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SIGNATURE S. ELLIOTT COHAN
TITLE ASST. GEN. COUNSEL
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<NAME> FEDERATED EQUITY INCOME FUND CLASS B
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<TABLE> <S> <C>
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<NUMBER> 013
<NAME> FEDERATED EQUITY INCOME FUND CLASS C
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<NAME> FEDERATED EQUITY INCOME FUND CLASS F
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Item 77 C -- Submission of Matters to a Vote of
Security Holders
A Special Meeting of shareholders of Federated Equity
Income Fund, Inc. was held on November 14, 1997. The
following items, which are required to be reported
under this Item 77C, were approved at the meeting:
AGENDA ITEM 1: To elect two Directors:*
1) Thomas G. Bigley
2) John E. Murray, Jr.
AGENDA ITEM 2: To approve or disapprove the removal of
the Fund's fundamental investment limitation
restricting the Fund's investment in restricted
securities to 10% of its total assets.
The results of shareholders voting were as follows:
Shares voted affirmatively .................................. 36,138,596
Shares voted negatively ....................................... 2,446,671
Shares abstaining .................................................. 2,869,434
AGENDA ITEM 3: To approve or disapprove the removal of
the Fund's fundamental investment limitation regarding
investing in oil, gas or other mineral exploration or
development programs.
The results of shareholders voting were as follows:
Shares voted affirmatively ..................................35,472,984
Shares voted negatively .......................................2,989,087
Shares abstaining ..................................................2,992,631
AGENDA ITEM 4: To approve or disapprove an amendment to
the Fund's fundamental investment limitation concerning
diversification.
The results of shareholders voting were as follows:
Shares voted affirmatively ..................................36,234,102
Shares voted negatively .......................................2,342,031
Shares abstaining ..................................................2,878,570
The Definitive Proxy Statement for the Special Meeting
held on November 14, 1997, was filed with the
Securities and Exchange Commission on September 17,
1997, and is incorporated by reference. (File No. 811-
4743)
_________________________
*The following Directors of the Fund continued their
terms as Directors of the Fund: John F. Donahue, J.
Christopher Donahue, John T. Conroy, Jr., William J.
Copeland, James E. Dowd, Lawrence D. Ellis, M.D.,
Edward L. Flaherty, Jr., Peter E. Madden, Wesley W.
Posvar, Marjorie P. Smuts.
ITEM 77D
POLICIES WITH RESPECT TO SECURITY INVESTMENTS
The policies of Federated Equity Income Fund, Inc. (the Fund) have
been amended in order to allow the Fund to invest in securities of other
investment companies and to invest in real estate investment trusts. The
added disclosure is as follows:
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment
companies as an efficient means of carrying out its investment policies.
It should be noted that investment companies incur certain expenses,
such as management fees, and, therefore, any investment by the Fund in
shares of other investment companies may be subject to such duplicate
expenses.
Real Estate Investment Trusts
The Fund may purchase interests in real estate investment trusts.
Risks associated with real estate investments include the fact that
equity and mortgage real estate investment trusts are dependent upon
management skill and are not diversified, and are, therefore, subject to
the risk of financing single projects or unlimited number of projects.
They are also subject to heavy cash flow dependency, defaults by
borrowers, and self-liquidation. Additionally, equity real estate
investment trusts may be affected by any changes in the value of the
underlying property owned by the trusts, and mortgage real estate
investment trusts may be affected by the quality of any credit extended.
The Adviser seeks to mitigate these risks by selecting real estate
investment trusts diversified by sector (shopping malls, apartment
building complexes, and health care facilities) and geographic location.
Post-Effective Amendment No. 25 under the Securities Act of 1993 and
Amendment No. 22 under the Investment Company Act of 1940 will be
filed with the Securities and Exchange Commission pursuant to Rule
485(b) of the Securities Act of 1933 on or about May 27, 1998.
Subsequently, the above-referenced policies will be effective in that
registration statement on May 31, 1998.
To the Shareholders and
Board of Directors of
Federated Equity Income Fund, Inc.
In planning and performing our audit of the financial statements of Federated
Equity Income Fund, Inc. for the year ended March 31, 1998, we considered its
internal control, including control activities for safeguarding securities, in
order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with the requirements of
Form N-SAR, not to provide assurance on the internal control.
The management of Federated Equity Income Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs of controls. Generally, controls that
are relevant to an audit pertain to the entity's objective of preparing
financial statements for external purposes that are fairly presented in
conformity with generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized acquisition, use or
disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of the internal control would not necessarily disclose all
matters in the internal control that might be material weaknesses under
standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control components does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as defined
above at March 31, 1998.
This report is intended solely for the information and use of the board of
directors and management of Federated Equity Income Fund, Inc. and the
Securities and Exchange Commission.
Pittsburgh, Pennsylvania
May 15, 1998
