 2.85% absent the
anticipated voluntary waiver of the management 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 "Trust 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
------ -------
<S> <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........ $ 36 $78
You would pay the following expenses on the same investment, assuming no
redemption.................................................................... $ 25 $78
</TABLE>

- - ------------------------------------------------------

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated April 17, 1984. The Trust's address is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate
portfolios of securities. As of the date of this prospectus, the Board
of Trustees has established three classes of shares for the Fund,
known as Class A Shares, Class B Shares, and Class C Shares
(individually and collectively as the context requires, "Shares").
Shares of the Fund are designed for individuals and intermediaries
seeking appreciation of capital by investing in a diversified
portfolio primarily consisting of equity securities of companies with
prospects for above-average appreciation.

The Fund's current net asset value and offering price may be found in
the mutual funds section of local newspapers under "Federated Class A,
Class B, or Class C," as appropriate.

- - ------------------------------------------------------

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide appreciation of
capital. The investment objective cannot be changed without approval
of shareholders. 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.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing at least 65% of
its assets in equity securities of companies with prospects for
above-average appreciation. Equity securities include common stocks,
preferred stocks, and investment grade securities (including debt
securities) that are convertible into common stocks. Unless indicated
otherwise, the investment policies of the Fund may be changed by the
Trustees without the approval of shareholders. Shareholders will be
notified before any material changes in these policies become
effective.

ACCEPTABLE INVESTMENTS

Federated Management, the Fund's investment adviser (the "Adviser"),
creates a universe of growing companies by using proprietary software
and research models that incorporate important attributes of
successful growth, such as upward earnings estimate revisions,
positive earnings surprises, accelerated sales and earnings growth.
Using fundamental research, the Adviser evaluates each company's
earnings quality and assesses the sustainability of the company's
current growth trends. Through this highly disciplined process, the
Adviser seeks to construct an

investment portfolio that possesses strong growth characteristics.

The Fund will not be restricted to specific market capitalization
requirements. Sector weightings will be restricted to no greater than
300% of the Standard and Poor's 500 sector weightings or no more than
20% of the total portfolio, whichever is greater. The Fund will
diversify its holdings across at least 100 companies, but generally
will not exceed 200 company holdings.

The securities in which the Fund invests include, but are not limited
to:

- - - common stock of U.S. companies that are considered by the Adviser to have
potential for above-average appreciation;

- - - other corporate securities including: corporate debt obligations,
convertible securities, and preferred stocks;

- - - securities of foreign issuers; and

- - - securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities.

COMMON STOCK

As described above, the Fund invests primarily in equity securities.
As with other mutual funds that invest primarily in equity securities,
the Fund is subject to market risks. That is, the possibility exists
that common stocks will decline over short or even extended periods of
time, and the United States equity market tends to be cyclical,
experiencing both periods when stock prices generally increase and
periods when stock prices generally decrease. However, since the Fund
invests in growth-oriented equity securities, there are some
additional risk factors associated with investment in the Fund.
Growth-oriented stocks may include issuers with smaller
capitalization. Small and medium capitalization stocks have
historically been more volatile in price than larger capitalization
stocks, such as those included in the Standard & Poor's 500 Index.
This is because, among other things, smaller companies have a lower
degree of liquidity in the equity market and tend to have a greater
sensitivity to changing economic conditions. That is, the stock of
small and medium capitalization companies may decline in price as the
price of large company stocks rise, or vice versa. Therefore,
investors should expect that the Fund will be more volatile than, and
may fluctuate independently of, broad market indices such as the
Standard & Poor's 500 Index. Additionally, many small capitalization
companies tend to have operating histories of less than three years.

CONVERTIBLE SECURITIES

Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified
time period. The Fund considers convertible securities to be equity
securities. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of
"usable" bonds and warrants, or a combination of the features of
several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities
to be employed for different investment objectives. The convertible
securities in which the Fund invests may be rated below investment
grade and considered speculative.

Convertible bonds and convertible preferred stocks generally retain
the investment characteristics of fixed income securities until they
have been converted, but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income
of a bond or the dividend preference of a preferred stock until the
holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used, in whole or in part, customarily at
full

face value, in lieu of cash to purchase the issuer's common stock.
When owned as part of a unit along with warrants, which are options to
buy the common stock, they function as convertible bonds, except that
the warrants generally will expire before the bond's maturity.
Convertible securities are senior to equity securities and, therefore,
have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible
securities of the same company. The interest income and dividends from
convertible bonds and preferred stocks provide a stable stream of
income with generally higher yields than common stocks, but lower than
nonconvertible securities of similar quality. The Fund will exchange
or convert the convertible securities held in its portfolio into
shares of the underlying common stock when, in the Adviser's opinion,
the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objective. Otherwise, the
Fund will hold or trade the convertible securities. In selecting
convertible securities for the Fund, the Adviser evaluates the
investment characteristics of the convertible security as a fixed
income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters
with respect to a particular convertible security, the Adviser
considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.

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

SECURITIES OF FOREIGN ISSUERS

The Fund may invest in the securities of foreign issuers which are
freely traded on United States securities exchanges or in the
over-the-counter market in the form of depository receipts. Securities
of a foreign issuer may present greater risks in the form of
nationalization, confiscation, domestic marketability, or other
national or international restrictions. As a matter of practice, the
Fund will not invest in the securities of a foreign issuer if any such
risk appears to the Adviser to be substantial.
INVESTING IN SECURITIES OF
OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of other investment companies,
but it will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in
any one investment company, or invest more than 10% of its total
assets in investment companies in general. The Fund will invest in
other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incur
certain expenses such as management fees and, therefore, any
investment by the Fund in shares of another investment company would
be subject to such duplicate expenses. The Adviser will waive its
investment advisory fee on assets invested in securities of open-end
investment companies.

U.S. GOVERNMENT SECURITIES

The types of U.S. government securities in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed in a variety of ways
by the U.S. government or its agencies or instrumentalities. Some of these
obligations, such as Government National Mortgage Association mortgage-backed
securities, are backed by the full faith and credit of the U.S. Treasury.
Obligations of Federal Home Loan

Banks are backed by the discretionary authority of the U.S. government
to purchase certain obligations of agencies or instrumentalities.
Obligations of Federal Home Loan Banks, Federal Farm Credit System,
including the National Bank for Cooperatives and Banks for
Cooperatives, Tennessee Valley Authority, Export-Import Bank of the
United States, Commodity Credit Corporation, Federal Financing Bank,
Federal National Mortgage Association, and Federal Home Loan Mortgage
Corporation, National Credit Union Administration, and Student Loan
Marketing Association are backed by the credit of the agency or
instrumentality issuing the obligations.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities
are any securities in which the Fund may otherwise invest pursuant to
its investment objective and policies, but which are subject to
restrictions on resale under federal securities law. However, the Fund
will limit investments in illiquid securities, including certain
restricted securities not determined by the Trustees to be liquid,
over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net
assets.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Fund purchases
securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to
miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions and the
market values of the securities purchased may vary from purchase
prices. Accordingly, the Fund may pay more or less than the market
value of the securities on the settlement date.

The Fund may dispose of a commitment prior to settlement if the
Adviser deems it appropriate to do so. In addition, the Fund may enter
into transactions to sell its purchase commitments to third parties at
current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Fund may realize
short-term profits or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS

Under normal market conditions, the Fund will be fully invested in its
primary investments. However, for temporary defensive purposes, when
the Adviser determines that market conditions warrant, the Fund may
invest up to 100% of its assets in cash and money market instruments.

Money market instruments may be:

- - - money market instruments;

- - - commercial paper;

- - - instruments of domestic banks and savings associations (such as
certificates of deposit, demand and time deposits, savings shares
and bankers' acceptances);

- - - securities issued and/or guaranteed as to payment of principal and interest
by the U.S. government, its agencies or instrumentalities; and

- - - repurchase agreements.

REPURCHASE AGREEMENTS

Certain securities 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
intermediaries sell U.S.
government securities or other securities to the Fund

and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. 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.

PUT AND CALL OPTIONS

The Fund may purchase put options on its portfolio securities. A put
option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during
the time of the options. These options will be used only as a hedge to
attempt to protect securities which the Fund holds against decreases
in value. The Fund may purchase these put options as long as they are
listed on a recognized options exchange and the underlying securities
are held in its portfolio.

The Fund may also write covered call options on securities either held
in its portfolio, or which it has the right to obtain without payment
of further consideration, or for which it has segregated cash in the
amount of any additional consideration. As a writer of a call option,
the Fund has the obligation, upon exercise of the option during the
option period, to deliver the underlying security upon payment of the
exercise price. The call options which the Fund writes and sells must
be listed on a recognized options exchange. Writing of calls by the
Fund is intended to seek to generate income for the Fund and, thereby,
protect against price movements in particular securities in the Fund's
portfolio.

Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded
options are third party contracts with standardized strike prices and
expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market while
over-the-counter options may not.

RISKS. Prior to exercise or expiration, an option position can
only be terminated by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange
which may or may not exist for any particular call or put option
at any specific time. The absence of a liquid secondary market
also may limit the Fund's ability to dispose of the securities
underlying an option. The inability to close options also could
have an adverse impact on the Fund's ability to effectively hedge
its portfolio.

FINANCIAL FUTURES

The Fund may purchase and sell financial futures contracts to hedge
all or a portion of its portfolio against changes in interest rates.
Financial futures contracts call for the delivery of particular debt
instruments at a certain time in the future. The seller of the
contract agrees to make delivery of the type of instrument called for
in the contract and the buyer agrees to take delivery of the
instrument at the specified future time.

Stock index futures contracts are based on indexes that reflect the
market value of common stock of the firms included in the indexes. An
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
differences between the value of the index at the close of the last
trading day of the contract and the price at which the index contract
was originally written.

The Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions would exceed 5% of the market value of the
Fund's total assets. When the Fund purchases futures contracts, an
amount of cash and U.S. Treasury securities, equal to the underlying
commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the Fund's

custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contract is
unleveraged.
RISKS. When the Fund uses financial futures as hedging devices,
much depends on the ability of the Adviser to predict market
conditions based upon certain economic analysis and factors.
There is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of
the securities in the Fund's portfolio. This may cause the
futures contract to react differently than the portfolio
securities to market changes. In addition, the Adviser could be
incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In these events,
the Fund may lose money on the futures contract.

It is not certain that a secondary market for positions in
futures contracts will exist at all times. The Fund's ability to
establish and close out futures and depends on this secondary
market.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio
securities on a short-term or a long-term basis, up to one-third of
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 Adviser has determined are creditworthy under guidelines
established by the Trustees 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
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever
the 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 Fund's rate of portfolio
turnover may exceed that of certain other mutual funds with the same
investment objective. A higher rate of portfolio turnover involves
correspondingly greater transaction expenses which must be borne
directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the
realization of larger amounts of capital gains which, when distributed
to the Fund's shareholders, are taxable to them. (Further information
is contained in the Fund's Statement of Additional Information within
the sections "Brokerage Transactions" and "Tax Status"). Nevertheless,
transactions for the Fund's portfolio will be based only upon
investment considerations and will not be limited by any other
considerations when the Adviser deems it appropriate to make changes
in the Fund's portfolio.

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 net assets and pledge up to 10%
of the value of those assets to secure such borrowings;

- - - sell securities short except, under strict limitations, the Fund
may maintain open short positions so long as not more than 10% of
the value of its net assets is held as collateral for those
positions; or
- - - with respect to 75% of its total assets, invest more than 5% of
the value of its total assets in securities of any one issuer (other
than cash, cash items, or securities issued or guaranteed by the
U.S. government and its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) or acquire
more than 10% of the outstanding voting securities of any one
issuer.

The Fund will not:

- - - commit more than 5% of its total assets to premiums on open put option
positions; or

- - - invest more than 5% of its net assets in warrants.

HUB AND SPOKE(R) OPTION

If the Trustees determine it to be in the best interest of the Fund
and its shareholders, the Fund may in the future seek to achieve its
investment objective by investing all of its assets in another
investment company having the same investment objective and
substantially the same investment policies and restrictions as those
applicable to the Fund. It is expected that any such investment
company would be managed in substantially the same manner as the Fund.

The initial shareholder of the Fund (who is an affiliate of Federated
Investors) voted to vest authority to use this investment structure in
the sole discretion of the Trustees. No further approval of
shareholders is required. Shareholders will receive at least 30 days
prior notice of any such investment.

In making its determination, the Trustees will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although it is expected
that the Trustees will not approve an arrangement that is likely to
result in higher costs, no assurance is given that costs will remain
the same or be materially reduced if this investment structure is
implemented.

- - ------------------------------------------------------

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.

The net asset value of each class of Shares of the Fund 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, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

- - ------------------------------------------------------

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. Certain purchases of Class A Shares
are not subject to a sales charge. See "Investing in Class A Shares."
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 or Eliminating the Sales Charge." 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 also
bear a 12b-1 fee while Class A Shares do not bear such a fee. 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 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 the
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 intermediary (such as a bank or
broker/dealer which has a sales agreement with the distributor) or by
sending a wire or a check directly to the Fund, with a minimum initial
investment of $500 for Class A Shares and $1500 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 intermediaries 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 through a financial intermediary 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 CHARGE
SALES CHARGE AS A DEALER
AS A PERCENTAGE CONCESSION AS
PERCENTAGE OF NET A PERCENTAGE
AMOUNT OF OF OFFERING AMOUNT OF PUBLIC
TRANSACTION PRICE INVESTED OFFERING 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. No sales charge is imposed for Class A Shares purchased
through bank trust departments, investment advisers registered under
the Investment Advisers Act of 1940, as amended, or retirement plans
where the third party administrator has entered into certain
arrangements with Federated Securities Corp. or its affiliates, or to
shareholders designated as Liberty Life Members. However, investors
who purchase Class A Shares through a trust department, investment
adviser, or retirement plan may be charged an additional service fee
by the financial intermediary. Additionally, no sales charge is
imposed for Class A Shares purchased through "wrap accounts" or
similar programs, under which clients pay a fee or fees 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.

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 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 $30,000 and he purchases $20,000
more at the current public offering price, the sales charge on the
additional purchase according to the schedule now in effect would be
4.50%, not 5.50%.

To receive the sales charge reduction, Federated Securities Corp. must
be notified by the shareholder in writing or by his financial
intermediary 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

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 ("Federated Funds"),
the purchase price of which includes a sales charge. For example, if a
shareholder concurrently invested $30,000 in one of the Class A Shares
in the 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
intermediary 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 Shares of any fund in the 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 intermediary 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 intermediary, at the time the
purchase is made. From time to time, the Fund may offer dealers a
payment of .50% 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 may 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 fund in the Federated Funds 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 INTERMEDIARY

An investor may call his financial intermediary (such as a bank or an
investment dealer) to place an order to purchase Shares. 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 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 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 additional 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

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: State Street Bank and Trust Company, Boston,
Massachusetts; Attn: 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

Once an account has been established, Shares may be purchased by
sending 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, Massachusetts 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 sales charge, if
applicable. 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.

- - ------------------------------------------------------

EXCHANGE PRIVILEGE

CLASS A SHARES

Class A shareholders may exchange all or some of their Shares for
Class A Shares of other funds in the 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.

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.

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for
Class B Shares of the Federated Funds. (Not all Federated Funds
currently offer Class B Shares. Contact your financial intermediary
regarding the availability of other Class B Shares in 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. For
more information, see "Contingent Deferred Sales Charge."

CLASS C SHARES

Class C shareholders may exchange all or some of their Shares for
Class C Shares of Federated Funds at net asset value without a
contingent deferred

sales charge. (Not all funds in the Federated Funds currently offer
Class C Shares. Contact your financial intermediary regarding the
availability of Class C Shares in 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."

Please contact your financial intermediary directly or Federated
Securities Corp. at 1-800-341-7400 for information on and prospectuses
for the Federated Funds into which your Shares may be exchanged free
of charge.

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 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

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 intermediaries during times of
drastic economic or market changes. If a shareholder cannot contact
his broker or financial intermediary 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, Massachusetts 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. Investors who redeem
Shares through a financial intermediary may be charged a service fee
by that financial intermediary. Redemption requests must be received
in proper form and can be made as described below.

REDEEMING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of the Fund may be redeemed by calling your financial
intermediary 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 intermediary. 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
intermediaries (such as banks) 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 redeemed at that day's net asset
value. The financial intermediary is responsible for promptly
submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the
financial intermediary for this service.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the
Fund has received 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 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.

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, Massachusetts 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.

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 by the Securities and Exchange Act
of 1934, as amended. The Fund does not accept signatures guaranteed by
a notary public.

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.

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 intermediary. 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 Shares and Class 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% 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%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
</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 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 funds in the 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

A contingent deferred sales charge will not be charged in connection
with exchanges of Shares for Class A Shares in other Federated Funds.

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, as amended, 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 Trustees, 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 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 intermediary, to the extent that no payments were advanced
for purchases made through such entities. The Trustees 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. Monthly confirmations are sent to report dividends
paid during that month.

DIVIDENDS

Dividends are declared and paid annually 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 the 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 Share 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.

------------

TRUST INFORMATION

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

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

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Management,
the Fund's investment adviser, subject to direction by the Trustees.
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 1% of
the Fund's average daily net assets. The fee paid by the Fund, while
higher than the advisory fee paid by other mutual funds in general, is
comparable to fees paid by other mutual funds with similar objectives
and policies. Under the investment advisory contract, which provides
for the voluntary waiver of the advisory fee by the Adviser, the
Adviser may voluntarily waive some or all of its fee. This does not
include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities.
The Adviser can terminate this voluntary waiver at any time in 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 Management, 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 Management 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, 1994,
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.

Keith J. Sabol has been the Fund's portfolio manager since inception. Mr. Sabol
joined Federated Investors in 1994 and has been the Equity Research Coordinator
of the Fund's investment adviser since 1996. Mr. Sabol was an Investment Analyst
for the Fund's investment adviser from 1994 to 1996. Following his graduation
from the U.S. Military Academy, Mr. Sabol was commissioned as an officer in the
U.S. Army where he served until 1992. Mr. Sabol earned his Masters in Industrial
Administration from Carnegie Mellon University with a concentration in Finance
and Operations Research.

Aash M. Shah has been the Fund's portfolio manager since inception. Mr. Shah
joined Federated Investors in 1993 as an Investment Analyst and has been an
Assistant Vice President of the Fund's investment adviser since 1995. Mr. Shah
was employed at Westinghouse Credit Corp. from 1990 to 1993 as an Investment
Analyst. Mr. Shah received his Masters in Industrial Administration from
Carnegie Mellon University with a concentration in finance and accounting. Mr.
Shah is a Chartered Financial Analyst.

Both the Trust 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
Board of Trustees, and could result in severe penalties.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. 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 intermediaries
such as depository institutions to register as dealers.

The distributor may offer to pay financial intermediaries an amount
equal 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 intermediaries 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 5.5% 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 intermediaries 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 intermediaries
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-related support
services pursuant to the 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 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 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
("Shareholder Services"). Under the Shareholder Services Agreement,
Federated Shareholder Services will either perform shareholder
services directly or will select financial intermediaries to perform
shareholder services. Financial intermediaries 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 INTERMEDIARIES

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 intermediaries supplemental fees for the performance of
sales services, distribution-related support
services, or shareholder services.

Federated Securities Corp. will pay financial intermediaries, at the
time of purchase of Class A Shares, an amount equal to .50% of the net
asset value of Class A Shares purchased by their clients or customers
under certain qualified retirement plans as approved by Federated
Securities Corp. (Such payments are subject to a reclaim from the
financial intermediary 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, the distributor may offer to pay a fee from its own assets
to financial intermediaries as financial assistance for providing
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 intermediary sells or may sell,
and/or upon the type and nature of sales or marketing support
furnished by the financial intermediary. Any payments made by the
distributor may be reimbursed by the Fund's investment 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 Federated
Funds as specified below:
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
- - ------------------- -------------------------
0.15% on the first $250 million
0.125% on the next $250 million
0.10% 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.

EXPENSES OF THE FUND AND CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES

Holders of Class A Shares, Class B Shares, and Class C Shares pay
their allocable portion of Trust and portfolio expenses.

The Trust expenses for which holders of Class A Shares, Class B
Shares, and Class C Shares pay their allocable portion include, but
are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of
Trustees; legal fees of the Trust; association membership dues; and
such non-recurring and extraordinary items as may arise from time to
time.

The Fund expenses for which holders of Class A Shares, Class B Shares,
and Class C Shares pay their allocable portion include, but are not
limited to: registering the Fund and Class A Shares, Class B Shares,
and Class C Shares of the Fund; investment advisory services; taxes
and commissions; custodian fees; insurance premiums; auditors' fees;
and such non-recurring and extraordinary items as may arise from time
to time.

At present, the only expenses which are allocated specifically to
Class A Shares, Class B Shares, and Class C Shares as classes are
expenses under the Trust's Distribution Plan and fees for Shareholder
Services. However, the Trustees reserve the right to allocate certain
other expenses to holders of Class A Shares, Class B Shares and Class
C Shares as they deem appropriate ("Class Expenses"). In any case,
Class Expenses would be limited to: distribution fees; transfer agent
fees as identified by the transfer agent as attributable to holders of
Class A Shares, Class B Shares, and Class C Shares; printing and
postage expenses related to preparing and distributing materials such
as shareholder reports, prospectuses and proxies to current
shareholders; registration fees paid to the Securities and Exchange
Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders
of Class A Shares, Class B Shares, and Class C Shares; legal fees
relating solely to Class A Shares, Class B Shares, or Class C Shares;
and Trustees' fees incurred as a result of issues related solely to
Class A Shares, Class B Shares, or Class C Shares.

- ------------------------------------------------------

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 utilize 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 Trustees.

- - ------------------------------------------------------

SHAREHOLDER INFORMATION

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

As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the
election of Trustees under certain circumstances.

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

- - ------------------------------------------------------

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.

The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and
losses realized by the Trust's other portfolios will not be combined
for tax purposes with those realized by the Fund.

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

In the opinion of Houston, Houston & Donnelley, counsel to the Trust,
Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.

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.

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 or 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, and Class C Shares. Expense differences among
Class A Shares, Class B Shares, and Class C Shares may affect the
performance of each class.

From time to time, advertisements for Class A Shares, Class B Shares,
and Class C 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, and Class C Shares to
certain indices.

- ----------------------------------------------------------------------------

- - --------------------------------------------------------------------------
FEDERATED AGGRESSIVE
GROWTH FUND
(A PORTFOLIO OF FEDERATED EQUITY
FUNDS)
CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company
November 15, 1996

LOGO
Cusip 314172875
Cusip 314172867
Cusip 314172859
G01925-01-ABC(11/96)

FEDERATED AGGRESSIVE GROWTH FUND
Class A Shares
Class B Shares
Class C Shares
(A Portfolio of Federated Equity Funds)

Supplement to Statement of Additional Information dated November 15, 1996

A. Please delete the last sentence of the section entitled
"Portfolio Turnover" on page 4 of the Statement of Additional
Information and replace it with the following two sentences.

"For the period from November 25, 1996 (date of
initial public investment) to April 30, 1997, the Fund's
portfolio turnover rate was 67%."

B. Please insert the following directly after the section entitled
"Federated Equity Funds Management" which begins on page 8 of
the Statement of Additional Information.

"Fund Ownership
Officers and Directors own less than 1% of the Fund's
outstanding shares.
As of May 7, 1997, the following shareholders of record owned
5% or more of the outstanding Class A Shares of the Fund: BHC
Securities Inc., Philadelphia, Pennsylvania, owned approximately
9,722.1440 shares (9.46%); Randall and Barbara Russell,
Pittsburgh, Pennsylvania, owned approximately 7,238.2450 shares
(7.04%); Donaldson Lufkin Jenrette, Jersey City, New Jersey,
owned approximately 7,028.3490 (6.84%); and Edward D. Jones &
Co. F/A/O Ruth Bartle, Maryland Heights, Missouri, owned
approximately 5,263.1580 (5.12%).
As of May 7, 1997, the following shareholders of record owned
5% or more of the outstanding Class C Shares of the Fund: State
Street Bank & Trust Custodian for the IRA Rollover of Dale E.
Stitzel, Hamilton, Ohio, owned approximately 2,527.8060 shares
(16.78%); State Street Bank & Trust Custodian for the IRA
Rollover of Robert L. Hoffman, Hamilton, Ohio, owned
approximately 1,503.8400 shares (9.98%); MLPF&S for the Sole
Benefit of Its Customers, Jacksonville, Florida, owned
approximately 1,156.0000 shares (7.67%); and Edward D. Jones &
Co. F/A/O Sidney J. Miles, Maryland Heights, Missouri owned
approximately 753.5330 shares (5.00%)."

C. Please delete the section entitled "Trustees Compensation" on page 12 of
the Statement of Additional Information and replace with the following.

"Trustees Compensation

Aggregate
Name, Compensation
Position With the From the Total Compensation
Paid
Trust Trust*# From Fund
Complex+

- -----------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue $0 $0 for the
Trust and 56 other investment
Chairman and Trustee companies in
the Fund Complex

Thomas G. Bigley $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

John T. Conroy, Jr. $1,439.95 $119,615 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

William J. Copeland $1,439.95 $119,615 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

James E. Dowd $1,439.95 $119,615 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Lawrence D. Ellis, M. D. $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Edward L. Flaherty, Jr. $1,439.95 $119,615 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Peter E. Madden $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Gregor F. Meyer $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

John E. Murray, Jr. $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Wesley W. Posvar $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

Marjorie P. Smuts $1,312.97 $108,725 for the
Trust and 56 other investment
Trustee
companies in the Fund Complex

- -----------------------------------------------------------------------------------------------------------

</TABLE>

* Information is furnished for the fiscal year ended October 31, 1996.

# The aggregate compensation is provided for the Trust which is
comprised of 4 portfolios.

+ The information is provided for the last calendar year."

D. Please insert the following as the second paragraph of the section
entitled "Advisory Fees" which
begins on page 13 of the Statement of Additional Information.

"For the period from November 25, 1996 (date of initial public
investment) to April 30, 1997, the Adviser earned management and
advisory fees of $11,364, all of which was waived."

E. Please insert the following as the final paragraph of the
section entitled "Brokerage
Transactions" on page 13 of the Statement of Additional Information.

"For the period from November 25, 1996 (date of initial public
investment) to April 30, 1997, the Fund paid
brokerage commissions in the amount of $6,889."

F. Please insert the following information as a second paragraph under the
sub-section entitled "Fund Administration"
on page 13 of the Statement of Additional Information.

"From the Fund's effective date, November 18, 1996 to April
30, 1997, the Fund incurred costs for administrative
services of $82,609."

<PAGE>

G. Please add the following as the fourth paragraph of the sub-section
entitled "Distribution Plan and Shareholder

Services Agreement" on page 14 of the Statement of Additional
Information.

"For the period from November 25, 1996 (date of initial
public investment) to April 30, 1997, payments in the amount
of $3,487 and $405 on behalf of Class B Shares and Class C Shares,
respectively, were made pursuant to the Plan. In addition, for the same
period, the Fund paid shareholder
services fees for Class A Shares, Class B Shares, and Class C
Shares in the amounts of $1,543, $1,162 and $135, respectively."

H. Please insert the following as the third paragraph of the section
entitled "Total Return" on page 16 of the
Statement of Additional Information.

"The Fund's cumulative total return for the Class A Shares
for the period between November 25, 1996 (date of initial
public investment) and April 30, 1997 was -12.97%.

The Fund's cumulative total return for the Class B Shares for
the period between November 25, 1996 (date of initial
public investment) and April 30, 1997 was -13.06%.

The Fund's cumulative total return for the Class C Shares for
the period between November 25, 1996 (date of initial
public investment) and April 30, 1997 was -9.27%."

May 30, 1997

Cusip 314172875
Cusip 314172867
Cusip 314172859
G02072-02(5/97)

Federated Aggressive Growth Fund

(A Portfolio of Federated Equity Funds)
Class A Shares
Class B Shares
Class C 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 stand-alone prospectus for Class A Shares of
Federated Aggressive Growth Fund (the "Fund") dated November 15,
1996. This Statement is not a prospectus itself. You may request
a copy of a prospectus or a paper copy of this Statement of
Additional Information, if you have received it electronically,
free of charge by calling 1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement dated November 15, 1996

<PAGE>

General Information About the Fund 1

Investment Objective and Policies 1
Types of Investments 1
Temporary Investments 2
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 3
Reverse Repurchase Agreements 3
Portfolio Turnover 3
Investment Limitations 3

Federated Equity Funds Management 8

Fund Ownership 11
Trustees Compensation 12
Trustee Liability 12

Investment Advisory Services 12

Adviser to the Fund 12
Advisory Fees 13
Other Related Services 13

Brokerage Transactions 13

Other Services 13
Fund Administration 13
Custodian 14
Transfer Agent 14
Independent Auditors 14

Purchasing Shares 14

Distribution Plan (Class B Shares and Class C Shares
Only) and Shareholder Services Agreement 14
Conversion to Federal Funds 14
Purchases by Sales Representatives, Trustees, and
Employees of the Fund 14

Determining Net Asset Value 15

Determining Market Value of Securities 15

Redeeming Shares 15

Redemption in Kind 15

Massachusetts Partnership Law 15

Exchanging Securities for Shares 16
Tax Consequences 16

Tax Status 16

The Fund's Tax Status 16
Shareholders' Tax Status 16

Total Return 16

Yield 17

Performance Comparisons 17

About Federated Investors 18
Mutual Fund Market 19
Institutional Clients 19
Trust Organizations 18
Broker/Dealers and Bank Broker/Dealer Subsidiaries 19

Appendix 20

<PAGE>

General Information About the Fund

The Fund is a portfolio of Federated Equity Funds (the "Trust"). The
Trust was established as a Massachusetts business trust under a
Declaration of Trust dated April 17, 1984, under the name "Federated
Growth Trust." The Trust later changed its name to "Federated Equity
Funds." The Declaration of Trust permits the Trust to offer separate
series and classes of shares. Shares of the Fund are offered in three
classes known as Class A Shares, Class B Shares, and Class C Shares
(individually and collectively referred to as "Shares" as the context
may require). This Statement of Additional Information relates to all
three classes of Shares.

Investment Objective and Policies

The Fund's investment objective is to provide appreciation of capital.

Types of Investments

The Fund may invest in common stocks, corporate securities other than
common stock, corporate debt securities, including notes and
debentures, and other corporate securities, including preferred
stocks, warrants and convertible securities.

Corporate Securities Other Than Common Stock

Corporate Debt Securities. Corporate debt securities may bear
fixed, fixed and contingent, or variable rates of interest.
They may involve equity features such as conversion or
exchange rights, warrants for the acquisition of common stock
of the same or a different issuer, participations based on
revenues, sales, or profits, or the purchase of common stock
in a unit transaction (where corporate debt securities and
common stock are offered as a unit).

The corporate debt securities (excluding convertible
securities) in which the Fund normally invests will be rated
investment grade, i.e., Baa or better by Moody's Investors
Service, Inc. ("Moody's"), or BBB or better by Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch") (or, if unrated, are deemed to be of comparable
quality by the Fund's investment adviser). It should be noted
that securities receiving the lowest investment grade rating
are considered to have some 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 securities. In the
event that a security which had an eligible rating when
purchased is downgraded below Baa or BBB, the investment
adviser will promptly reassess whether continued holding of
the security is consistent with the Fund's objective.
However, the Fund may invest up to 5% of its assets in
corporate debt obligations that are not investment-grade
bonds (excluding securities convertible into equity
securities) during the current fiscal year.

Other Corporate Securities. The Fund may invest in preferred stocks,
warrants, and convertible securities, rated investment grade, i.e.,
Baa or better by Moody's Investor Service, Inc. ("Moody's"), or BBB or
better by Standard & Poor's ratings Group (S&P) or Fitch Investor's
Services, Inc. ("Fitch") (or, if unrated, are deemed to be of
comparable quality by the Adviser), and warrants of these companies.
Corporate fixed income securities are subject to market and credit
risks. The prices of fixed income securities fluctuate inversely to
the direction of interest rates. In the event that a security which
had an eligible rating when purchased is downgraded below Baa or BBB,
the Adviser will promptly reassess whether continued holding of the
security is consistent with the Fund's objective. The Fund may invest
in corporate debt obligations that are not investment grade bonds or
are not rated but are determined by the Adviser to be of comparable
quality.

Securities which are rated BBB or lower by Standard & Poor's or Baa
or lower by Moody's either have speculative characteristics or are
speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. A
description of the rating categories is contained in the Appendix to
the Statement of Additional Information. There is no lower limit with
respect to rating categories for securities in which the Fund may
invest.

Corporate debt obligations that are not determined to be investment
grade are high-yield, high-risk bonds, typically subject to greater
market fluctuations and greater risk of loss of income and principal
due to an issuer's default. Lower-rated bonds or unrated bonds are
commonly referred to as "junk bonds." To a greater extent than
investment grade bonds, lower rated bonds tend to reflect short-term
corporate, economic and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower rated
bonds may be more difficult to dispose of or to value than high-rated,
lower-yielding bonds.

The Adviser attempts to reduce the risks described above
through diversification of the portfolio and by credit
analysis of each issuer as well as by monitoring broad
economic trends and corporate and legislative developments.

Restricted Securities

The Fund expects that any restricted securities would be acquired
either from institutional investors who originally acquired the
securities in private placements or directly from the issuers of the
securities in private placements. Restricted securities and securities
that are not readily marketable may sell at a discount from the price
they would bring if freely marketable.

The Trustees may consider the following criteria in
determining the liquidity of certain restricted
securities:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security
and the number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace
trades.

Temporary Investments

The Fund may also invest in temporary investments from time to time
for defensive purposes.

Money Market Instruments

The Fund may invest in the following money market
instruments:

o instruments of domestic and foreign banks and savings
associations if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount
of the instrument is insured in full by the Bank Insurance
Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC"), or the Savings Association
Insurance Fund, which is administered by the FDIC; and

o prime commercial paper (rated A-1 by S&P , Prime-1 by
Moody's, or F-1 by Fitch).

U.S. Government Obligations

The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury (such
as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These
securities are backed by:

o the full faith and credit of the U.S. Treasury;

o the issuer's right to borrow from the U.S. Treasury;

o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or

o the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are:

o Federal Home Loan Banks;

o Federal National Mortgage Association;

o Student Loan Marketing Association; and

o Federal Home Loan Mortgage Corporation.

When-Issued and Delayed Delivery Transactions

These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date.
These assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its
assets.

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 and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower
or placing broker. 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

The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked
to market daily. In the event that 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 and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's
Adviser to be creditworthy pursuant to guidelines established by the
Board of Trustees.

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial 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 are maintained until the
transaction is settled.

Put and Call Options

The Fund may purchase listed put options on stocks or write
covered call options to protect against price movements in
particular securities in its portfolio and generate income. A
put option gives the Fund, in return for a premium, the right
to sell the underlying security to the writer (seller) at a
specified price during the term of the option. As writer of a
call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying
security upon payment of the exercise price.

The Fund may only: (1) buy put options which are listed on a
recognized options exchange and which are on securities held
in its portfolio; and (2) sell listed call options either on
securities held in its portfolio or on securities which it
has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any
such additional consideration). The Fund will maintain its
positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised,
closed, or expire. An option position may be closed out only
on an exchange which provides a secondary market for an
option of the same series. Although the Adviser will consider
liquidity before entering into option transactions, there is
no assurance that a liquid secondary market on an exchange
will exist for any particular option or at any particular
time. The Fund reserves the right to hedge the portfolio by
buying financial futures and put options on stock index
futures and financial futures.

Futures Transactions

The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and market conditions
without necessarily buying or selling the securities. The Fund also
may purchase and sell stock index futures to hedge against changes in
prices. the Fund will not engage in futures transactions for
speculative purposes.

Financial Futures Contracts

A futures contract is a firm commitment by two parties: the
seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going
long") at a certain time in the future.

In the fixed-income securities market, price moves inversely
to interest rates. A rise in rates means a drop in price.
Conversely, a drop in rates means a rise in price. In order
to hedge its holdings of fixed-income securities against a
rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility
that the prices of its fixed-income securities may decline
during the Fund's anticipated holding period. The Fund would
"go long" (agree to purchase securities in the future at a
predetermined price) to hedge against a decline in market
interest rates.

Stock index futures contracts are based on indices that
reflect the market value of common stock of the firms
included in the indices. An index futures contract is an
agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the differences
between the value of the index at the close of the last
trading day of the contract and the price at which the index
contract was originally written.

"Margin" in Futures Transactions

Unlike the purchase or sale of a security, the Fund does not
pay or receive money upon the purchase or sale of a futures
contract. Rather, the Fund is required to deposit an amount
of "initial margin" in cash or U.S. Treasury bills with its
custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from
that of margin in securities transactions in that futures
contract initial margin does not involve the borrowing of
funds by the Fund to finance the transactions. Initial margin
is in the nature of a performance bond or good-faith deposit
on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.

A futures contract held by the Fund is valued daily at the
official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund
and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset
value, the Fund will mark to market its open futures
positions.

The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.

Portfolio Turnover

The Fund will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in
an attempt to achieve the Fund's investment objective. Portfolio
turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. A higher turnover rate (100%
or more) increases transaction costs (e.g. brokerage commissions) and
increases realized gains and losses. It is estimated the rate of
portfolio turnover will, generally, not exceed 250 %.

Investment Limitations

The following limitations are fundamental, except that no investment
limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not
considered "investment securities" under the Investment Company Act of
1940, or assets exempted by the Securities and Exchange Commission) in
an open-end investment company with substantially the same investment
objectives:

Concentration of Investments

The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would
be invested in any one industry. However, the Fund may at
times invest 25% or more of the value of its total assets in
cash or cash items (not including certificates of deposit),
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or repurchase agreements
secured by such instruments.

Investing in Commodities

The Fund will not purchase or sell commodities. The Fund
reserves the right to purchase financial futures and put
options on stock index futures and on financial futures.

Investing in Real Estate

The Fund will not purchase or sell real estate, although it
may invest in the securities of companies whose business
involves the purchase or sale of real estate, or in
securities which are secured by real estate or interests in
real estate.

Buying on Margin

The Fund will not purchase any securities on margin but may
obtain such short-term credits as may be necessary for the
clearance of transactions and may make margin payments in
connection with buying financial futures, put options on
stock index futures, and put options on financial futures.

Selling Short

The Fund will not sell securities short unless at all times
when a short position is open, it owns an equal amount of
such securities or securities convertible into or
exchangeable, without payment of any further consideration,
for securities of the same issuer as, and equal in amount to,
the securities sold short; and unless not more than 10% of
the value of the Fund's net assets (taken at current value)
is held as collateral for such sales at any one time.

Issuing Senior Securities and Borrowing Money

The Fund will not issue senior securities, except as
permitted by its investment objective and policies, and
except that the Fund may borrow money and engage in reverse
repurchase agreements only in amounts up to one-third of the
value of its net assets, including the amounts borrowed. The
Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure, or to
facilitate management of the portfolio by enabling the Fund
to meet redemption requests where the liquidation of
portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities
while any such borrowings (including reverse repurchase
agreements) are outstanding.

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
corporate or government 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 Declaration of Trust.

Underwriting

The Fund will not underwrite any issue of securities, except
as it may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in
accordance with its investment objective, policies, and
limitations.

Investing in Minerals

The Fund will not purchase interests in oil, gas, or other
mineral exploration or development programs, although it may
purchase the securities of issuers which invest in or sponsor
such programs.

Diversification of Investments

With respect to securities comprising 75% of the value of its
total assets, the Fund will not purchase the securities of
any issuer (other than cash, cash items, or securities issued
or guaranteed by the U.S. government, its agencies, or
instrumentalities, and repurchase agreements collateralized
by such securities) if, as a result, more than 5% of the
value of its total assets would be invested in the securities
of such issuer and will not acquire more than 10% of the
outstanding voting securities of any issuer. For these
purposes, the Fund takes all common stock and all preferred
stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval, except that no investment
limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not
considered "investment securities" under the Investment Company Act of
1940, or assets exempted by the Securities and Exchange Commission) in
an open-end investment company with substantially the same investment
objective. Shareholders will be notified before any material changes
in these limitations become effective.

Investing in Securities of Other Investment Companies

The Fund will not purchase securities of other investment
companies, except by purchases in the open market involving
only customary brokerage commissions and as a result of which
not more than 10% of the value of its total assets would be
invested in such securities, or except as part of a merger,
consolidation, or other acquisition. (It should be noted that
investment companies incur certain expenses such as
management fees and, therefore, any investment by the Fund in
shares of another investment company would be subject to such
duplicate expenses.)

Investing in Illiquid Securities

TheFund will not invest more than 15% of the value of its
net assets in illiquid securities, including certain
restricted securities not determined by the Trustees to be
liquid, over-the-counter options, and repurchase
agreements providing for settlement in more than seven
days after notice.

Investing in New Issuers

The Fund will not invest more than 50% of the value of its
total assets in securities of issuers which have records of
less than three years of continuous operations, including the
operation of any predecessor.

Investing in Issuers Whose Securities are Owned by Officers and Trustees
of the Trust

The Fund will not purchase or retain the securities of any
issuer if the Officers and Trustees of the Trust or the
Fund's Adviser, owning individually more than 1/2 of 1% of
the issuer's securities, together own more than 5% of the
issuer's securities.

Pledging Assets

The Fund will not mortgage, pledge, or hypothecate any
assets, except to secure permitted borrowings. In those
cases, it may pledge assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 10% of
the value of total assets at the time of the borrowing.

Purchasing Put Options

The Fund will not purchase put options on securities unless
the securities are held in the Fund's portfolio and not more
than 5% of the value of the Fund's total assets would be
invested in premiums on open put options.

Writing Covered Call Options
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the
Fund is entitled to them in deliverable form without further
payment or after segregating cash in the amount of any
further payment.

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 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, Trustees and other persons
associated with the Fund and its affiliates might possibly
become directors of companies in which the Fund holds stock.

Investing In Warrants

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 or American Stock Exchanges. Warrants acquired in units
or attached to securities may be deemed to be without value
for purposes of this policy.

For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be "cash items."

Except with respect to 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 has no intent to
borrow money or invest in reverse repurchase agreements in excess of
5% of the value of its total assets in the coming fiscal year.

In addition to the limitations set forth above, the Fund will not
purchase or sell real estate limited partnership interests or oil,
gas, or other mineral leases, except that the Fund may purchase or
sell securities of companies which invest in or hold the foregoing.

<PAGE>

Federated Equity Funds Management

Officers and Trustees are listed with their addresses, birthdates,
present positions with Federated Equity Funds, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924

Chairman

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 of the Fund.

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.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Trustee, 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

Trustee

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

Trustee

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

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Directoror or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932

Trustee

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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee

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
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942

Trustee

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.

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

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; 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

Trustee

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

Trustee

Professor, International Politics; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University, U.S. Space
Foundation and Czech Management Center; President Emeritus, University
of Pittsburgh; Founding Chairman, National Advisory Council for
Environmental Policy and Technology, Federal Emergency Management
Advisory Board and Czech Management Center; Director or Trustee of the
Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning, Manchester
Craftsmen's Guild; Restaurant Consultant, Frick Art & History Center;
Conference Coordinator, University of Pittsburgh Art History
Department; Director or Trustee of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949

Executive Vice President

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, Chairman of the Trust.

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.

Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929

President

Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Shareholder Services.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

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; Treasurer of some of the
Funds.

*This Trustee 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 Trustees 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 American Leaders 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.; 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 Trustees own less than 1% of the Fund's outstanding
Shares.

<PAGE>

Trustees Compensation
<TABLE>
<CAPTION>

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

- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in
the Fund Complex

Thomas G. Bigley $0 $20,688 for the Trust and
Trustee 49 other investment companies in
the Fund Complex

John T. Conroy, Jr. $1472 $117,202 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

William J. Copeland $1472 $117,202 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

James E. Dowd $1472 $117,202 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

Lawrence D. Ellis, M.D. $1342 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

Edward L. Flaherty, Jr. $1472 $117,202 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

Peter E. Madden $1131 $90,563 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

Gregor F. Meyer $1342 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

John E. Murray $777 $0 for the Trust and
Trustee 69 other investment companies in
the Fund Complex

Wesley W. Posvar $1342 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

Marjorie P. Smuts $1342 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex

</TABLE>

*Information is furnished for the fiscal year ended October 31, 1995.

+The information is provided for the last calendar year.

Trustee Liability

The Trust's Declaration of Trust provides that the Trustees 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 misfeasance, 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 Management (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 Trust, the Fund, or any
shareholder of the Fund 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 Trust.

Advisory Fees

For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.

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.

Other Related Services

Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order
to facilitate the purchase of shares of funds offered by Federated
Securities Corp.

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.

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 prospectus. Dr. Henry J. Gailliot, an officer of
Federated Management, 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

State Street Bank and Trust Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600, 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, P.O. Box 8600, Boston, Massachusetts
02266-8600, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder
records and serves as transfer agent for the Fund. For its services,
the transfer agent receives a fee based upon the size, type, and
number of accounts and transactions made by shareholders. Federated
Services Company also maintains the Fund's accounting records. 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.

Independent Auditors

The independent auditors for the Fund are Ernst & Young LLP, One
Oxford Centre, Pittsburgh, Pennsylvania 15219.

Purchasing Shares

Except under certain circumstances described in the prospectus, Shares
are sold at their net asset value (plus a sales charge on Class A
Shares only) on days the New York Stock Exchange is open for business.
The procedure for purchasing Shares is explained in each prospectus
under "How To Purchase Shares."

Distribution Plan (Class B Shares and Class C Shares Only) and Shareholder
Services Agreement

These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder Services as
appropriate, 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 Trustees expect that the Class B Shares and Class C Shares
of 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 objective. By identifying potential investors whose
needs are served by the Fund's objective, 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.

Conversion to Federal Funds

It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds before shareholders begin to earn dividends. Federated Services
Company acts as the shareholder's agent in depositing checks and
converting them to federal funds.

Purchases by Sales Representatives, Trustees, and Employees of the Fund

Trustees, employees, and sales representatives of the Fund, Federated
Management, and Federated Securities Corp., or their affiliates, or
any investment dealer who has a sales agreement with Federated
Securities Corp., and their spouses and children under 21, may buy
Class A 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.

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 each
prospectus.

Determining Market Value of Securities

Market values of the Fund's portfolio securities, other than options,
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
for unlisted equity securities, the latest bid prices; or

o for short-term obligations, according to the mean between
bid and asked prices as furnished by an independent
pricing service or at fair value as determined in good
faith by the Trustees.

Options are valued at the market values established by the exchanges
at the close of option trading unless the Trustees determine in good
faith that another method of valuing option positions is necessary.

Redeeming Shares

The Fund redeems Shares at the next computed net asset value, less any
applicable contingent deferred sales charge, after the Fund receives
the redemption request. Redemption procedures are explained in each
prospectus under "How To Redeem 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.

Class B Shares redeemed within one to six years of purchase and Class
C Shares and applicable Class A Shares redeemed within one year of
purchase may be subject to a contingent deferred sales charge. The
amount of the contingent deferred sales charge is based upon the
amount of the administrative fee paid at the time of purchase by the
distributor to the financial institution for services rendered, and
the length of time the investor remains a shareholder in the Fund.
Should financial institutions elect to receive an amount less than the
administrative fee that is stated in the prospectus for servicing a
particular shareholder, the contingent deferred sales charge and/or
holding period for that particular shareholder will be reduced
accordingly.

Redemption in Kind

Although the Trust 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 respective Fund's
portfolio. To the extent available, such securities will be readily
marketable.

The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, as amended, under which the Fund is obligated to
redeem Shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of the respective class's net asset value during any
90-day period.

Any redemption beyond this amount will also be in cash unless the
Trustees determine that payments should be in kind. In such a case,
the Fund will pay all or a portion of the remainder of the redemption
in portfolio instruments, valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a manner that the Trustees deem fair and equitable.

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.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for obligations of the
Trust. To protect its shareholders, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
its shareholders for acts or obligations of the Trust. These documents
require notice of this disclaimer to be given in each agreement,
obligation, or instrument the Trust or its Trustees enter into or
sign.

In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required to use its property to
protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss
resulting from liability as a shareholder will occur only if the Trust
itself cannot meet its obligations to indemnify shareholders and pay
judgments against them.

Exchanging Securities for Shares

Investors may exchange securities they already own for Shares, or they
may exchange a combination of securities and cash for Shares. An
investor should forward the securities in negotiable form with an
authorized letter of transmittal to Federated Securities Corp. The
Fund will notify the investor of its acceptance and valuation of the
securities within five business days of their receipt by State Street
Bank.

The Fund values securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value
of Shares on the day the securities are valued. One Share of the Fund
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, 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.

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 of 1986, as
amended, 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. No portion of any
income dividend paid by the Fund is eligible for the dividends
received deduction available to corporations. These 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 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 net asset value of Shares
redeemed.

Cumulative total return reflects total performance over a specified
period of time. This total return assumes and is reduced by the
payment of the maximum sales charge and/or the contingent deferred
sales charge, if applicable.

Yield
- --------------------------------------------------------------------------

The yield for each class of Shares of the Fund is determined by
dividing the net investment income per share (as defined by the
Securities and Exchange Commission) earned by any 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
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
Securities and Exchange Commission 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 any class of Shares, the performance will be reduced for
those shareholders paying those fees.

Performance Comparisons

The performance of each of the classes 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 any class of Shares' expenses; and

o various other factors.

The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per Share fluctuate daily. Both net
earnings and offering price 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
specified period of time. From time to time, the Fund will
quote its Lipper ranking in advertising and sales
literature.

o Dow Jones Industrial Average ("DJIA") is an unmanaged
index representing share prices of major industrial
corporations, public utilities, and transportation
companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.

o Standard & Poor's Low-Priced Index compares a group of
approximately twenty actively traded stocks priced under
$25 for one month periods and year-to-date.

o Standard & Poor's Daily Stock Price Index Of 500 Common
Stocks (S&P 500), a composite index of common stocks in
industry, transportation, and financial and public utility
companies, can be used to compare to the total returns of
funds whose portfolios are invested primarily in common
stocks. In addition, the S&P 500 assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor
are brokerage or other fees calculated in 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 one month.

o Value Line Mutual Fund Survey, published by Value Line
Publishing, Inc., analyzes price, yield, risk, and total
return for equity and fixed income mutual funds. The
highest rating is One, and ratings are effective for one
month.

o CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc., analyzes price, current yield, risk,
total return, and average rate of return (average annual
compounded growth rate) over specified time periods for
the mutual fund industry.

o Strategic Insight Mutual Fund Research And Consulting,
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 specified period of
time. From time to time, the Fund will quote its Strategic
Insight ranking in the "growth funds" category in
advertising and sales literature.

o Mutual Fund Source Book, published by Morningstar, Inc.,
analyzes price, yield, risk, and total return for equity
and fixed income funds.

o Value Line Composite Index consists of approximately 1,700
common equity securities. It is based on a geometric
average of relative price changes of the component stocks
and does not include income.

o Financial Publications: The Wall Street Journal, Business Week,
Changing Times, Financial World, Forbes, Fortune, and Money
Magazines, among others--provide performance statistics
over specified time periods.

Advertisements and other sales literature for any class 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 any class of Shares based on quarterly
reinvestment of dividends over a specified period of time.

Advertisements may quote performance information which does not
reflect the effect of the sales charge on Class A 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 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's equity management 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's
equity and high yield corporate bond management while William D.
Dawson, Executive Vice President, oversees Federated's domestic fixed
income management. Henry A. Frantzen, Executive Vice President,
oversees the management of Federated's 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 $3 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.

*source: Investment Company Institute

<PAGE>

Appendix

Standard & Poor's Ratings Group Corporate and Municipal Bond Rating Definitions

AAA--Debt rated AAA has the highest rating assigned by S&P. 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
effects 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.

NR--NR indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of policy.
S&P's may apply a plus (+) or minus (-) to the above rating
classifications to show relative standing within the classifications.

Moody's Investors Service, Inc. Corporate and Municipal Bond Rating 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.

NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2
and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.

Fitch Investors Service, Inc. Long-Term Debt Ratings

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 to be 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 with higher ratings.

Fitch Investors Service, Inc. Short-Term Debt Ratings

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect
an assurance for timely payment only slightly less in degree than
issues rated "F-1+".

Standard and Poor's Ratings Group Commercial Paper Rating Definitions

A-1--This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a plus sign
(+).

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1".

Moody's Investors Service, Inc. Commercial Paper Rating Definitions

P-1--Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior capacity for repayment of senior short-term promissory
obligations. P-1 repayment capacity will often be evidenced by many of
the following characteristics:

o Leading market positions in well-established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.

o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.

Well-established access to a range of financial markets and assured
sources of alternate liquidity.

P-2--Issuers (or supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics cited
above, but to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Cusip 314172875
Cusip 314172867
Cusip 314172859
G01925-02(11/96)

<TABLE>

PART C. OTHER INFORMATION.

<S> <C>
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (1-3) Incorporated by reference to each portfolio's Annual Report dated
October 31, 1996, pursuant to Rule 411 under the Securities Act of 1933. (File Nos. 2-91090
and 811-4017) (4) Filed in Part A.

(b) Exhibits:
(1) Conformed copy of Declaration of Trust of the
Registrant; (11)
(i) Conformed copy of Amended and Restated Declaration of Trust;
(12)
(2) Copy of By-Laws of the Registrant as amended ; (11)
(i) Copy of Amendment No. 2 to By-Laws effective February 2, 1987 ; (11)
(ii) Copy of Amendment No. 3 to By-Laws effective August 25, 1988; (11)
(iii) Copy of Amended and Restated By-Laws effective August 15, 1995; (12)
(3) Not applicable;
(4) (i) Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (Federated Small Cap Strategies Fund) ;(7)
(ii) Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (Federated Growth Strategies Fund); (8)
(iii) Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (Federated Capital Appreciation Fund); (9)
(iv) Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (Federated Aggressive Growth Fund); (13)
(5) (i) Conformed copy of Investment Advisory Contract on behalf of Federated Growth
Trust; (6)
(ii) Conformed copy of Investment Advisory Contract on behalf of Federated Equity
Funds, which includes
.........
+ All exhibits have been filed electronically.
6. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 20 on Form N-1A filed
December 29, 1994. (File Nos. 2-91090 and 811-4017)
7. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 21 on Form N-1A filed
June 30, 1995. (File Nos. 2-91090 and 811-4017)
8. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 22 on Form N-1A filed
July 17, 1995. (File Nos. 2-91090 and 811-4017)
9. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 25 on Form N-1A filed
August 31, 1995. (File Nos. 2-91090 and 811-4017)
11. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 31 on Form N-1A filed
June 11, 1996. (File Nos. 2-91090 and 811-4017)
12. Response is incorporated by reference to Registrant's Post-Effective Amendment No.30 on Form N-1A filed
May 31, 1996. (File Nos. 2-91090 and 811-4017)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed December 30, 1996. (File Nos. 2-91090 and 811-4017)

<PAGE>

exhibits A and B for Federated Small Cap Strategies Fund and Federated Capital
Appreciation Fund, respectively; (10)
(iii) Conformed copy of Exhibit C to the Investment Advisory Contract for Federated
Aggressive Growth Fund; +
(6) Conformed copy of Distributor's Contract; (10)
(i) Conformed copy of Exhibit A to the
Distributor's Contract for
Federated Small Cap Strategies
Fund, Class A Shares; (10)
(ii) Conformed copy of Exhibit B to the
Distributor's Contract for
Federated Small Cap Strategies
Fund, Class B Shares; (10)
(iii) Conformed copy of Exhibit C to the
Distributor's Contract for
Federated Small Cap Strategies
Fund, Class C Shares; (10)
(iv) Conformed copy of Exhibit D to the
Distributor's Contract for
Federated Growth Strategies Fund,
Class A Shares; (10)
(v) Conformed copy of Exhibit E to the
Distributor's Contract for
Federated Growth Strategies Fund,
Class B Shares; (10)
(vi) Conformed copy of Exhibit F to the
Distributor's Contract for
Federated Growth Strategies Fund,
Class C Shares; (10)
(vii) Conformed copy of Exhibit G to the
Distributor's Contract for
Federated Capital Appreciation
Fund, Class A Shares; (10)
(viii) Conformed copy of Exhibit H to the
Distributor's Contract for
Federated Capital Appreciation
Fund, Class B Shares; (10)
(ix) Conformed copy of Exhibit I to the
Distributor's Contract for
Federated Capital Appreciation
Fund, Class C Shares; (10)
(x) Conformed copy of Exhibit J to the
Distributor's Contract for
Federated Aggressive Growth Fund,
Class A Shares; +
(xi) Conformed copy of Exhibit K to the
Distributor's Contract for
Federated Aggressive Growth Fund,
Class B Shares; +
(xii) Conformed copy of Exhibit L to the
Distributor's Contract for
Federated Aggressive Growth Fund,
Class C Shares; +
(xiii) The Registrant hereby incorporates
the conformed copy of the specimen
Mutual Funds Sales and Service
Agreement; Mutual Funds Service
Agreement; and Plan Trustee/Mutual
Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series
II Registration Statement on Form
N-1A, filed with the Commission on
July 24, 1995. (File No. 33-38550
and 811-6269).
(7) Not applicable;
(8) Conformed Copy of the Custodian Agreement of the Registrant; (6)
- --------------------------
+ All exhibits have been filed electronically.
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed December 29, 1994. (File Nos. 2-
91090 and 811-4017)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed September 12, 1995. (File Nos. 2-
91090 and 811-4017)

(9) The Registrant hereby incorporates by
reference the conformed copy of the
Shareholder Services Sub-Contract between
Fidelity and Federated Shareholder Services
from Item 24(b)(9)(iii) of the Federated
GNMA Trust Registration Statement on Form
N-1A, filed with the Commission on March
25, 1996 (File Nos. 2-75670 and 811-3375).
(i) Conformed copy of Shareholder Services
Agreement of the Registrant; (6) (ii)
Conformed copy of Administrative Services
Agreement of the Registrant; (6)
(iii) Conformed Copy of Agreement for Fund Accounting, Shareholder Recordkeeping,
and Custody Services Procurement; (6)
(iv) The responses and exhibits
described in Item 24(b)(6) are
hereby incorporated by reference.
(10) Conformed copy of the Opinion and Consent of Counsel regarding legality of shares being
registered; (6)
(11) Not applicable;
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding; (2)
(14) Not applicable;
(15) Conformed Copy of Distribution Plan; (10)
(i) Conformed copy of Exhibit A to the Distribution Plan for Federated Small Cap
Strategies Fund, Class A Shares; (10)
(ii) Conformed copy of Exhibit B to the Distribution Plan for Federated Small Cap Strategies
Fund, Class B Shares; (10)
(iii) Conformed copy of Exhibit C to the Distribution Plan for Federated Small Cap
Strategies Fund, Class C Shares; (10)
(iv) Conformed copy of Exhibit D to the Distribution Plan for Federated Growth
Strategies Fund, Class B Shares; (10)
(v) Conformed copy of Exhibit E to the Distribution Plan for Federated Growth
Strategies Fund, Class C Shares;
(10)
(vi) Conformed copy of Exhibit F to the Distribution Plan for Federated Capital
Appreciation Fund, Class A Shares; (10)
(vii) Conformed copy of Exhibit I to the
Distribution Plan for Federated
Aggressive Growth Fund, Class A
Shares;+
(viii) Conformed copy of Exhibit J to the
Distribution Plan for Federated
Aggressive Growth Fund, Class B
Shares;+
(ix) Conformed copy of Exhibit K to the
Distribution Plan for Federated
Aggressive Growth Fund, Class C
Shares;+
(16) Copy of Schedule for Computation of Fund Performance
Data for Federated Growth Trust, the predecessor to
Federated Growth Strategies Fund; (6) + All exhibits
have been filed electronically.
2. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 1 on Form N-1A filed
February 28, 1985. (File Nos. 2-91090 and 811-4017)
6. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 20 on Form N-1A filed
December 29, 1994. (File Nos. 2-91090 and 811-4017)
10. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 26 on Form N-1A filed
September 12, 1995. (File Nos. 2-91090 and 811-4017)

</TABLE>

<PAGE>

(i) Copy of Schedule for Computation of Fund
Performance Data for the
Federated Aggressive Growth Fund; +
(17) Copy of Financial Data Schedules; +
(18) The Registrant hereby incorporates the conformed
copy of the specimen Mulitiple Class
Plan from Item 24(b)(18) of the World Investment
Series, Inc. Registration
Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
(19) Conformed copy of Power of Attorney. (13)

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of May 7, 1997
- -------------- -----------------

Shares of Beneficial Interest
(no par value)

Federated Growth Strategies Fund
Class A Shares 17,422
Class B Shares 2,329
Class C Shares 828

Federated Small Cap Strategies Fund
Class A Shares 5,120
Class B Shares 9,550
Class C Shares 1,179

Federated Capital Appreciation Fund.........
Class A Shares 1,398
Class B Shares 1,696
Class C Shares 442

Federated Agressive Growth Fund
Class A Shares 1,216
Class B Shares 1,239
Class C Shares 1,055

Item 27. Indemnification: (1)

+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed
July 9, 1984. (File Nos. 2-91090 and 811-4017)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed
December 30, 1996. (File Nos. 2-91090 and 811-4017)

<PAGE>

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of the
investment adviser, see the section entitled "Trust
Information - Management of the Trust" in Part A.
The affiliations with the Registrant of four of the
Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration
Statement under "Federated Equity Funds Management."
The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D.
Olson (Partner, Wilson, Halbrook & Bayard), 107 West
Market Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are: William D.
Dawson,III, Henry A. Frantzen, and J. Thomas Madden, Executive Vice
Presidents; Peter R. Anderson, Drew J. Collins, Jonathan C. Conley,
Deborah A. Cunningham, Mark E. Durbiano, J. Alan Minteer, and Mary Jo
Ochson, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall S. Bauer, David F. Belton, Christine A. Bosio,
David A. Briggs, Kenneth J. Cody, Alexandre de Bethmann, Linda A.
Duessel, Michael J. Donnelly, Michael P. Donnelly, Kathleen M.
Foody-Malus, Thomas M. Franks; Edward C. Gonzales, James E.
Grefenstette, Susan R. Hill, Stephen A. Keen, Robert M. Kowit, Jeff A.
Kozemchak, Marian R. Marinack, Sandra L. McInerney, Susan M. Nason,
Robert J. Ostrowski, Charles A. Ritter, Frank Semack, Aash M. Shah,
Scott B. Schermerhorn, William F. Stotz, Tracy P.Stouffer, Edward J.
Tiedge, Paige M. Wilhelm, Jolanta M. Wysocka, Vice Presidents; Todd A.
Abraham, Stefanie L. Bachhuber, Michael W. Casey, William R. Jamison,
Constantine Kartsonsas, Robert M. March, Joseph M. Natoli, Keith J.
Sabol, and Michael W. Sirianni, Assistant Vice Presidents; Stephen A.
Keen, Secretary; Thomas R. Donahue, Treasurer and Assistant Secretary;
Richard B. Fisher, Assistant Secretary and Assistant Treasurer;
Christine I. McGonigle, Assistant Secretary. The business address of
each of the Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the Funds listed
in Part B of this Registration Statement.

Item 29. Principal Underwriters:

(a) 111 Corcoran Funds; Arrow Funds; Automated Government Money
Trust; BayFunds; 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 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; Independence One Mutual
Funds; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Biltmore Funds; The Biltmore Municipal Funds; The Monitor Funds; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Tower Mutual Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision
Group of Funds, Inc.; Wesmark Funds; and World Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company:
Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
<S> <C> <C>
Richard B. Fisher Director, Chairman, Chief Vice President Federated
Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Exec. Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

</TABLE>

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:

Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Administrative Services
("Administrator")
Federated Management
("Adviser")

Federated Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, MA 02266-8600
Disbursing Agent")

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling
of special shareholder meetings by shareholders.

Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, the Registrant,
FEDERATED EQUITY FUNDS (formerly, Federated Growth Trust), has duly
caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 29th day of May,
1997.

FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)

BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
May 29, 1997

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to its Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:

NAME TITLE DATE

By: /s/ S. Elliott Cohan Attorney In Fact May 29, 1997
S. Elliott Cohan For the Persons
ASSISTANT SECRETARY Listed Below

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Glen R. Johnson* President

John W. McGonigle* Executive Vice President,
Treasurer and Secretary
(Prinicipal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr.* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.

Cusip 314172867

G01971-01 (12/96)

FEDERATED AGGRESSIVE GROWTH FUND
(A Portfolio of Federated Equity Funds)
Class B Shares

Supplement to Prospectus dated November 15, 1996

Please delete in its entirety the section entitled "Elimination of
Contingent Deferred Sales Charge" which begins on page 21 and replace
with the following:

"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 the last
surviving 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; (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the
minimum balance requirements; and (4) qualifying redemptions
of Class B Shares under a Systematic Withdrawal Program. To
qualify for elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, the
redemptions of Class B Shares must be from an account: that
is at least 12 months old, has all Fund distributions
reinvested in Fund Shares, and has a value of at least
$10,000 when the Systematic Withdrawal Program is
established. Qualifying redemptions may not exceed 1.00%
monthly of the account value as periodically determined by
the Fund. For more information regarding the elimination of
the contingent deferred sales charge through a Systematic
Withdrawal Program contact your financial intermediary or the
Fund. No contingent deferred sales charge will be imposed on
redemptions of Shares held by Trustees, 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 Fund
reserves the right to discontinue or modify the elimination
of the contingent deferred sales charge. Shareholders will be
notified of a discontinuation. 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 the shareholder is entitled to such
elimination."

December 20, 1996

Exhibit 5(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

EXHIBIT C
to the
Investment Advisory Contract

Federated Aggressive Growth Fund

For all services rendered by Adviser hereunder, the
above-named Fund of the Trust shall pay to Adviser and Adviser agrees
to accept as full compensation for all services rendered hereunder, an
annual investment advisory fee equal to 1% of the average daily net
assets of the Fund.

The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of 1/365th of 1%
applied to the daily net assets of the Fund.

The advisory fee so accrued shall be paid to Adviser daily.

Witness the due execution hereof this December 1, 1996.

Attest: Federated Management

/s/ Stephen A. Keen By: /s/ J. Thomas Madden
Secretary Executive Vice President

Attest: Federated Equity Funds

/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Assistant Secretary Vice President:

Page 1

Exhibit 6(x) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit J
to the
Distributor's Contract

FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class A Shares

The following provisions are hereby incorporated and made
part of the Distributor's Contract dated June 1, 1995, between
Federated Equity Funds and Federated Securities Corp. with respect to
the Class of shares set forth above.

1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class ("Shares").
Pursuant to this appointment, FSC is authorized to
select a group of financial institutions ("Financial
Institutions") to sell Shares at the current
offering price thereof as described and set forth in
the respective prospectuses of the Trust.

2. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .25 of 1%
of the average aggregate net asset value of the
Shares held during the month. For the month in which
this Agreement becomes effective or terminates,
there shall be an appropriate proration of any fee
payable on the basis of the number of days that the
Agreement is in effect during the month.

3. FSC may from time-to-time and for such periods as it
deems appropriate reduce its compensation to the
extent any Class' expenses exceed such lower expense
limitation as FSC may, by notice to the Trust,
voluntarily declare to be effective.

4. FSC will enter into separate written agreements with
various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole
discretion, may pay Financial Institutions a
periodic fee in respect of Shares owned from time to
time by their clients or customers. The schedules of
such fees and the basis upon which such fees will be
paid shall be determined from time to time by FSC in
its sole discretion.

5. FSC will prepare reports to the Board of Trustees of
the Trust on a quarterly basis showing amounts
expended hereunder including amounts paid to
Financial Institutions and the purpose for such
expenditures.

In consideration of the mutual covenants set forth in the
Distributor's Contract dated June 1, 1995 between Federated Equity
Funds and Federated Securities Corp., Federated Equity Funds executes
and delivers this Exhibit with respect to the Class A Shares thereof,
first set forth in this Exhibit.

Witness the due execution hereof this 1st day of December,
1996.

ATTEST: Federated Equity Funds

/s/ John W. McGonigle By:/s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/S/ Byron F. Bowman By:/s/ David M. Taylor
Secretary Executive Vice President
(SEAL)

Exhibit 6(xi) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit K
to the
Distributor's Contract

FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class B Shares

2. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the
Shares held during the month. For the month in which
this Agreement becomes effective or terminates,
there shall be an appropriate proration of any fee
payable on the basis of the number of days that the
Agreement is in effect during the month.

Witness the due execution hereof this 1st day of December,
1996.

ATTEST: Federated Equity Funds

/s/ John W. McGonigle By:/s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/S/ Byron F. Bowman By:/s/ David M. Taylor
Secretary Executive Vice President
(SEAL)

Exhibit 6(xii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit L
to the
Distributor's Contract

FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class C Shares

Witness the due execution hereof this 1st day of December,
1996.

ATTEST: Federated Equity Funds

/s/ John W. McGonigle By:/s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/S/ Byron F. Bowman By:/s/ David M. Taylor
Secretary Executive Vice President
(SEAL)

Page 1

Exhibit 15(vii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT I
to the
Distribution Plan
Federated Equity Funds

Federated Aggressive Growth Fund
Class A Shares

This Distribution Plan is adopted by Federated Equity Funds
with respect to the Class of Shares of the Trust set forth above.

In compensation for the services provided pursuant to this
Plan, FSC will be paid a monthly fee computed at the annual rate of
.25 of 1% of the average aggregate net asset value of the Class A
Shares of Federated Aggressive Growth Fund held during the month.

Witness the due execution hereof this 1st day of December,
1996.

Federated Equity Funds

By:/s/ Glen R. Johnson
President

<PAGE>

Exhibit 15(viii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT J
to the
Distribution Plan
Federated Equity Funds

Federated Aggressive Growth Fund
Class B Shares

This Distribution Plan is adopted by Federated Equity Funds
with respect to the Class of Shares of the Trust set forth above.

In compensation for the services provided pursuant to this
Plan, FSC will be paid a monthly fee computed at the annual rate of
.75 of 1% of the average aggregate net asset value of the Class B
Shares of Federated Aggressive Growth Fund held during the month.

Witness the due execution hereof this 1st day of December,
1996.

Federated Equity Funds

By:/s/ Glen R. Johnson
President

<PAGE>

Exhibit 15(ix) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT K
to the
Distribution Plan
Federated Equity Funds

Federated Aggressive Growth Fund
Class C Shares

This Distribution Plan is adopted by Federated Equity Funds
with respect to the Class of Shares of the Trust set forth above.

In compensation for the services provided pursuant to this
Plan, FSC will be paid a monthly fee computed at the annual rate of
.75 of 1% of the average aggregate net asset value of the Class C
Shares of Federated Aggressive Growth Fund held during the month.

Witness the due execution hereof this 1st day of December,
1996.

Federated Equity Funds

By:/s/ Glen R. Johnson
President

Exhibit 16(i) under Form N-1A

Exhibit 99 under Item 601/Reg. S-K

<S> <C> <C> <C> <C> <C> <C>
Federated Aggressive Growth Fund
Class A Shares
Yield = 2{( $0.00 - $1,228.06 )+1)^6-1}=
----------------------------------------------------
Computation of SEC Yield 93,547 *( $9.20 - 0.00000)
As of: April 30, 1997
SEC Yield = -1.71%
=============

Dividend and/or Interest
Inc for the 30 days ended $0.00

Net Expenses for $1,228.06
the Period

Avg Daily Shares
Outstanding and entitled
to receive dividends 93,547

Maximum offering price $9.20
per share as of 4/30/97

Undistributed net income 0.00000

</TABLE>

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

Schedule for Computation of Initial
Fund Performance Data Invest of: $1,000
Offering
Federated Aggressive Growth Fund Price/Share= $10.58
Class A Shares
Return Since Inception 11/25/96 NAV= $9.20
ending 4/30/97

FYE: October 31, 1997
Beginning Capital Reinvest Ending Total
DECLARED: Annually Reinvest Period Dividend Gain Price Period Ending Investment
PAID: Annually Dates Shares /Share /Share /Share Shares Price Value
11/30/96 94.500 0.000000000 0.00000 $10.04 94.500 $10.04 $948.78
12/30/96 94.500 0.008000000 0.00000 $9.90 94.576 $9.90 $936.31
12/31/96 94.576 0.000000000 0.00000 $9.89 94.576 $9.89 $935.36
1/31/97 94.576 0.000000000 0.00000 $10.21 94.576 $10.21 $965.62
2/28/97 94.576 0.000000000 0.00000 $9.69 94.576 $9.69 $916.44
3/31/97 94.576 0.000000000 0.00000 $9.80 94.576 $9.80 $926.85
4/30/97 94.576 0.000000000 0.00000 $9.20 94.576 $9.20 $870.10

Note: The Fund has not paid any ST capital gain dividends as of 4/30/97.

$1,000 (1+T) = Ending Value

T = -12.97%

</TABLE>

Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

<S> <C> <C> <C> <C> <C> <C>
Federated Aggressive Growth Fund
Class B Shares
Yield = 2{( $0.00 - $3,663.64 )+1)^6-1}=
-------------------------------------------------------------------
Computation of SEC Yield 195,482 *( $9.20 - 0.00000)
As of: April 30, 1997
SEC Yield = -2.43%
=====================

Dividend and/or Interest
Inc for the 30 days ended $0.00

Net Expenses for $3,663.64
the Period

Avg Daily Shares
Outstanding and entitled
to receive dividends 195,482

Maximum offering price $9.20
per share as of 4/30/97

Undistributed net income 0.00000

</TABLE>

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

Schedule for Computation of Initial
Fund Performance Data Invest of: $1,000
Offering
Federated Aggressive Growth Fund Price/Share= $10.58
Class B Shares
Return Since Inception 11/25/96 NAV= $9.20
ending 4/30/97

FYE: October 31, 1997
Beginning Capital Reinvest Ending Total
DECLARED: Annually Reinvest Period Dividend Gain Price Period Ending Investment
PAID: Annually Dates Shares /Share /Share /Share Shares Price Value
11/30/96 94.500 0.000000000 0.00000 $10.04 94.500 $10.04 $948.78
12/30/96 94.500 0.004000000 0.00000 $9.90 94.538 $9.90 $935.93
12/31/96 94.538 0.000000000 0.00000 $9.89 94.538 $9.89 $934.98
1/31/97 94.538 0.000000000 0.00000 $10.20 94.538 $10.20 $964.29
2/28/97 94.538 0.000000000 0.00000 $9.69 94.538 $9.69 $916.07
3/31/97 94.538 0.000000000 0.00000 $9.26 94.538 $9.26 $875.42
4/30/97 94.538 0.000000000 0.00000 $9.20 94.538 $9.20 $869.75

Note: The Fund has not paid any ST capital gain dividends as of 4/30/97.

$1,000 (1+T) = Ending Value

T = - 13.06%

</TABLE>

Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

<S> <C> <C> <C> <C> <C> <C>
Federated Aggressive Growth Fund
Class C Shares
Yield = 2{( $0.00 - $245.35 )+1)^6-1}=
------------------------------------------------------------------
Computation of SEC Yield 13,151 *( $9.16 - 0.00000)
As of: April 30, 1997
SEC Yield = -2.43%
==========

Dividend and/or Interest
Inc for the 30 days ended $0.00

Net Expenses for $245.35
the Period

Avg Daily Shares
Outstanding and entitled
to receive dividends 13,151

Maximum offering price $9.16
per share as of 4/30/97

Undistributed net income 0.00000

</TABLE>

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

Schedule for Computation of Initial
Fund Performance Data Invest of: $1,000
Offering
Federated Aggressive Growth Fund Price/Share= $10.10
Class C Shares
Return Since Inception 11/25/96 NAV= $9.16
ending 4/30/97

FYE: October 31, 1997
Beginning Capital Reinvest Ending Total
DECLARED: Annually Reinvest Period Dividend Gain Price Period Ending Investment
PAID: Annually Dates Shares /Share /Share /Share Shares Price Value
11/30/96 99.000 0.000000000 0.00000 $10.04 99.000 $10.04 $993.96
12/30/96 99.000 0.003000000 0.00000 $9.90 99.030 $9.90 $980.40
12/31/96 99.030 0.000000000 0.00000 $9.89 99.030 $9.89 $979.41
1/31/97 99.030 0.000000000 0.00000 $10.20 99.030 $10.20 $1,010.11
2/28/97 99.030 0.000000000 0.00000 $9.67 99.030 $9.67 $957.62
3/31/97 99.030 0.000000000 0.00000 $9.23 99.030 $9.23 $914.05
4/30/97 99.030 0.000000000 0.00000 $9.16 99.030 $9.16 $907.11

$1,000 (1+T) = Ending Value
T = -9.27%

Note: The Fund has not paid any ST capital gain dividends as of 4/30/97.

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> Federated Equity Funds
Federated Aggressive Growth Fund
Class A Shares
<PERIOD-TYPE> 5-mos
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 3,140,804
<INVESTMENTS-AT-VALUE> 3,087,996
<RECEIVABLES> 33,373
<ASSETS-OTHER> 445
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,121,814
<PAYABLE-FOR-SECURITIES> 97,564
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,891
<TOTAL-LIABILITIES> 122,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,207,161
<SHARES-COMMON-STOCK> 101,492
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (12,587)
<ACCUMULATED-NET-GAINS> (142,407)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (52,808)
<NET-ASSETS> 933,430
<DIVIDEND-INCOME> 9,228
<INTEREST-INCOME> 3,939
<OTHER-INCOME> 0
<EXPENSES-NET> 23,824
<NET-INVESTMENT-INCOME> (10,657)
<REALIZED-GAINS-CURRENT> (142,407)
<APPREC-INCREASE-CURRENT> (52,808)
<NET-CHANGE-FROM-OPS> (205,872)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,722
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 369,553
<NUMBER-OF-SHARES-REDEEMED> 268,080
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 2,999,359
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,364
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215,300
<AVERAGE-NET-ASSETS> 2,356,999
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.030)
<PER-SHARE-GAIN-APPREC> (0.760)
<PER-SHARE-DIVIDEND> 0.010
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.200
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> Federated Equity Funds
Federated Aggressive Growth Fund
Class B Shares
<PERIOD-TYPE> 5-mos
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 3,140,804
<INVESTMENTS-AT-VALUE> 3,087,996
<RECEIVABLES> 33,373
<ASSETS-OTHER> 445
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,121,814
<PAYABLE-FOR-SECURITIES> 97,564
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,891
<TOTAL-LIABILITIES> 122,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,207,161
<SHARES-COMMON-STOCK> 209,839
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (12,587)
<ACCUMULATED-NET-GAINS> (142,407)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (52,808)
<NET-ASSETS> 1,929,550
<DIVIDEND-INCOME> 9,228
<INTEREST-INCOME> 3,939
<OTHER-INCOME> 0
<EXPENSES-NET> 23,824
<NET-INVESTMENT-INCOME> (10,657)
<REALIZED-GAINS-CURRENT> (142,407)
<APPREC-INCREASE-CURRENT> (52,808)
<NET-CHANGE-FROM-OPS> (205,872)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 165
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 215,310
<NUMBER-OF-SHARES-REDEEMED> 5,488
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 2,999,359
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,364
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215,300
<AVERAGE-NET-ASSETS> 2,356,999
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.040)
<PER-SHARE-GAIN-APPREC> (0.760)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.200
<EXPENSE-RATIO> 2.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 043
<NAME> Federated Equity Funds
Federated Aggressive Growth Fund
Class C Shares
<PERIOD-TYPE> 5-mos
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 3,140,804
<INVESTMENTS-AT-VALUE> 3,087,996
<RECEIVABLES> 33,373
<ASSETS-OTHER> 445
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,121,814
<PAYABLE-FOR-SECURITIES> 97,564
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,891
<TOTAL-LIABILITIES> 122,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,207,161
<SHARES-COMMON-STOCK> 14,886
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (12,587)
<ACCUMULATED-NET-GAINS> (142,407)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (52,808)
<NET-ASSETS> 136,379
<DIVIDEND-INCOME> 9,228
<INTEREST-INCOME> 3,939
<OTHER-INCOME> 0
<EXPENSES-NET> 23,824
<NET-INVESTMENT-INCOME> (10,657)
<REALIZED-GAINS-CURRENT> (142,407)
<APPREC-INCREASE-CURRENT> (52,808)
<NET-CHANGE-FROM-OPS> (205,872)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 43
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,163
<NUMBER-OF-SHARES-REDEEMED> 11,281
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 2,999,359
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,364
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215,300
<AVERAGE-NET-ASSETS> 2,356,999
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.060)
<PER-SHARE-GAIN-APPREC> (0.780)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.160
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>