CCB FUNDS, 497, 1999-09-29

CCB FUNDS
497, 1999-09-29

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PROSPECTUS

CCB Equity Fund

A Portfolio of CCB Funds

A mutual fund seeking to provide high total return over longer periods of time
through appreciation of capital and current income provided by dividends and
interest payments. The Fund attempts to achieve this objective by investing
primarily in dividend paying common stocks.

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

SEPTEMBER 30, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the
Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 6

What Do Shares Cost? 6

How is the Fund Sold? 7

How to Purchase Shares 7

How to Exchange Shares 8

How to Redeem Shares 9

Account and Share Information 11

Who Manages the Fund? 12

Financial Information 13

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide high total return over longer
periods of time through appreciation of capital and current income provided by
dividends and interest payments. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests primarily in a broad, diversified range of dividend paying
common stocks of companies deemed to have above average earnings growth
prospects and whose shares are available at reasonable prices. As a matter of
investment policy, the Fund will invest so that, under normal circumstances, at
least 65% of its total assets are invested in equity securities. The Adviser
uses the "value" style of investing, selecting companies which are trading at
discounts to their historic relationship to the market as well as to their
expected growth.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

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

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

* SECTOR RISKS. Because the Adviser may allocate more of the Fund's portfolio
holdings to a particular industry sector, the Fund's performance will be more
susceptible to any economic, business or other developments which generally
affect that sector.

* RISKS RELATED TO INVESTING FOR VALUE. The Fund generally uses a "value" style
of investing, so that the Fund's share price may lag that of other Funds using a
different investment style.

The Shares offered by this prospectus are not deposits or obligations of Central
Carolina Bank or its affiliates, are not endorsed or guaranteed by Central
Carolina Bank or its affiliates and are not insured or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of CCB Equity Fund as of the calendar year-end for each of
four years.

The "y" axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 8% up to 32%.

The "x" axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features four distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1995
through 1998. The percentages noted are: 29.16%, 21.43%, 30.27%, and 24.49%.

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

The total returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower.

The Fund's total return for the six-month period from January 1, 1999 to June
30, 1999 was 8.05%.

Within the period shown in the Chart, the Fund's highest quarterly return was
21.31% (quarter ended December 31, 1998). Its lowest quarterly return was
(10.72%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Average Annual Total Returns, reduced
to reflect applicable sales charges, for the calendar periods ended December 31,
1998. As of August 1, 1999, Fund Shares are sold without a sales charge.

The table shows the Fund's total returns averaged over a period of years
relative to the Standard & Poor's 500 ("S&P 500"), a broad-based market index.
The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
Securities and Exchange Commission requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.

<TABLE>

CALENDAR PERIOD FUND S&P 500
<S> <C> <C>
1 Year 18.89% 28.58%
Start of Performance 1 24.75% 30.38%

</TABLE>

1 The Fund's start of performance date was December 5, 1994.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.

What are the Fund's Fees and Expenses?

CCB EQUITY FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.

<TABLE>

SHAREHOLDER FEES

<S> <C>

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases

(as a percentage of offering price) None Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or redemption proceeds, as
applicable) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None Redemption
Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1

Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.85%
Distribution (12b-1) Fee 3 0.35%
Shareholder Services Fee 4 0.25%
Other Expenses 0.33%
Total Annual Fund Operating Expenses 5 1.78%
1 Although not contractually obligated to do so, the Adviser, distributor and
shareholder services provider expect to waive certain amounts during the fiscal
year ending May 31, 2000. These are shown below along with the net expenses the
Fund expects to actually pay for the fiscal year ending May 31, 2000.
Total Waivers of Fund Expenses 0.63%
Total Actual Annual Fund Operating Expenses (after waivers) 5 1.15%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.67% for the year ending May 31, 2000. 3 The Fund did not pay or
accrue the distribution 12b-1 fee for the fiscal year ended May 31, 1999. The
Fund has no present intention of paying or accruing the distribution 12b-1 fee
for the fiscal year ending May 31, 2000. 4 The shareholder services provider
expects to waive a portion of the shareholder services fee. The shareholder
services provider can terminate this anticipated voluntary waiver at any time.
The shareholder services fee paid by the Fund (after the anticipated voluntary
waiver) is expected to be 0.15% for the fiscal year ending May 31, 2000. 5 For
the fiscal year ended May 31, 1999, the Total Annual Fund Operating Expenses and
Total Actual Annual Fund Operating Expenses (after waivers) were 1.09% and
1.00%, respectively.

</TABLE>

EXAMPLE

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

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

<TABLE>

<S> <C>
1 Year $ 181
3 Years $ 560
5 Years $ 964
10 Years $2,095

</TABLE>

What are the Fund's Investment Strategies?

The Fund invests at least 65% of its assets in equity securities. The Fund
invests primarily in a broad, diversified range of dividend paying common stocks
which, in the Adviser's opinion, are trading at a low valuation in relation to
their history, to their current market and to their expected future price. A
description of the various types of securities in which the Fund invests, and
their risks, immediately follows the strategy discussion.

Companies with similar characteristics may be grouped together in broad
categories called sectors. Although the Adviser may allocate relatively more of
the Fund's portfolio securities to a particular industry sector, the Adviser
diversifies the Fund's investments, limiting the Fund's risk exposure with
respect to individual securities and industry sectors.

The Fund's Adviser performs traditional fundamental analysis to select
securities that exhibit the most promising long-term value for the Fund's
portfolio. In selecting securities, the Adviser focuses on the current financial
condition of the issuing company, in addition to examining each issuer's
business and product strength, competitive position, and management expertise.
Further, the Adviser considers current economic, financial market, and industry
factors, which may affect the issuing company. To determine the timing of
purchases and sales of portfolio securities, the Adviser looks at recent stock
price performance and the direction of current fiscal year earnings estimates of
various companies.

The Adviser uses the "value" style of investing, selecting securities of
companies which are trading at discounts to their historic relationship to the
market as well as to their expected growth. Because the Adviser uses a "value"
style of investing, the price of the securities held by the Fund may not, under
certain market conditions, increase as rapidly as stocks selected primarily for
growth attributes.

PORTFOLIO TURNOVER

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities will be sold without regard to the length of time
they have been held when the Fund's Adviser or sub-adviser believe it is
appropriate to do so in light of the Fund's investment objective. A higher
portfolio turnover rate involves greater transaction expenses which must be
borne directly by the Fund (and thus, indirectly by its shareholders), and
affects performance. 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.

TEMPORARY DEFENSIVE INVESTMENTS

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

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

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

COMMON STOCKS

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

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

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

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

SECTOR RISKS

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

RISKS RELATED TO INVESTING FOR VALUE

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

What Do Shares Cost?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in the prospectus), it is processed at the next calculated net
asset value (NAV). The Fund does not charge a front-end sales charge. NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open. The Fund generally values equity securities according to
the last sale price in the market in which they are primarily traded (either a
national securities exchange or the over-the-counter market).

The minimum initial investment for Fund Shares by an investor is $1,000.
Subsequent investments must be in amounts of at least $100. The Fund may waive
these minimums for purchases made by the Trust Division of Central Carolina Bank
for its fiduciary or custodial accounts. An institutional investor's minimum
investment will be calculated by combining all accounts it maintains with the
Fund.

Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

How is the Fund Sold?

The Fund's Distributor, Federated Securities Corp. (Distributor), markets the
Shares described in this prospectus to trust clients of Central Carolina Bank
and its affiliates and individual investors.

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale and distribution of
the Fund's Shares. The Fund is not presently paying or accruing 12b-1 fees. The
Fund will not pay or accrue these fees until a separate class of shares has been
created for certain trust and institutional investors. Once the Fund begins
accruing the 12b-1 fee, the Fund expenses will rise.

How to Purchase Shares

You may purchase Shares through Central Carolina Bank, or through an investment
professional that has an agreement with the Distributor (Authorized Dealer).

THROUGH CENTRAL CAROLINA BANK

An investor may purchase Shares by calling Central Carolina Bank at 1-800-
386-3111. Orders must be received by 3:00 p.m. (Eastern time) in order to
receive that day's public offering price. Payment is normally required within
three business days.

Texas residents must purchase Shares of the Fund through Federated
Securities Corp. at 1-800-356-2805.

THROUGH AN AUTHORIZED DEALER

Call your Authorized Dealer for specific instructions.

Purchase orders must be received before 3:00 p.m. (Eastern time) in order to
receive that day's public offering price. Orders received after 3:00 p.m.
(Eastern time) will be purchased at the next determined public offering price.

THROUGH AN EXCHANGE

An investor may exchange Shares of the Fund for certain other funds administered
or distributed by subsidiaries of Federated that are not advised by Central
Carolina Bank ("Federated Funds"). For further information on the availability
of Federated Funds for exchange, call Central Carolina Bank at 1-800-386-3111.
Both accounts must have a common owner.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may add to your investment on a regular
basis in amounts of at least $100. Under this program, funds may be
automatically withdrawn from your checking account and invested in Fund Shares
at the NAV next determined after an order is received by the Fund. You may apply
for participation in this program through Central Carolina Bank or through the
Distributor.

How to Exchange Shares

You may exchange Shares of the Fund into shares of certain Federated Funds.

The Federated Funds you may exchange into are:

* Liberty U.S. Government Money Market Trust-a U.S. government money
market fund; and

* Federated American Leaders Fund, Inc.-a high-quality equity fund.

To do this, you must:

* meet any minimum initial investment requirements; and

* receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request an exchange
into another fund with a different shareholder registration.

The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or Adviser may determine from the amount,
frequency and pattern of exchanges that a shareholder is engaged in excessive
trading which is detrimental to the Fund and other shareholders. If this occurs,
the Fund may terminate the availability of exchanges to that shareholder and may
bar that shareholder from purchasing other Federated Funds.

BY TELEPHONE

You may exchange Shares by telephone by calling 1-800-386-3111, or by calling
your Authorized Dealer directly.

Telephone exchange instructions must be received by 4:00 p.m. (Eastern time) for
Shares to be exchanged that day.

Your telephone instructions may be recorded. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will notify you if it changes
telephone transaction privileges.

BY MAIL

You may exchange Shares by sending a written request to the Fund. Send your
requests by mail to:

CCB Funds

c/o Federated Shareholder Services Company

P.O. Box 8609

Boston, MA 02266

In addition, you may exchange Shares by sending a written request to your
Authorized Dealer directly.

How to Redeem Shares

The Fund redeems Shares at its NAV next determined after the Fund receives the
redemption request in proper form. Shares may be redeemed by telephone or by
mail through Central Carolina Bank or directly from the Fund.

Redemption requests must be received by 3:00 p.m. (Eastern time) and must be
transmitted by Central Carolina Bank to the Fund before 4:00 p.m. (Eastern time)
in order for Shares to be redeemed at that day's NAV.

BY TELEPHONE

You may redeem Shares by calling Central Carolina Bank at 1-800-386-3111.

Shareholders who have an Authorized Dealer should contact their Authorized
Dealer for specific instructions on how to redeem by telephone.

BY MAIL

You may redeem Shares by sending a written request to the Fund.

Send your written redemption request including your name, the Fund name, your
account number and the Share or dollar amount requested to:

CCB Funds

c/o Federated Shareholder Services Company

P.O. Box 8609

Boston, MA 02266

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the shareholder(s) of
record.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

SYSTEMATIC WITHDRAWAL PROGRAM

The Systematic Withdrawal Program allows you to automatically redeem Shares on a
regular basis. Your account value must be at least $10,000 at the time the
program is established. This program may reduce, and eventually deplete, your
account, and the payments should not be considered yield or income. You may
apply for participation in this program through your financial institution.

ADDITIONAL CONDITIONS

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS

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

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

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions or exchanges cause the account balance to fall below the
minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Central Carolina Bank. The Adviser manages the Fund's assets,
including buying and selling portfolio securities. The Adviser's address
is 111 Corcoran Street, Durham, North Carolina 27702.

The Adviser has delegated daily management of the Fund's assets to the Sub-
Adviser, Franklin Street Advisors, Inc., who is paid by the Adviser and not by
the Fund. The Sub-Adviser's address is 6330 Quadrangle Drive, Chapel Hill, North
Carolina 27514. The Sub-Adviser manages the Fund's assets, including buying and
selling portfolio securities.

The Adviser is the lead bank within CCB Financial Corporation, which is a
multibank holding company that includes a commercial bank subsidiary with
offices in North Carolina. The Adviser has managed commingled funds since 1953.
As of August 31, 1999, the Adviser managed $2.1 billion. The Adviser also
manages one commingled fund with approximately $115 million in total assets. The
Adviser has managed CCB Funds since their inception in July 1992.

The Sub-Adviser is a registered investment advisory firm founded in 1990 and is
a wholly owned subsidiary of Franklin Street Partners, Inc., a privately owned
holding company that also owns a private non-depository trust bank. As of August
31, 1999, the Sub-Adviser managed assets in excess of $800 million.

ADVISORY FEES

The Fund's Adviser receives an annual maximum investment advisory fee equal to
0.85% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive all or a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can terminate this voluntary waiver of its advisory fee at
any time at its sole discretion.

Robert C. Eubanks, Jr. has been the Fund's portfolio manager since its
inception. Mr. Eubanks is the President of Franklin Street Advisors, Inc.,
and has served in that capacity since 1990. He is also vice-chairman and
chief investment officer of Franklin Street Trust, an affiliate of the Sub-
Adviser. Prior to founding Franklin Street Trust, he was co-founder and
president of McMillion Eubanks Capital Management in Greensboro, North
Carolina.

William B. Thompson, Jr. has been a co-portfolio manager for the Fund since
November 1995. Mr. Thompson is a portfolio manager for Franklin Street
Advisors, Inc., and has served in that capacity since April 1995. Mr.
Thompson is also a partner with Franklin Street Partners, Inc., the parent
company of Franklin Street Advisors, Inc. Prior to joining Franklin Street
Advisors, Inc., he was co-founder and President of Peacock-Thompson
Investment Management in Cary, North Carolina since November 1987.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

Financial Information

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Arthur Andersen LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED MAY 31, 1999 1998 1997 1996 1995 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING

OF PERIOD $20.24 $17.33 $13.80 $11.48 $10.00
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.08 0.07 0.13 0.14 0.11
Net realized and
unrealized gain on
investments and options 3.10 3.93 3.72 2.57 1.44
TOTAL FROM INVESTMENT

OPERATIONS 3.18 4.00 3.85 2.71 1.55
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.08) (0.07) (0.13) (0.16) (0.07)
Total distributions from
net realized gain on
investments and options (1.60) (1.02) (0.19) (0.23) -
TOTAL DISTRIBUTIONS (1.68) (1.09) (0.32) (0.39) (0.07)
NET ASSET VALUE, END OF

PERIOD $21.74 $20.24 $17.33 $13.80 $11.48
TOTAL RETURN 2 15.90% 23.86% 28.25% 23.91% 15.55%

RATIOS TO AVERAGE NET

ASSETS:

Expenses 3 1.09% 1.07% 1.19% 1.45% 2.67% 4
Net investment income 3 0.30% 0.32% 0.65% 0.88% 1.58% 4
Expenses (after waivers) 1.00% 1.00% 1.03% 1.25% 1.25% 4
Net investment income
(after waivers) 0.39% 0.39% 0.81% 1.08% 3.00% 4
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $99,526 $219,694 $167,503 $29,194 $24,581
Portfolio turnover 92% 69% 55% 69% 4%

</TABLE>

1 Reflects operations for the period from December 5, 1994 (date of initial
public investment) to May 31, 1995.

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

3 During the period certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.

4 Computed on an annualized basis.

[GRAPHIC]

CCB Equity Fund

Prospectus

A Portfolio of CCB Funds

SEPTEMBER 30, 1999

A Statement of Additional Information (SAI) dated September 30, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report's Management Discussion and Analysis discusses market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. To obtain the SAI, the Annual Report, Semi-Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800- 386-3111.

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

Federated Securities Corp. is the distributor of the fund.

Investment Company Act File No. 811-6561
Cusip 12500E307

005826 (9/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION

CCB EQUITY FUND

A Portfolio of CCB Funds

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for CCB Equity Fund (Fund), dated
September 30, 1999.

This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-386-3111.

september 30, 1999

CONTENTS

How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What do Shares Cost? 9
How is the Fund Sold? 10
Subaccounting Services 10
Redemption in Kind 11
Massachusetts Partnership Law 11
Account and Share Information 11
Tax Information 12
Who Manages and Provides Services to the Fund? 12
How Does the Fund Measure Performance? 16
Financial Information 17
Investment Ratings 18
Addresses 21
CUSIP 12500E307

005902 (9/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of CCB Funds (Trust). The Trust is an
open-end, management investment company that was established under the laws of
the Commonwealth of Massachusetts on December 11, 1991. The Trust may offer
separate series of shares representing interests in separate portfolios of
securities. The Trust changed its name from 111 Corcoran Funds to CCB Funds and
the Fund changed its name from 111 Corcoran Equity Fund to CCB Equity Fund on
May 13, 1998. The Fund's investment adviser is Central Carolina Bank and Trust
Company (Central Carolina Bank or Adviser).

SECURITIES IN WHICH THE FUND INVESTS

Following is a table that indicates which types of securities are a:

P = PRINCIPAL investment of a Fund; (shaded in chart)

A = ACCEPTABLE (but not principal) investment of a Fund

AGENCY SECURITIES A AMERICAN DEPOSITARY RECEIPTS A BANK INSTRUMENTS A
COMMON STOCKS P CONVERTIBLE SECURITIES A CORPORATE DEBT SECURITIES A DELAYED
DELIVERY TRANSACTIONS A DERIVATIVE CONTRACTS A INVESTING IN SECURITIES OF OTHER
INVESTMENT COMPANIES A LENDING OF PORTFOLIO SECURITIES A PREFERRED STOCKS A
REPURCHASE AGREEMENTS A RESTRICTED AND ILLIQUID SECURITIES (1) A REVERSE
REPURCHASE AGREEMENTS A SECURITIES OF FOREIGN ISSUERS (2) A TREASURY SECURITIES
A WARRANTS A ZERO COUPON SECURITIES A

(1) The Fund will limit investments in illiquid securities, including
certain restricted securities not determined by the Trustees to be liquid, to
15% of its net assets.

(2) The Fund will not invest more than 10% of its total assets in
securities of foreign issuers.

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

<PAGE>

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES

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

COMMON STOCKS

PREFERRED STOCKS

Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may also treat
such redeemable preferred stock as a fixed income security.

WARRANTS

Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the MARKET RISKS of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses. The
corporate debt securities in which the Fund invests are rated, at the time of
purchase, at least Baa by Moody's Investors Service, Inc. ("Moody's"), or at
least BBB by Standard & Poor's ("S&P") or Fitch IBCA, Inc. ("Fitch"), or, if not
rated, determined by the Fund's Adviser to be of comparable quality. Notes,
bonds, debentures and commercial paper are the most prevalent types of corporate
debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

In addition, the credit risk of an issuer's debt security may vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security. A zero coupon
step-up security converts to a coupon security before final maturity.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

CONVERTIBLE SECURITIES

Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.

The convertible securities in which the Fund invests are rated, at the time of
purchase, at least BBB by S&P or Fitch, or at least Baa by Moody's, or, if not
rated, determined by the Fund's Adviser to be of comparable quality.

The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

o it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.

The only foreign securities in which the Fund invests are American Depositary
Receipts.

AMERICAN DEPOSITARY RECEIPTS

American Depositary Receipts ("ADRs") represent interests in underlying
securities issued by a foreign company. The foreign securities underlying ADRs
are not traded in the United States. ADRs provide a way to buy shares of
foreign-based companies in the United States rather than in overseas markets.
ADRs are also traded in U.S. dollars, eliminating the need for foreign exchange
transactions. ADRs involve risks of foreign investing.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.

The Fund may buy and sell the following types of futures contracts: stock index
futures contracts and financial futures contracts.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.

The Fund may:

o Buy put options on portfolio securities and financial futures contracts in
anticipation of a decrease in the value of the underlying asset.

o Write call options on portfolio securities and financial futures contracts to
generate income from premiums, and in anticipation of a decrease or only limited
increase in the value of the underlying asset. If a call written by the Fund is
exercised, the Fund foregoes any possible profit from an increase in the market
price of the underlying asset over the exercise price plus the premium received.

o Buy or write options to close out existing options positions.

When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.

Securities lending activities are subject to interest rate risks and credit
risks.

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 laws. However, the Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, to 15% of its net assets.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

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

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
risk factors are described below.

STOCK MARKET RISKS

SECTOR RISKS

RISKS RELATED TO INVESTING FOR VALUE

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of its
outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital. These
factors also increase risks and make these companies more likely to fail than
companies with larger market capitalizations.

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities that are not widely
held. This may make it more difficult to sell or buy a security at a favorable
price or time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.

Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

CREDIT RISKS

Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

RISKS OF FOREIGN INVESTING

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and its Adviser from obtaining information concerning foreign
companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States.

Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

FUNDAMENTAL INVESTMENT OBJECTIVE

The Fund's investment objective is to provide high total return over longer
periods of time through appreciation of capital and current income provided by
dividends and interest payments. The investment objective may not be changed by
the Fund's Trustees without shareholder approval.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures contracts, put
options on stock index futures, put options on financial futures and portfolio
securities, and writing covered call options, but may obtain such short-term
credits as may be necessary for clearance of purchases and sales of portfolio
securities. A deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total 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 to facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. For purposes of this limitation, the following will not be
deemed to be pledges of the Fund's assets: (a) the deposit of assets in escrow
in connection with the writing of covered put or call options and the purchase
of securities on a when- issued basis; and (b) collateral arrangements with
respect to (i) the purchase and sale of stock options (and options on stock
indices) and (ii) initial or variation margin for futures contracts.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, including limited partnership
interests, 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.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, the Fund may purchase put options on stock
index futures, put options on financial futures, stock index futures contracts,
and put options on portfolio securities, and may write covered call options.

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 which the Fund may purchase pursuant to its investment
objective, policies, and limitations.

DIVERSIFICATION OF INVESTMENTS

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

CONCENTRATION OF INVESTMENTS

The Fund will not invest 25% or more of the value of its total assets in any one
industry. However, the Fund may invest 25% or more of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities. This
shall not prevent the Fund from purchasing or holding money market instruments,
repurchase agreements, obligations of the U.S. government, its agencies or
instrumentalities, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or certain debt instruments as permitted by its
investment objective, policies, and limitations or the Trust's Declaration of
Trust.

THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
TRUSTEES (BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice, non-negotiable fixed time deposits with
maturities over seven days, over-the-counter options, and certain securities not
determined by the Trustees to be liquid.

PURCHASING SECURITIES TO EXERCISE CONTROL

The Fund will not purchase securities of a company for purpose of exercising
control or management.

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.

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 does not intend to borrow money or pledge securities in excess of 5% of
the value of its net assets during the coming fiscal year. 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 and loan
having capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items."

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for fixed income securities, at the last sale price on a national
securities exchange, if available, otherwise, as determined by an independent
pricing service;

o futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading
on such exchanges. Options traded in the over-the-counter market are
generally valued according to the mean between the last bid and the last
asked price for the option as provided by an investment dealer or other
financial institution that deals in the option. The Board may determine in
good faith that another method of valuing such investments is necessary to
appraise their fair market value;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

WHAT DO SHARES COST?

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

<PAGE>

HOW IS THE FUND SOLD?

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

RULE 12B-1 PLAN

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

<PAGE>

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the 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.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust 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.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.

All Shares of the 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.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding Shares.

As of September 10, 1999, the following shareholder owned of record,
beneficially, or both, 5% or more of outstanding Shares: Central Carolina Bank &
Trust Company, Durham, North Carolina, owned approximately 3,967,902 Shares
(88.76%).

<PAGE>

TAX INFORMATION

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, and total compensation received as a Trustee from the Trust for
its most recent fiscal year. The Trust is comprised of one fund and is the only
investment company in the Fund Complex.

As of September 10, 1999, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.

<PAGE>

NAME AGGREGATE
BIRTH DATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH TRUST FOR PAST FIVE YEARS TRUST

JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0
Birth Date: July 28, Trustee of the Federated Fund Complex;
1924 Chairman and Director, Federated Investors,
Federated Investors Inc.; Chairman and Trustee, Federated
Tower Investment Management Company; Chairman and
1001 Liberty Avenue Director, Federated Investment Counseling,
Pittsburgh, PA and Federated Global Investment Management
CHARIMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,195.38
Birth Date: February 3, Complex; Director, Member of Executive
1934 Committee, Children's Hospital of Pittsburgh;
15 Old Timber Trail Director, Robroy Industries, Inc. (coated
Pittsburgh, PA steel conduits/computer storage equipment);
TRUSTEE formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,315.10
Birth Date: June 23, Complex; President, Investment Properties
1937 Corporation; Senior Vice President,
Wood/Commercial Dept. John R. Wood and Associates, Inc., Realtors;
John R. Wood Partner or Trustee in private real estate
Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trial and Northgate Village Development Corporation.
North
Naples, FL

TRUSTEE

WILLIAM J. COPELAND Director or Trustee of the Federated Fund $1,385.62
Birth Date: July 4, 1918 Complex; Director and Member of the Executive
One PNC Plaza-23rd Floor Committee, Michael Baker, Corp. (engineering,
Pittsburgh, PA construction, operations, and technical
TRUSTEE services); Chairman, Pittsburgh Foundation;

Director, Forbes Fund (philanthropy);
formerly: Vice Chairman and Director, PNC
Bank, N.A. and PNC Bank Corp.; Director, Ryan

Homes, Inc.

Previous Positions: Director, United
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh
Civic Light Opera; Chairman, Health Systems
Agency of Allegheny County; Vice President,
United Way of Allegheny County; President,
St. Clair Hospital; Director, Allegheny

Hospital.

JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $583.65
Birth Date: March 5, Fund Complex; Chairman, President and Chief
1943 Executive Officer, Cunningham & Co., Inc.
353 El Brillo Way (strategic business consulting); Trustee
Palm Beach, FL Associate, Boston College; Director, Iperia
TRUSTEE Corp. (communications/software); formerly:
Director, Redgate Communications and EMC Corporation
(computer storage systems).

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

Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1,195.38
Birth Date: October 11, Complex; Professor of Medicine, University of
1932 Pittsburgh; Medical Director, University of
3471 Fifth Avenue Pittsburgh Medical Center - Downtown;
Suite 1111 Hematologist, Oncologist, and Internist,
Pittsburgh, PA University of Pittsburgh Medical Center;
TRUSTEE Member, National Board of Trustees, Leukemia
Society of America.

EDWARD C. GONZALES* Trustee or Director of some of the Funds in $0
Birth Date: October 22, the Federated Fund Complex; President,
1930 Executive Vice President and Treasurer of
Federated Investors some of the Funds in the Federated Fund
Tower Complex; Vice Chairman, Federated Investors,
1001 Liberty Avenue Inc.; Vice President, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
PRESIDENT, TREASURER Counseling, Federated Global Investment
AND TRUSTEE Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.

PETER E. MADDEN Director or Trustee of the Federated Fund $1,067.35
Birth Date: March 16, Complex; formerly: Representative,
1942 Commonwealth of Massachusetts General Court;
One Royal Palm Way President, State Street Bank and Trust
100 Royal Palm Way Company and State Street Corporation.

Palm Beach, FL

TRUSTEE Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.

CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $583.65
JR.++ Fund Complex; Management Consultant.

Birth Date: April 10,

1945 Previous Positions: Chief Executive Officer,
80 South Road PBTC International Bank; Partner, Arthur
Westhampton Beach, NY Young & Company (now Ernst & Young LLP);
TRUSTEE Chief Financial Officer of Retail Banking

Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.

JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $1,253.84
J.D., S.J.D.# Complex; President, Law Professor, Duquesne
Birth Date: December University; Consulting Partner, Mollica &
20, 1932 Murray; Director, Michael Baker Corp.
President, Duquesne (engineering, construction, operations, and
University technical services).
Pittsburgh, PA
TRUSTEE Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1,195.38
Birth Date: June 21, Complex; Public
1935 Relations/Marketing/Conference Planning.
4905 Bayard Street
Pittsburgh, PA Previous Positions: National Spokesperson,
TRUSTEE Aluminum Company of America; television
producer, business owner.

JOHN S. WALSH++ Director or Trustee of some of the Federated $583.65
Birth Date: November Fund Complex; President and Director, Heat
28, 1957 Wagon, Inc. (manufacturer of construction
2007 Sherwood Drive temporary heaters); President and Director,
Valparaiso, IN Manufacturers Products, Inc. (distributor of
TRUSTEE portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the $0
Birth Date: April 11, Federated Fund Complex; Director or Trustee
1949 of some of the Funds in the Federated Fund
Federated Investors Complex; President, CEO and Director,
Tower Federated Investors, Inc.; President and
1001 Liberty Avenue Trustee, Federated Investment Management
Pittsburgh, PA Company; President and Trustee, Federated
EXECUTIVE VICE PRESIDENT Investment Counseling; President and
Director, Federated Global Investment Management
Corp.; President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company; Director,
Federated Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0
Birth Date: October 26, Federated Fund Complex; Executive Vice
1938 President, Secretary, and Director, Federated
Federated Investors Investors, Inc.; Trustee, Federated
Tower Investment Management Company; Trustee,
1001 Liberty Avenue Federated Investment Counseling and Director,
Pittsburgh, PA Federated Global Investment Management Corp.;
EXECUTIVE VICE Director, Federated Services Company;
PRESIDENT AND SECRETARY Director, Federated Securities Corp.
RICHARD B. FISHER President or Vice President of some of the $0
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director
Federated Investors or Trustee of some of the Funds in the
Tower Federated Fund Complex; Executive Vice
1001 Liberty Avenue President, Federated Investors, Inc.;
Pittsburgh, PA Chairman and Director, Federated Securities
VICE PRESIDENT Corp.
JOSEPH S. MACHI Vice President and Assistant Treasurer of $0
Birth Date: May 22, 1962 some of the Funds.
Federated Investors
Tower
1001 Liberty Avenue
Pittsburgh, PA
VICE PRESIDENT AND
ASSISTANT TREASURER
</TABLE>

* AN ASTERISK DENOTES A TRUSTEE WHO IS DEEMED TO BE AN INTERESTED PERSON AS
DEFINED IN THE INVESTMENT COMPANY ACT OF 1940. # A POUND SIGN DENOTES A MEMBER
OF THE BOARD'S EXECUTIVE COMMITTEE, WHICH HANDLES THE BOARD'S RESPONSIBILITIES
BETWEEN ITS MEETINGS.

+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE EXECUTIVE VICE
PRESIDENT OF THE TRUST.

++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
TRUSTEES ON JANUARY 1, 1999.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser shall not be liable to the Trust, the Fund or any Fund shareholder
for any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust. Because
of internal controls maintained by the Adviser to restrict the flow of
non-public information, Fund investments are typically made without any
knowledge of the Adviser or its affiliates' lending relationships with an
issuer.

SUB-ADVISER

The Fund is sub-advised by Franklin Street Advisors, Inc. Pursuant to the terms
of an investment sub-advisory agreement between the Adviser and Franklin Street
Advisors, Inc. (Sub-Adviser), the Sub-Adviser manages the Fund's assets,
including buying and selling portfolio securities. The Sub-Adviser is paid by
the Adviser and not by the Fund. In no event shall the Fund be responsible for
any fees due to the Sub-Adviser for its services to the Adviser.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

RESEARCH SERVICES

Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.

For the fiscal year ended, May 31, 1999, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. The
total amount of these transactions was $316,071,129 for which the Fund paid
$239,314 in brokerage commissions.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Administrative Services, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Administrative
Services provides these at the following annual rate of the average aggregate
daily net assets of all Federated Funds as specified below:

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least $50,000
per fund. Federated Administrative Services may voluntarily waive a portion of
its fee and may reimburse the Fund for expenses.

Federated Administrative Services also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments for a
fee based on Fund assets plus out-of-pocket expenses.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

Fifth Third Bank, Cincinnati, Ohio, is custodian for the securities and cash of
the Fund. Federated Services Company 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 AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS

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

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED MAY 31, 1999 1998 1997
Advisory Fee Earned $1,420,177 $1,713,011 $913,689
Advisory Fee Reduction $148,367 $141,072 $166,477
Sub-Advisory Fee $1,085,528 $1,309,949 $747,211
Brokerage Commissions $239,314 $291,312 $205,818
Administrative Fee $241,260 $290,642 $160,784

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year and start of performance periods
ended May 31, 1999.

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

Start of Performance
30-DAY PERIOD 1 Year 5 Years 10 Years on December 5, 1994
Total Return NA 15.90% NA NA 24.11%
Yield 0.20% NA NA NA NA

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

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

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the
Investment Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

o STANDARD & POOR'S ("S&P") DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, which
is a composite index of common stocks in industry, transportation, and financial
and public utility companies, and 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 Index assumes reinvestments of all dividends paid by stocks listed on
its index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in S&P figures.

o 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 the maximum offering price over a specific period of
time. From time to time, the Fund will quote its Lipper ranking in the "index
funds" category in advertising and sales literature.

o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended May 31, 1999 are
incorporated herein by reference to the Annual Report to Shareholders of CCB
Equity Fund dated May 31, 1999.

<PAGE>

INVESTMENT RATINGS

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
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.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM 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.

BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered 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.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by 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 earning coverage of fixed financial charges and high
internal cash generation; and

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

PRIME-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory 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, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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

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.

FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS

FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

CCB EQUITY FUND

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7010

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

INVESTMENT ADVISER

Central Carolina Bank and Trust Company
111 Corcoran Street

Durham, NC 27702

SUB-ADVISER
Franklin Street Advisors, Inc.
6330 Quadrange Drive
Chapel Hill, NC 27514

CUSTODIAN

Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45263

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8609

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110-2812