Federated American Leaders Fund, Inc.

Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

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

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.     This prospectus contains the information you should
read and know before you invest in Class A Shares, Class B Shares, and
Class C Shares of the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for
Class A Shares, Class B Shares, Class C Shares, and Class F Shares
dated July 31, 1997, with the Securities and Exchange Commission
("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may
request a copy of the Statement of Additional Information or a paper
copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain
other information or make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information,
material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).      THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.     Prospectus dated July 31, 1997
    

                             TABLE OF CONTENTS

 Summary of Fund Expenses                                          1
 Financial Highlights -- Class A Shares                            2
 Financial Highlights -- Class B Shares                            3
 Financial Highlights -- Class C Shares                            4
 General Information                                               5
  Calling the Fund                                                 5
 Investment Information                                            5

  Investment Objective                                             5
  Investment Policies                                              5
  Investment Limitations                                           6
 Net Asset Value                                                   7
 Investing in the Fund                                             7
 Purchasing Shares                                                 8
  Purchasing Shares Through a

    Financial Intermediary                                         8
  Purchasing Shares by Wire                                        8
  Purchasing Shares by Check                                       8
  Systematic Investment Program                                    8
  Retirement Plans                                                 8
  Class A Shares                                                   8
  Class B Shares                                                   9
  Class C Shares                                                   9
 Redeeming and Exchanging Shares                                   9
  Redeeming or Exchanging Shares Through

    a Financial Intermediary                                       9

   

  Redeeming or Exchanging Shares by Telephone                     10
  Redeeming or Exchanging Shares by Mail                          10
    

  Requirements for Redemption                                     10
  Requirements for Exchange                                       10
  Systematic Withdrawal Program                                   10
   

  Contingent Deferred Sales Charge                                11

    

 Account and Share Information                                    11
  Confirmations and Certificates                                  11
  Dividends and Distributions                                     11
  Accounts with Low Balances                                      11
 Fund Information                                                 11
  Management of the Fund                                          11
  Distribution of Shares                                          12
  Administration of the Fund                                      13
  Brokerage Transactions                                          14
 Shareholder Information                                          14
 Tax Information                                                  14

  Federal Income Tax                                              14
  State and Local Taxes                                           14

 Performance Information                                          14
 Other Classes of Shares                                          15

                          SUMMARY OF FUND EXPENSES

                   SHAREHOLDER TRANSACTION EXPENSES




                                                                 CLASS A       CLASS B      CLASS C

                                                                                   

 Maximum Sales Charge Imposed on Purchases (as a

 percentage of offering price)                                       5.50%         None         None
 Maximum Sales Charge Imposed on Reinvested

 Dividends (as a percentage of offering price)                       None          None         None

 Contingent Deferred Sales Charge (as a percentage
 of original purchase price or redemption proceeds,

 as applicable)                                                      None          5.50%(1)     1.00%(1)

 Redemption Fee (as a percentage of amount

 redeemed, if applicable)                                            None          None         None
 Exchange Fee                                                        None          None         None



                                     ANNUAL OPERATING EXPENSES
                              (As a percentage of average net assets)

 Management Fee                                                      0.65%         0.65%        0.65%
 12b-1 Fee                                                           None          0.75%        0.75%
 Total Other Expenses                                                0.52%         0.55%        0.55%
   

  Shareholder Services Fee (after waiver)                   0.22%(2)         0.25%         0.25%
    

 Total Operating Expenses                                            1.17%(3)      1.95%(4)      1.95%



(1) For shareholders of Class B Shares, the contingent deferred sales
    charge is 5.50% in the first year declining to 1.00% in the sixth
    year and 0.00% thereafter. For shareholders of Class C Shares, the
    contingent deferred sales charge assessed is 1.00% of the lesser
    of the original purchase price or the net asset value of Shares
    redeemed within one year of their purchase date. For a more
    complete description, see "Contingent Deferred Sales Charge."

   

(2) The shareholder services fee for Class A Shares only has been
    reduced to reflect a voluntary waiver. The shareholder service
    provider can terminate this voluntary waiver at any time at its
    sole discretion. The maximum shareholder services fee is 0.25%.

    

(3) The total operating expenses for Class A Shares would have been
    1.20% absent the voluntary waiver described in note 2 above.

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

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

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL

ASSOCIATION OF SECURITIES DEALERS, INC.




 EXAMPLE                                                                   CLASS A  CLASS B  CLASS C
                                                                                    

 You would pay the following expenses on a $1,000 investment, assuming
 (1) 5% annual return; (2) redemption at the end of each time period;
 and (3) payment of maximum sales charge.
 1 Year                                                                     $ 66     $ 76     $ 30
 3 Years                                                                    $ 90     $105     $ 61
 5 Years                                                                    $116     $128     $105
 10 Years                                                                   $189     $206     $227
 You would pay the following expenses on the same investment,
 assuming no redemption.
 1 Year                                                                     $ 66     $ 20     $ 20
 3 Years                                                                    $ 90     $ 61     $ 61
 5 Years                                                                    $116     $105     $105
 10 Years                                                                   $189     $206     $227


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

                   FINANCIAL HIGHLIGHTS -- CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the
Fund's independent public accountants. Their report, dated April 24,
1997, on the Fund's financial statements for the year ended March 31,
1997, and on the following table for the periods presented, is
included in the Annual Report, which is incorporated by reference.
This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.
 

                                                               YEAR ENDED MARCH 31,

                      1997      1996      1995       1994      1993      1992      1991       1990
1989      1988

                                                                      
       

 NET ASSET VALUE,
 BEGINNING OF

 PERIOD              $19.78    $15.66    $14.58     $14.90    $13.88    $13.18    $12.21     $13.04
$12.55    $14.21
 INCOME FROM

 INVESTMENT
 OPERATIONS

 Net investment

 income                0.23      0.22      0.25       0.23      0.29      0.29      0.37       0.55
0.50      0.45
 Net realized and
 unrealized
 gain (loss) on

 investments           3.11      4.70      1.42       0.18      2.05      1.34      1.28       0.36
1.08     (1.21)
 Total from
 investment

 operations            3.34      4.92      1.67       0.41      2.34      1.63      1.65       0.91
1.58     (0.76)
 LESS DISTRIBUTIONS

 Distributions

 from net

 investment

 income               (0.21)    (0.17)    (0.24)     (0.24)    (0.28)    (0.28)    (0.38)     (0.56)
(0.50)    (0.43)
 Distributions
 from net
 realized gain on

 investments          (1.51)    (0.63)    (0.35)     (0.49)    (1.04)    (0.65)    (0.30)     (1.18)
(0.59)    (0.47)
 Total

 distributions        (1.72)    (0.80)    (0.59)     (0.73)    (1.32)    (0.93)    (0.68)     (1.74)
(1.09)    (0.90)
 NET

 ASSET

 VALUE,

 END OF

 PERIOD              $21.40    $19.78    $15.66     $14.58    $14.90    $13.88    $13.18     $12.21
$13.04    $12.55
 TOTAL RETURN(A)      17.40%    32.00%    11.87%      2.76%    18.31%    12.91%    14.17%      7.13%
13.23%    (5.32%)
 RATIOS TO
 AVERAGE NET

 ASSETS

 Expenses              1.17%     1.16%     1.23%      1.18%     1.13%     1.02%     1.02%      1.01%
1.01%     1.00%
 Net investment

 income                0.95%     1.07%     1.71%      1.48%     2.07%     2.12%     3.06%      4.23%
3.85%     3.35%
 Expense waiver/

 reimbursement(b)      0.03%     0.07%       --         --      0.06%     0.16%     0.30%      0.35%
0.12%     0.11%
 SUPPLEMENTAL DATA

 Net assets, end
 of period

 (000 omitted)     $638,082  $455,867  $268,470   $226,857  $202,866  $171,210  $149,360   $147,235
$149,049  $158,818
   

 Average
 commission

 rate paid(c)       $0.0500        --        --         --        --        --        --
- --         --        --
    

 Portfolio

 Turnover                88%       46%       34%        27%       39%       67%       57%
50%        27%       65%


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

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

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

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED MARCH 31, 1997, WHICH CAN BE OBTAINED FREE
OF CHARGE.

                   FINANCIAL HIGHLIGHTS -- CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the
Fund's independent public accountants. Their report, dated April 24,
1997, on the Fund's financial statements for the year ended March 31,
1997, and on the following table for the periods presented, is
included in the Annual Report, which is incorporated by reference.
This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.
 

                                                                         YEAR ENDED MARCH 31,
                                                                    1997       1996      1995(A)

                                                                                
 NET ASSET VALUE, BEGINNING OF PERIOD                              $19.79     $15.67     $14.97

 INCOME FROM INVESTMENT OPERATIONS

  Net investment income                                              0.05       0.10       0.13
  Net realized and unrealized gain (loss) on investments             3.12       4.70       0.92
  Total from investment operations                                   3.17       4.80       1.05
 LESS DISTRIBUTIONS

  Distributions from net investment income                         (0.05)      (0.05)     (0.12)
  Distributions from net realized gain on investments              (1.51)      (0.63)     (0.23)
  Total distributions                                              (1.56)      (0.68)     (0.35)
 NET ASSET VALUE, END OF PERIOD                                    $21.40     $19.79     $15.67
 TOTAL RETURN(B)                                                   16.49%      31.10%      7.28%
 RATIOS TO AVERAGE NET ASSETS

  Expenses                                                          1.95%       1.93%      1.95%*
  Net investment income                                             0.18%       0.32%      1.09%*
  Expense waiver/reimbursement(c)                                 --            0.05%      0.12%*
 SUPPLEMENTAL DATA

  Net assets, end of period (000 omitted)                       $540,995    $261,024    $46,671
   

  Average commission rate paid(d)                                $0.0500         --         --
    

  Portfolio turnover                                                  88%         46%        34%


* Computed on an annualized basis.

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

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

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

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

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED MARCH 31, 1997, WHICH CAN BE OBTAINED FREE
OF CHARGE.

                   FINANCIAL HIGHLIGHTS -- CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the
Fund's independent public accountants. Their report, dated April 24,
1997, on the Fund's financial statements for the year ended March 31,
1997, and on the following table for the periods presented, is
included in the Annual Report, which is incorporated by reference.
This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.
 

                                                                     YEAR ENDED MARCH 31,
                                                            1997      1996      1995     1994(A)

                                                                             
 NET ASSET VALUE, BEGINNING OF PERIOD                      $19.80    $15.66    $14.55    $14.70
 INCOME FROM INVESTMENT OPERATIONS

  Net investment income                                      0.04      0.05      0.14      0.12
  Net realized and unrealized gain (loss) on investments     3.12      4.75      1.45      0.35
  Total from investment operations                           3.16      4.80      1.59      0.47
 LESS DISTRIBUTIONS

  Distributions from net investment income                  (0.05)    (0.03)    (0.13)    (0.13)
  Distributions from net realized gain on investments       (1.51)    (0.63)    (0.35)    (0.49)
  Total distributions                                       (1.56)    (0.66)    (0.48)    (0.62)
 NET ASSET VALUE, END OF PERIOD                            $21.40    $19.80    $15.66    $14.55
 TOTAL RETURN(B)                                            16.42%    31.14%    11.23%     3.16%
 RATIOS TO AVERAGE NET ASSETS

  Expenses                                                   1.95%     1.96%     2.04%     2.11%*
  Net investment income                                      0.18%     0.27%     0.91%     0.71%*
  Expense waiver/reimbursement(c)                             --       0.02%       --        --
 SUPPLEMENTAL DATA

  Net assets, end of period (000 omitted)                 $69,990   $44,434   $20,055   $11,895
   

  Average commission rate paid(d)                         $0.0500        --        --        --
    

  Portfolio turnover                                           88%       46%       34%       27%


* Computed on an annualized basis.

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

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

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

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

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED MARCH 31, 1997, WHICH CAN BE OBTAINED FREE
OF CHARGE.

                            GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on
July 22, 1968. Class A Shares, Class B Shares and Class C Shares of
the Fund ("Shares") are designed for individuals as a convenient means
of accumulating an interest in a professionally managed, diversified
portfolio of common stocks and other securities of high quality
companies.

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

CALLING THE FUND

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

                           INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

   

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

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

ACCEPTABLE INVESTMENTS

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

* common stocks;

* preferred stocks;

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

* certain convertible securities;

* warrants; and

* American depositary receipts.

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

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

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

THE LEADERS LIST

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

AMERICAN DEPOSITARY RECEIPTS

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

CONVERTIBLE SECURITIES

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

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

REPURCHASE AGREEMENTS

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

ILLIQUID SECURITIES

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

LENDING OF PORTFOLIO SECURITIES

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

PORTFOLIO TURNOVER

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

INVESTMENT LIMITATIONS

The Fund will not:

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

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

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

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

                              NET ASSET VALUE

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

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

                           INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the
characteristics described below.




                             CLASS A      CLASS B       CLASS C

                                             
 Minimum and                $500/$100   $1500/$100    $1500/$100
 Subsequent
 Investment Amounts
 Minimum and                $50         $50           $50
 Subsequent
 Investment Amount
 for Retirement Plans
 Maximum Sales Charge       5.50%*      None          None
 Maximum Contingent         None        5.50%+        1.00%#
 Deferred Sales
 Charge**

 Conversion Feature         No          Yes++         No


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




                             SALES CHARGE               DEALER
                           AS A PERCENTAGE OF       CONCESSION AS
                           PUBLIC        NET       A PERCENTAGE OF

                          OFFERING     AMOUNT      PUBLIC OFFERING

  AMOUNT OF TRANSACTION     PRICE     INVESTED          PRICE
                                               
  Less than $50,000         5.50%       5.82%           5.00%
  $50,000 but less
  than $100,000             4.50%       4.71%           4.00%
  $100,000 but less
  than $250,000             3.75%       3.90%           3.25%
  $250,000 but less
  than $500,000             2.50%       2.56%           2.25%
  $500,000 but less
  than $1 million           2.00%       2.04%           1.80%
  $1 million or greater     0.00%       0.00%           0.25%


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

+ The following contingent deferred sales charge schedule applies to
  Class B Shares:




   YEAR OF REDEMPTION      CONTINGENT DEFERRED
   AFTER PURCHASE              SALES CHARGE
                               
   First                          5.50%
   Second                         4.75%
   Third                          4.00%
   Fourth                         3.00%
   Fifth                          2.00%
   Sixth                          1.00%
   Seventh and thereafter         0.00%


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

   "Conversion of Class B Shares."

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

                             PURCHASING SHARES

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

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

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY

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

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

PURCHASING SHARES BY WIRE

   

Shares may be purchased by Federal Reserve wire by calling the Fund.
All information needed will be taken over the telephone, and the order
is considered received when State Street Bank receives payment by
wire. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA
02266-8600; Attention; EDGEWIRE; For Credit to: (Fund Name) (Fund
Class); (Fund Number -- this number can be found on the account
statement or by contacting the Fund); Account Number; Trade Date and
Order Number; Group Number or Dealer Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on
holidays when wire transfers are restricted.

    

PURCHASING SHARES BY CHECK

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

SYSTEMATIC INVESTMENT PROGRAM

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

RETIREMENT PLANS

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

CLASS A SHARES

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

NO SALES CHARGE IS IMPOSED FOR CLASS A SHARES PURCHASED:

* through financial intermediaries that do not receive sales charge dealer
  concessions;

* by Federated Life Members who maintain a $500 minimum balance in at least
  one of the Federated Funds; or

* through "wrap accounts" or similar programs under which clients pay
  a fee for services.

IN ADDITION, THE SALES CHARGE CAN BE REDUCED OR ELIMINATED BY:
   
* purchasing in quantity and accumulating purchases at the levels in the

  table under "Investing in the Fund";

    

* combining concurrent purchases of two or more funds;     * signing a
letter of intent to purchase a specific quantity of shares

  within 13 months; or

* using the reinvestment privilege.

    

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

DEALER CONCESSION

   

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

    

Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the establishment of customer accounts
and purchases of Shares.

CLASS B SHARES

   

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

Class B Shares will automatically convert into Class A Shares after
eight full years from the purchase date. Such conversion will be on
the basis of the relative NAVs per Share, without the imposition of
any charges. Class B Shares acquired by exchange from Class B Shares
of another Federated Fund will convert into Class A Shares based on
the time of the initial purchase.

CLASS C SHARES

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

                      REDEEMING AND EXCHANGING SHARES

   

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

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

REDEEMING OR EXCHANGING
SHARES BY TELEPHONE

   

Shares acquired directly from the Fund may be redeemed in any amount,
or exchanged, by calling 1-800-341-7400. Appropriate authorization
forms for these transactions must be on file with the Fund. Shares
held in certificate form must first be returned to the Fund as
described in the instructions under "Redeeming or Exchanging Shares by
Mail." Redemption proceeds will either be mailed in the form of a
check to the shareholder's address of record or wire-transferred to
the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System. The minimum amount for a wire
transfer is $1,000. Proceeds from redeemed Shares purchased by check
or through ACH will not be wired until that method of payment has
cleared.      Telephone instructions will be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions. In the event
of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming or
Exchanging Shares By Mail" should be considered. The telephone
transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

REDEEMING OR EXCHANGING SHARES BY MAIL

Shares may be redeemed in any amount, or exchanged, by mailing a
written request to: Federated Shareholder Services Company, Fund Name,
Fund Class, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they must accompany the written
request. It is recommended that certificates be sent unendorsed by
registered or certified mail.

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

REQUIREMENTS FOR REDEMPTION

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

REQUIREMENTS FOR EXCHANGE

   

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

    

Upon receipt of proper instructions and required supporting documents,
Shares submitted for exchange are redeemed and proceeds invested in
the same class of shares of the other fund. Signature guarantees will
be required to exchange between fund accounts not having identical
shareholder registrations. The exchange privilege may be modified or
terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder. To be
eligible to participate in this program, a shareholder must have an
account value of at least $10,000, other than retirement accounts
subject to required minimum distributions. A shareholder may apply for
participation in this program through his financial intermediary or by
calling the Fund.

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

CONTINGENT DEFERRED SALES CHARGE

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

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

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

* following the death or disability, as defined in Section 72(m)(7) of
  the Internal Revenue Code of 1986, of the last surviving
  shareholder;

* representing minimum required distributions from an Individual
  Retirement Account or other retirement plan to a shareholder who has
  attained the age of 701U2;

* which are involuntary redemptions of shareholder accounts that do not
  comply with the minimum balance requirements;

* which are qualifying redemptions of Class B Shares under a Systematic
  Withdrawal Program;

   

* which are reinvested in the Fund under the reinvestment privilege;

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

* of Shares originally purchased through a bank trust department, an
  investment adviser registered under the Investment Advisers Act of
  1940 or retirement plans where the third party administrator has
  entered into certain arrangements with Federated Securities Corp. or
  its affiliates, or any other financial intermediary, to the extent
  that no payments were advanced for purchases made through such
  entities.

    

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

                       ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND CERTIFICATES

   

Shareholders will receive detailed confirmations of all transactions and
periodic confirmations reporting other activity. Share certificates are not
issued unless requested in writing to Federated Shareholder Services
Company.
    
DIVIDENDS AND DISTRIBUTIONS

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

ACCOUNTS WITH LOW BALANCES

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

                              FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

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

INVESTMENT ADVISER

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

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 0.55%
of the Fund's average daily net assets, plus 4.50% of the Fund's gross
income (excluding any capital gains or losses). Gross income includes,
in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all interest-bearing obligations, and
dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the
Funds for certain operating expenses. The Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole
discretion.

ADVISER'S BACKGROUND

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

Federated Advisers and other subsidiaries of Federated Investors serve
as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion
invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial
institutions nationwide.

Scott B. Schermerhorn has been the Fund's portfolio manager since July
1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice
President of the Fund's investment adviser. From 1990 through 1996,
Mr. Schermerhorn was a Senior Vice President and Senior Investment
Officer at J W Seligman & Co., Inc. Mr. Schermerhorn received his
M.B.A. in Finance and International Business from Seton Hall
University.     Michael P. Donnelly has been the Fund's portfolio
manager since July 1997. Mr. Donnelly joined Federated in 1989 as an
Investment Analyst and has been a Vice President of the Fund's adviser
since 1994. He served as an Assistant Vice President of the Fund's
adviser from 1992 to 1994. Mr. Donnelly is a Chartered Financial
Analyst and received his M.B.A. from the University of Virginia.     
Both the Fund and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Directors, and could result in severe penalties.

DISTRIBUTION OF SHARES

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

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

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

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

SERVICES

Under a distribution plan adopted in accordance with Rule 12b-1 under
the Investment Company Act of 1940 (the "Plan"), Class B Shares and
Class C Shares will pay a fee to the distributor in an amount computed
at an annual rate of 0.75% of the average daily net assets of each
class of Shares to finance any activity which is principally intended
to result in the sale of Shares subject to the Plan. For Class C
Shares, the distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers,
and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers. With
respect to Class B Shares, because distribution fees to be paid by the
Fund to the distributor may not exceed an annual rate of 0.75% of each
class of Shares' average daily net assets, it will take the
distributor a number of years to recoup the expenses it has incurred
for its sales services and distribution and distribution-related
support services pursuant to the Plan.

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

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

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the
time of purchase of Class A Shares, an amount equal to 0.50% of the
net asset value of Class A Shares purchased by their clients or
customers under certain qualified plans as approved by Federated
Securities Corp. (Such payments are subject to a reclaim from the
financial institution should the assets leave the program within 12
months after purchase.)

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

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by affiliates of Federated Investors as specified below:

     MAXIMUM                    AVERAGE AGGREGATE
 ADMINISTRATIVE FEE             DAILY NET ASSETS

   

     0.150%                on the first $250 million
    

     0.125%                on the next $250 million
   

     0.100%                on the next $250 million
    

     0.075%          on assets in excess of $750 million

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

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the
order at a favorable price. in working with dealers, the Adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. in selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have
sold or are selling Shares of the Fund and other funds distributed by
Federated Securities Corp. The Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Directors.

                          SHAREHOLDER INFORMATION

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

Directors may be removed by the Directors or by shareholders at a
special meeting. A special meeting of shareholders shall be called by
the Directors upon the written request of shareholders owning at least
10% of the Fund's outstanding Shares of all series entitled to vote.
    As of July 7, 1997, MLPF&S, Jacksonville, FL, for the sole benefit
of its customers, owned 32.83% of the voting securities of the Fund's
Class C Shares and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.     

                              TAX INFORMATION

FEDERAL INCOME TAX

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

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

STATE AND LOCAL TAXES

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

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

                          PERFORMANCE INFORMATION

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

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

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

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

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

   

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

                          OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Class F Shares.
Class F Shares are sold primarily to customers of financial
institutions subject to a front-end sales charge, a contingent
deferred sales charge, a Shareholder Services Agreement, and a minimum
initial investment of $1,500, unless the investment is in a retirement
account, in which the minimum investment is $50.     Class A Shares,
Class B Shares, Class C Shares, and Class F Shares are subject to
certain of the same expenses, however, the front-end sales charge for
Class F Shares is lower than that for Class A Shares. Expense
differences between Class A Shares, Class B Shares, Class C Shares,
and Class F Shares may affect the performance of each class.      To
obtain more information and a prospectus for Class F Shares, investors
may call 1-800-341-7400 or contact their financial institution.

                                   NOTES

FEDERATED AMERICAN LEADERS FUND, INC.
CLASS A, CLASS B,

CLASS C SHARES

Federated Investors Tower
Pittsburgh, PA 15222-3779

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

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and
Trust Company

P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor

   
313914103
313914202
313914301

G01085-01 (7/97)

    

[Graphic]

Federated American Leaders Fund, Inc.

Class A Shares, Class B Shares,
Class C Shares

PROSPECTUS
   
JULY 31, 1997

    

An Open-End, Diversified
Management Investment Company

Federated American Leaders Fund, Inc.

Class F Shares

PROSPECTUS

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

   

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.      This prospectus contains the information you should
read and know before you invest in Class F Shares of the Fund. Keep
this prospectus for future reference.     The Fund has also filed a
Statement of Additional Information for Class A Shares, Class B
Shares, Class C Shares, and Class F Shares dated July 31, 1997, with
the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated
by reference into this prospectus. You may request a copy of the
Statement of Additional Information, or a paper copy of this
prospectus, if you have received your prospectus electronically, free
of charge by calling 1-800-341-7400. To obtain other information, or
make inquiries about the Fund contact your financial institution. The
Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).      THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.     Prospectus dated July 31, 1997     

                             TABLE OF CONTENTS

   

 Summary of Fund Expenses                     1
 Financial Highlights                         2
 General Information                          3
  Calling the Fund                            3
 Investment Information                       3

  Investment Objective                        3
  Investment Policies                         3
  Investment Limitations                      4
 Net Asset Value                              5
 Investing in the Fund                        5
 Purchasing Shares                            5
  Purchasing Shares Through a
   Financial Intermediary                     5

  Purchasing Shares by Wire                   6
  Purchasing Shares by Check                  6
  Systematic Investment Program               6
  Retirement Plans                            6
  Reducing or Eliminating the Sales Charge    6

 Redeeming and Exchanging Shares              6
  Redeeming or Exchanging Shares Through a

   Financial Intermediary                     7
  Redeeming or Exchanging Shares by Telephone 7
  Redeeming or Exchanging Shares by Mail      7
  Requirements for Redemption                 7
  Requirements for Exchange                   7
  Systematic Withdrawal Program               8
  Contingent Deferred Sales Charge            8

 Account and Share Information                8
  Confirmations and Certificates              8
  Dividends and Distributions                 8
  Accounts with Low Balances                  9
 Fund Information                             9
  Management of the Fund                      9
  Distribution of Class F Shares             10
  Administration of the Fund                 10
  Brokerage Transactions                     10
 Shareholder Information                     11
 Tax Information                             11

  Federal Income Tax.                        11
  State and Local Taxes                      11

 Performance Information                     11
 Other Classes of Shares                     12

    

                          SUMMARY OF FUND EXPENSES




                               CLASS F SHARES
                      SHAREHOLDER TRANSACTION EXPENSES

  Maximum Sales Charge Imposed on Purchases (as a percentage of
 1.00% offering price) Maximum Sales Charge Imposed on Reinvested
 Dividends (as a None percentage of offering price) Contingent
 Deferred Sales Charge (as a percentage of original purchase price or

  redemption proceeds, as applicable)(1)                              1.00%
 Redemption Fee (as a percentage of amount redeemed, if applicable)   None
 Exchange Fee                                                         None



                      ANNUAL TRUST OPERATING EXPENSES
                  (As a percentage of average net assets)

                                                               
 Management Fee                                                       0.65%
 12b-1 Fee                                                            None
 Total Other Expenses                                                 0.54%

  Shareholder Services Fee (after waiver)(2)                 0.24%
 Total Operating Expenses(3)                                          1.19%


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

(2) The shareholder services fee has been reduced to reflect a
    voluntary waiver. The shareholder service provider can terminate
    this voluntary waiver at any time at its sole discretion. The
    maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 1.20% absent the
    voluntary waiver of a portion of the shareholder services fee.

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




 EXAMPLE

                                                                           
 You would pay the following expenses on a $1,000 investment, assuming (1)
 5% annual return, (2) redemption at the end of each time period, and (3)
 payment of the maximum sales charge.
 1 Year                                                                          $ 32
 3 Years                                                                         $ 58
 5 Years                                                                         $ 75
 10 Years                                                                        $153
 You would pay the following expenses on the same investment, assuming no
 redemption.
 1 Year                                                                          $ 22
 3 Years                                                                         $ 47
 5 Years                                                                         $ 75
 10 Years                                                                        $153


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

                            FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the
Fund's independent public accountants. Their report, dated April 24,
1997, on the Fund's financial statements for the year ended March 31,
1997, and on the following table for the periods presented, is
included in the Annual Report, which is incorporated by reference.
This table should be read in conjunction with the Fund's financial
statements and notes thereto, which may be obtained from the Fund.




                                                                      YEAR ENDED MARCH 31,
                                                          1997     1996       1995       1994(A)

                                                                           
 NET ASSET VALUE, BEGINNING OF PERIOD                  $19.78     $15.66    $14.58       $14.95
 INCOME FROM INVESTMENT OPERATIONS

  Net investment income                                  0.20       0.19      0.25         0.16
  Net realized and unrealized gain (loss) on             3.13       4.72      1.42        (0.20)
  investments

  Total from investment operations                       3.33       4.91      1.67        (0.04)
 LESS DISTRIBUTIONS

  Distributions from net investment income              (0.20)     (0.16)    (0.24)       (0.16)
  Distributions from net realized gain on investments   (1.51)     (0.63)    (0.35)       (0.17)
  Total distributions                                   (1.71)     (0.79)    (0.59)       (0.33)
 NET ASSET VALUE, END OF PERIOD                        $21.40     $19.78    $15.66       $14.58
 TOTAL RETURN(B)                                        17.39%     31.95%    11.80%       (0.30%)
 RATIOS TO AVERAGE NET ASSETS

  Expenses                                               1.19%      1.21%      1.27%       1.35%*
  Net investment income                                  0.94%      1.02%      1.69%       1.51%*
  Expense waiver/ reimbursement(c)                       0.01%      0.02%       --                     --
 SUPPLEMENTAL DATA

  Net assets, end of period (000 omitted)             $85,151    $55,329    $28,495     $15,282
   

  Average commission rate paid(d)                     $0.0500         --        --         --
    

  Portfolio turnover                                       88%        46%        34%         27%


* Computed on an annualized basis.

(a) Reflects operations for the period from July 27, 1993 (date of
    initial public investment) to March 31, 1994.

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

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

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

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED MARCH 31, 1997, WHICH CAN BE OBTAINED FREE
OF CHARGE.

                            GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on
July 22, 1968. Class F Shares of the Fund ("Shares") are designed for
individuals as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio of common stocks and
other securities of high quality companies.

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

CALLING THE FUND

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

                           INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

   

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

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

ACCEPTABLE INVESTMENTS

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

* common stocks;

* preferred stocks; and

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

* certain convertible securities;

* warrants; and

* American depositary receipts.

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

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

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

THE LEADERS LIST

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

AMERICAN DEPOSITARY RECEIPTS

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

CONVERTIBLE SECURITIES

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

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

REPURCHASE AGREEMENTS

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

ILLIQUID SECURITIES

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

LENDING OF PORTFOLIO SECURITIES

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

PORTFOLIO TURNOVER

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

INVESTMENT LIMITATIONS

The Fund will not:

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

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

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

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

                              NET ASSET VALUE

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

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

                           INVESTING IN THE FUND

This prospectus offers Class F Shares with the characteristics
described below.

 Minimum and Subsequent        $1500/$100
 Investment Amounts
 Minimum and Subsequent        $50
 Investment Amount
 for Retirement Plans
 Maximum Sales Charge          1.00%*
 Maximum Contingent            1.00%**
 Deferred Sales Charge

* There is no sales charge for purchases of $1 million or more. In
  addition, no sales charge is imposed for Shares purchased through
  certain entities or programs. Please see the section entitled
  "Reducing or Eliminating the Sales Charge."

** Computed on the lesser of the NAV of the redeemed Shares at the
   time of purchase or the NAV of the redeemed Shares at the time of
   redemption. The following contingent deferred sales charge schedule
   applies to Class F Shares:

   

 AMOUNT OF                                     CONTINGENT DEFERRED
 PURCHASE                      SHARES HELD         SALES CHARGE
 Up to $1,999,999           Four Years or less        1.00%
 $2,000,000 to $4,999,999    Two Years or less         .50%
 $5,000,000 or more          One Year or less          .25%

    

                             PURCHASING SHARES

Shares of the Fund are sold on days on which the New York Stock
Exchange is open. Shares of the Fund may be purchased as described
below, either through a financial intermediary (such as a bank or
broker/dealer) or by sending a wire or check directly to the Fund.
Financial intermediaries may impose different minimum investment
requirements on their customers. An account must be established with a
financial intermediary or by completing, signing, and returning the
new account form available from the Fund before Shares can be
purchased. Shareholders in Class F Shares of certain other funds
advised and distributed by affiliates of Federated Investors
("Federated Funds") may exchange their Shares for Class F Shares of
the Fund. The Fund reserves the right to reject any purchase or
exchange request.

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

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY

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

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

PURCHASING SHARES BY WIRE

   

Shares may be purchased by Federal Reserve wire by calling the Fund.
All information needed will be taken over the telephone, and the order
is considered received when State Street Bank receives payment by
wire. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA
02266-8600; Attention; EDGEWIRE; For Credit to: (Fund Name) (Fund
Class); (Fund Number -- this number can be found on the account
statement or by contacting the Fund); Account Number; Trade Date and
Order Number; Group Number or Dealer Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on
holidays when wire transfers are restricted.

    

PURCHASING SHARES BY CHECK

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

SYSTEMATIC INVESTMENT PROGRAM

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

RETIREMENT PLANS

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

REDUCING OR ELIMINATING THE SALES CHARGE

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

NO SALES CHARGE IS IMPOSED FOR CLASS F SHARES PURCHASED:

   

* through bank trust departments or through investment advisers
  registered under the Investment Advisers Act of 1940 purchasing on
  behalf of their clients;

* by sales representatives, Directors, and employees of the Fund, Federated
  Advisers, Federated Securities Corp. or their affiliates and their immediate
  family members;

* by any investment dealer who has a sales agreement with Federated
  Securities Corp., and their immediate family members, or by any
  trusts or pension or profit-sharing plans for these persons or
  retirement plans where the third party administrator has entered
  into certain arrangements with Federated Securities Corp. or its
  affiliates.

IN ADDITION, THE SALES CHARGE CAN BE REDUCED OR ELIMINATED BY:

* purchasing in quantity and accumulating purchases;

* combining concurrent purchases of two or more funds;

* signing a letter of intent to purchase a specific quantity of shares
  within 13 months; or

* using the reinvestment privilege.

    

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

DEALER CONCESSION

   

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

                      REDEEMING AND EXCHANGING SHARES

   

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

    

REDEEMING OR EXCHANGING SHARES THROUGH A FINANCIAL INTERMEDIARY

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

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

   

Shares acquired directly from the Fund may be redeemed in any amount,
or exchanged, by calling 1-800-341-7400. Appropriate authorization
forms for these transactions must be on file with the Fund. Shares
held in certificate form must first be returned to the Fund as
described in the instructions under "Redeeming or Exchanging Shares by
Mail." Redemption proceeds will either be mailed in the form of a
check to the shareholder's address of record or wire-transferred to
the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System. The minimum amount for a wire
transfer is $1,000. Proceeds from redeemed Shares purchased by check
or through ACH will not be wired until that method of payment has
cleared.      Telephone instructions will be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions. In the event
of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming or
Exchanging Shares By Mail" should be considered. The telephone
transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

REDEEMING OR EXCHANGING SHARES BY MAIL

Shares may be redeemed in any amount, or exchanged, by mailing a
written request to: Federated Shareholder Services Company, Fund Name,
Fund Class, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they must accompany the written
request. It is recommended that certificates be sent unendorsed by
registered or certified mail.

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

REQUIREMENTS FOR REDEMPTION

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

REQUIREMENTS FOR EXCHANGE

   

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

    

Upon receipt of proper instructions and required supporting documents,
Shares submitted for exchange are redeemed and proceeds invested in
the same class of shares of the other fund. Signature guarantees will
be required to exchange between fund accounts not having identical
shareholder registrations. The exchange privilege may be modified or
terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder. To be
eligible to participate in this program, a shareholder must have an
account value of at least $10,000, other than retirement accounts
subject to required minimum distributions. A shareholder may apply for
participation in this program through his financial intermediary or by
calling the Fund.

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

CONTINGENT DEFERRED SALES CHARGE

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

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

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

* following the death or disability, as defined in Section 72(m)(7) of
  the Internal Revenue Code of 1986, of the last surviving
  shareholder;

   

* representing a total or partial distribution from an Individual
  Retirement Account, Keogh Plan, or a custodial account to a
  shareholder who has attained the age of 701U2;

* representing a total or partial distribution from a qualified plan,
  other than an Individual Retirement Account, Keogh Plan, or a
  custodial account following retirement;

    

* which are involuntary redemptions of shareholder accounts that do
not     * which are reinvested in the Fund under the reinvestment
privilege;

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

* of Shares originally purchased through a bank trust department, an
  investment adviser registered under the Investment Advisers Act of
  1940 or retirement plans where the third party administrator has
  entered into certain arrangements with Federated Securities Corp. or
  its affiliates, or any other financial intermediary, to the extent
  that no payments were advanced for purchases made through such
  entities.

    

For more information regarding the contingent deferred sales charge or
any of the above provisions, contact your financial intermediary or
the Fund. The Fund reserves the right to discontinue or modify these
provisions.

Shareholders will be notified of such action.

                       ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND CERTIFICATES

   

Shareholders will receive detailed confirmations of all transactions and
periodic confirmations reporting other activity. Share certificates are not
issued unless requested in writing to Federated Shareholder Services
Company.
    
DIVIDENDS AND DISTRIBUTIONS

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

ACCOUNTS WITH LOW BALANCES

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

                              FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

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

INVESTMENT ADVISER

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

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 0.55%
of the Fund's average daily net assets, plus 4.5% of the Fund's gross
income (excluding any capital gains or losses). Gross income includes,
in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all interest-bearing obligations, and
dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the
Funds for certain operating expenses. The Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole
discretion.

ADVISER'S BACKGROUND

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

Federated Advisers and other subsidiaries of Federated Investors serve
as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion
invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial
institutions nationwide.

Scott B. Schermerhorn has been the Fund's portfolio manager since July
1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice
President of the Fund's investment adviser. From 1990 through 1996,
Mr. Schermerhorn was a Senior Vice President and Senior Investment
Officer at J W Seligman & Co., Inc. Mr. Schermerhorn received his
M.B.A. in Finance and International Business from Seton Hall
University.     Michael P. Donnelly has been the Fund's portfolio
manager since July 1997. Mr. Donnelly joined Federated in 1989 as an
Investment Analyst and has been a Vice President of the Fund's adviser
since 1994. He served as an Assistant Vice President of the Fund's
adviser from 1992 to 1994. Mr. Donnelly is a Chartered Financial
Analyst and received his M.B.A. from the University of Virginia.     
Both the Fund and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Directors, and could result in severe penalties.

DISTRIBUTION OF CLASS F SHARES

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

SHAREHOLDER SERVICES

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

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

The distributor will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the
offering price of the Shares acquired by their clients or customers on
purchases up to $1,999,999, 0.50% of the offering price on purchases
of $2,000,000 to $4,999,999, and 0.25% of the offering price on
purchases of $5,000,000 or more. (This fee is in addition to the 1.00%
sales charge on purchases of less than $1 million.) The financial
institutions may elect to waive the initial payment described above;
such waiver will result in the waiver by the Fund of the otherwise
applicable contingent deferred sales charge.

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

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by affiliates of Federated Investors as specified below:    

    MAXIMUM

  ADMINISTRATIVE          AVERAGE AGGREGATE
       FEE                DAILY NET ASSETS

     0.150%            on the first $250 million
     0.125%            on the next $250 million
     0.100%            on the next $250 million
     0.075%      on assets in excess of $750 million

    

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

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the Adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have
sold or are selling shares of the Fund and other funds distributed by
Federated Securities Corp. The Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Directors.

                          SHAREHOLDER INFORMATION

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

Directors may be removed by Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the
Directors upon the written request of shareholders owning at least 10%
of the Fund's outstanding Shares of all series entitled to vote.    
As of July 7, 1997, MLPF&S, Jacksonville, FL, for the sole benefit of
its customers, owned 32.83% of the voting securities of the Fund's
Class C Shares and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.     

                              TAX INFORMATION

FEDERAL INCOME TAX

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

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

STATE AND LOCAL TAXES

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

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

                          PERFORMANCE INFORMATION

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

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

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

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

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

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

                          OTHER CLASSES OF SHARES

   

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

    

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

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

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

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

To obtain more information and a prospectus for Class A Shares, Class
B Shares, and Class C Shares, investors may call 1-800-341-7400 or
contact their financial institution.

[Graphic]

Federated American Leaders Fund, Inc.

Class F Shares

PROSPECTUS
   
JULY 31, 1997

    

An Open-End, Diversified
Management Investment Company

FEDERATED AMERICAN LEADERS FUND, INC.

CLASS F SHARES

Federated Investors Tower
Pittsburgh, PA 15222-3779

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

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and
Trust Company

P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder
Services Company

P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor

   

Cusip 313914400

8062808A-FS (7/97)
    

                   FEDERATED AMERICAN LEADERS FUND, INC.

                               CLASS A SHARES
                               CLASS B SHARES
                               CLASS C SHARES
                               CLASS F SHARES

                    STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the
prospectus for Class A Shares, Class B Shares, and Class C Shares, and
the prospectus for Class F Shares of Federated American Leaders Fund,
Inc. (the "Fund"), each dated July 31, 1997. This Statement is not a
prospectus itself. You may request a copy of either prospectus or a
paper copy of this Statement, if you have received it electronically,
free of charge by calling 1-800-245-4770.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

                   Statement dated July 31, 1997
[Graphic]

   
Cusip 313914103
Cusip 313914202
Cusip 313914301
Cusip 313914400
    
8062808b (7/97)
[Graphic]

TABLE OF CONTENTS

 GENERAL INFORMATION ABOUT THE FUND                                1
 INVESTMENT OBJECTIVE AND POLICIES                                 1

  Types of Investments                                             1
  Convertible Securities                                           1
  Lending of Portfolio Securities                                  1
  Repurchase Agreements                                            1
  Reverse Repurchase Agreements                                    1
  Portfolio Turnover                                               2
 INVESTMENT LIMITATIONS                                            2
  Selling Short and Buying on Margin                               2
  Borrowing Money                                                  2
  Pledging Assets                                                  2
  Diversification of Investments                                   2
 Investing in Securities of Other Investment Companies             2
  Investing in New Issuers                                         2

 Investing in Issuers Whose Securities are Owned
 by Officers of the Fund                                           2

  Underwriting                                                     3
  Investing in Commodities or Real Estate                          3
  Lending Cash or Securities                                       3
  Acquiring Securities                                             3
  Concentration of Investments                                     3
  Issuing Senior Securities                                        3
  Investing in Restricted Securities                               3
 FEDERATED AMERICAN LEADERS FUND, INC.

 MANAGEMENT                                                        3
  Fund Ownership                                                   7
  Directors' Compensation                                          8
  Director Liability                                               8
 INVESTMENT ADVISORY SERVICES                                      8
  Adviser to the Fund                                              8
  Advisory Fees                                                    9
 BROKERAGE TRANSACTIONS                                            9
 OTHER SERVICES                                                    9

  Fund Administration                                              9
  Custodian and Portfolio Accountant                               9
  Transfer Agent                                                   9
  Independent Public Accountants                                   9
 PURCHASING SHARES                                                10

  Quantity Discounts and

   Accumulated Purchases                                          10
  Concurrent Purchases                                            10
  Letter of Intent                                                10
  Reinvestment Privilege                                          11
  Conversion of Class B Shares                                    11
 DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

                                                                  11

 Purchases by Sales Representatives, Fund Directors,
 and Employees                                                    12

  Exchanging Securities for Fund Shares                           12
 DETERMINING NET ASSET VALUE                                      12

  Determining Market Value of Securities                          12
 REDEEMING SHARES                                                 13

  Redemption in Kind                                              13
  Contingent Deferred Sales Charge                                13
  Elimination of the Contingent Deferred
   Sales Charge -- Class B Shares                                 13
 TAX STATUS                                                       14
  The Fund's Tax Status                                           14
  Shareholders' Tax Status                                        14

 TOTAL RETURN                                                     14
 YIELD                                                            14
 PERFORMANCE COMPARISONS                                          15
  Economic and Market Information                                 16
 ABOUT FEDERATED INVESTORS                                        16

  Mutual Fund Market                                              16
  Institutional Clients                                           16
  Bank Marketing                                                  16
  Broker/Dealers and Bank Broker/Dealer
   Subsidiaries                                                   16
 FINANCIAL STATEMENTS                                             17
 APPENDIX                                                         18

GENERAL INFORMATION ABOUT THE FUND

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

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek growth of capital and of
income by concentrating the area of investment decision in the
securities of high-quality companies. The investment objective cannot
be changed without shareholder approval.

TYPES OF INVESTMENTS

   

The Fund invests primarily in common stocks, preferred stocks,
corporate bonds, convertible securities, notes, American depositary
receipts, and warrants of companies selected from "The Leaders List."
     CONVERTIBLE SECURITIES

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

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

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Fund lends portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays
the Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in
connection with a loan. The Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right
to vote if that were considered important with respect to the
investment.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institution's sell U.S. government
securities or certificates of deposit to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the
securities subject to repurchase agreements, and these securities will
be marked to market daily. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into
repurchase agreements with banks or other recognized financial
institutions such as broker/dealers which are deemed by the Fund's
adviser to be creditworthy, pursuant to guidelines established by the
Directors.

REVERSE REPURCHASE AGREEMENTS

The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as an institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase
agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure
that the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time. When effecting reverse repurchase agreements,
liquid assets of the Fund, in a dollar amount sufficient to make
payment for the obligations to be purchased, are segregated at the
trade date. These securities are marked to market daily and maintained
until the transaction is settled.

PORTFOLIO TURNOVER

The Fund will not engage in short-term trading but may dispose of
securities held for a short period if, after examination of their
value, management believes such disposition to be advisable. In
determining whether or not to sell portfolio securities, consideration
will be given among other factors to the effect on shareholders of the
resultant tax liability. Nevertheless changes will be made whenever,
in the judgment of management, they will contribute to the attainment
of the Fund's investment objective, even though such changes may
result in realization of capital gains. For the fiscal years ended
March 31, 1997 and 1996, the portfolio turnover rates were 88% and
46%, respectively.

INVESTMENT LIMITATIONS

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

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities
on margin.

BORROWING MONEY

The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets. In addition, the Fund
may enter into reverse repurchase agreements and otherwise borrow up
to one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. This latter practice is not for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or
disadvantageous.

Interest paid on borrowed funds will not be available for investment
and will reduce net income. The Fund will liquidate any such
borrowings as soon as possible and may not purchase any portfolio
securities while the borrowings are outstanding. However, during the
period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio
instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate its securities.

DIVERSIFICATION OF INVESTMENTS

The Fund will not invest more than 5% of its total assets in the
securities of any one issuer, except U.S. government securities, and
will not purchase more than 10% of any class of voting securities of
any one issuer.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not purchase securities of other investment companies,
except by purchase in the open market involving only customary
brokerage commissions or as part of a merger or consolidation.

INVESTING IN NEW ISSUERS

The Fund will not invest more than 5% of the value of its total assets
in securities of issuers with a record of less than three years of
continuous operation, including the operation of any predecessor.

INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND

The Fund will not purchase or retain the securities of any issuer if
the officers and Directors of the Fund or its investment adviser,
owning individually more than 1U2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.

UNDERWRITING

The Fund will not underwrite or engage in agency distribution of
securities, except as it may be deemed to be an underwriter, if it
purchases and sells restricted securities as permitted.

INVESTING IN COMMODITIES OR REAL ESTATE

The Fund will not invest in commodities, commodity contracts, or real
estate.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets except portfolio securities.
(This shall not prevent the purchase or holding of bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, repurchase agreements, or other transactions which are
permitted by the Fund's investment objective and policies or Articles
of Incorporation.)

ACQUIRING SECURITIES

The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund may invest in up
to 10% of the voting securities of any one issuer and may exercise its
voting powers consistent with the best interests of the Fund. In
addition, the Fund, other companies advised by the Fund's investment
adviser, and other affiliated companies may together buy and hold
substantial amounts of voting stock of a company and may vote together
in regard to such company's affairs. In some such cases, the Fund and
its affiliates might collectively be considered to be in control of
such company. In some cases, the Directors and other persons
associated with the Fund and its affiliates might possibly become
directors of companies in which the Fund holds stock.

CONCENTRATION OF INVESTMENTS

The Fund will not invest more than 25% of the value of its total
assets in any one industry.

ISSUING SENIOR SECURITIES

The Fund will not issue senior securities.

INVESTING IN RESTRICTED SECURITIES

The Fund will not purchase restricted securities if immediately
thereafter more than 15% of the net assets of the Fund, taken at
market value, would be invested in such securities.

In addition, in order to comply with certain state restrictions, the
Fund will not invest in real estate limited partnerships or oil, gas,
or other mineral leases. Also, the Fund will not invest more than 5%
of its net assets in warrants. No more than 2% of the Fund's net
assets, to be included within the overall 5% limit on investments in
warrants, may be warrants which are not listed on the New York Stock
Exchange or the American Stock Exchange. If state requirements change,
these restrictions may be revised without notice to shareholders.
Except when borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.

The Fund did not borrow money, invest in reverse repurchase
agreements, or purchase restricted securities in excess of 5% of the
value of its total or net assets during the last fiscal year and has
no present intent to do so in the coming fiscal year. Restricted
securities are generally not available from companies comprising "The
Leader's List."

FEDERATED AMERICAN LEADERS FUND, INC. MANAGEMENT

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

John F. Donahue@*
Federated Investors Tower

Pittsburgh, PA

Birthdate: July 28, 1924

President and Director

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice

President and Director of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

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

John T. Conroy, Jr.
Wood/IPC Commercial Department

John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North

Naples, FL

Birthdate: June 23, 1937

Director

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

Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor

Pittsburgh, PA

Birthdate: July 4, 1918

Director

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

J. Christopher Donahue *
Federated Investors Tower

Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President and Director

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Director of the Company.

James E. Dowd
571 Hayward Mill Road

Concord, MA

Birthdate: May 18, 1922

Director

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

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111

Pittsburgh, PA

Birthdate: October 11, 1932

Director

Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street

Pittsburgh, PA

Birthdate: June 18, 1924

Director

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

Region; Director or Trustee of the Funds.

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

Birthdate: March 16, 1942

Director

Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.

   

Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA

Birthdate: October 6, 1926

Director

Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee

of the Funds.

    

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University

Pittsburgh, PA

Birthdate: December 20, 1932

Director

President, Law Professor, Duquesne University; Consulting Partner,
Mollica & Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh

Pittsburgh, PA

Birthdate: September 14, 1925

Director

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

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

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

Edward C. Gonzales
Federated Investors Tower

Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower

Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.

Richard B. Fisher
Federated Investors Tower

Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of

the Funds; Director or Trustee of some of the Funds.

* This Director is deemed to be an "interested person" as defined in
  the Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the
  Board of Directors handles the responsibilities of the Board between
  meetings of the Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income
Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund:
2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. -- 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term
U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.

FUND OWNERSHIP

   

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

As of July 7, 1997, no shareholder of record owned 5% or more of the
outstanding Class A Shares of the Fund:

As of July 7, 1997, no shareholder of record owned 5% or more of the
outstanding Class B Shares of the Fund:

As of July 7, 1997, the following shareholder of record owned 5% or
more of the outstanding Class C Shares of the Fund: MLPF&S,
Jacksonville, FL, for the sole benefit of its customers, owned
approximately 1,275,508 Shares (32.83%).

As of July 7, 1997, the following shareholder of record owned 5% or
more of the outstanding Class F Shares of the Fund: MLPF&S,
Jacksonville, FL, for the sole benefit of its customers, owned
approximately 1,022,141 Shares (23.75%).     

DIRECTORS' COMPENSATION




                           AGGREGATE

 NAME,                   COMPENSATION

 POSITION WITH                FROM                  TOTAL COMPENSATION PAID
 FUND                        FUND*                     FROM FUND COMPLEX+

                                 
 John F. Donahue,                $ 0   $0 for the Fund and
 President and Director                56 other investment companies in the Fund Complex
 Thomas G. Bigley,         $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 John T. Conroy, Jr.,      $1,983.95   $119,615 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 William J. Copeland,      $1,983.95   $119,615 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 J. Christopher Donahue,         $ 0   $0 for the Fund and
 Executive Vice President              15 other investment companies in the Fund Complex
 and Director
 James E. Dowd,            $1,983.95   $119,615 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Lawrence D. Ellis, M.D.,  $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Edward L. Flaherty, Jr.,  $1,983.95   $119,615 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Peter E. Madden,          $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Gregor F. Meyer,          $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 John E. Murray, Jr.,      $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Wesley W. Posvar,         $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex
 Marjorie P. Smuts,        $1,803.32   $108,725 for the Fund and
 Director                              56 other investment companies in the Fund Complex


* Information is furnished for the fiscal year ended March 31, 1997.

+ The information is provided for the last calendar year.

DIRECTOR LIABILITY

The Articles of Incorporation provide that the Directors will not be
liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would
otherwise be subject by reason of willful misfeasence, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND

The Fund's investment adviser is Federated Advisers (the "Adviser").
It is a subsidiary of Federated Investors. All the voting securities
of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, his wife, and his son, J. Christopher Donahue. The
Adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it except acts or
omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract
with the Fund.

ADVISORY FEES

For its advisory services, the Adviser receives an annual investment
advisory fee as described in the respective prospectuses. During the
fiscal years ended March 31, 1997, 1996, and 1995, the Adviser earned
$6,915,061, $3,637,755, and $2,010,685, respectively, none of which
was waived.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the
Fund or to the Adviser and may include: advice as to the advisability
of investing in securities; security analysis and reports; economic
studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of
these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their
expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in
relationship to the value of the brokerage and research services
provided. During the fiscal years ended March 31, 1997, 1996, and
1995, the Fund paid total brokerage commissions of $2,449,369,
$677,135, and $277,942, respectively.

Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the Adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the Adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the respective prospectuses. From March 1, 1994, to
March 1, 1996, Federated Adminstrative Services, a subsidiary of
Federated Investors, served as the Fund's Adminstrator. For purposes
of this Statement of Additional Information, Federated Services
Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal
years ended March 31, 1997, 1996, and 1995, the Administrators earned
$809,285, $423,163, and $223,061, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. The fee paid for
this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.

TRANSFER AGENT

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

INDEPENDENT PUBLIC ACCOUNTANTS

The independent public accounts for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.

PURCHASING SHARES

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

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES

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

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

   

In addition, the Fund will also combine purchases for the purpose of
reducing the contingent deferred sales charge imposed on Class F Share
redemptions. For example, if a shareholder already owns Class F Shares
having current value at the public offering price of $1 million and
purchases an additional $1 million at the current public offering
price, the applicable contingent deferred sales charge would be
reduced to .50% of those additional Class F Shares.

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

CONCURRENT PURCHASES

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

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

LETTER OF INTENT

If a shareholder intends to purchase at least $50,000 of Class A
Shares or at least $1 million of Class F Shares of Federated Funds
(excluding money market funds) over the next 13 months, the sales
charge may be reduced by signing a letter of intent to that effect.
This letter of intent includes a provision for a sales charge
adjustment depending on the amount actually purchased within the
13-month period and a provision for the custodian to hold up to 5.50%
(in the case of Class A Shares) or 1.00% (in the case of Class F
Shares) of the total amount intended to be purchased in escrow (in
Shares) until such purchase is completed.

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

The letter of intent for Class F Shares also includes a provision for
reductions in the contingent deferred sales charge and holding period
depending on the amount actually purchased within the 13-month period.

While this letter of intent will not obligate the shareholder to
purchase Class A Shares or Class F Shares, each purchase during the
period will be at the sales charge applicable to the total amount
intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares or
Class F Shares of any Federated Funds, excluding money market
accounts, will be aggregated to provide a purchase credit towards
fulfillment of the letter of intent. The letter may be dated as of a
prior date to include any purchase made within the past 90 days. Prior
trade prices will not be adjusted.

REINVESTMENT PRIVILEGE

The reinvestment privilege is available for all Shares of the Fund. If
Class A Shares in the Fund have been redeemed, the shareholder has the
privilege, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Similarly,
shareholders who redeem Class B Shares, Class C Shares or Class F
Shares may be reinvested in the same Share class within 120 days but
would not be entitled to a reimbursement of the contingent deferred
sales charge if paid at the time of redemption. However, such
reinvested shares would not be subject to a contingent deferred sales
charge upon later redemption. In addition, if the Class B, Class C or
Class F Shares were reinvested through a financial intermediary, the
financial intermediary would not be entitled to an advanced payment
from Federated Securities Corp. on the reinvested Shares. Federated
Securities Corp. must be notified by the shareholder in writing or by
his financial intermediary of the reinvestment in order to eliminate a
sales charge or a contingent deferred sales charge. If the shareholder
redeems Shares in the Fund, there may be tax consequences.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares on or
around the 15th of the month eight full years from the purchase date
and will no longer be subject to a fee under the distribution plan.
For purposes of conversion to Class A Shares, Shares purchased through
the reinvestment of dividends and distributions paid on Class B Shares
will be considered to be held in a separate sub-account. Each time any
Class B Shares in the shareholder's account (other than those in the
sub-account) convert to Class A Shares, an equal pro rata portion of
the Class B Shares in the sub-account will also convert to Class A
Shares. The conversion of Class B Shares to Class A Shares is subject
to the continuing availability of a ruling from the Internal Revenue
Service or an opinion of counsel that such conversions will not
constitute taxable events for federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the
conversion of Class B Shares to Class A Shares will not occur if such
a ruling or opinion is not available. In such event, Class B Shares
would continue to be subject to higher expenses than Class A Shares
for an indefinite period.

    

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

With respect to Class B Shares and Class C Shares, the Fund has
adopted a Distribution Plan in accordance with Investment Company Act
Rule 12b-1. Additionally, the Fund has adopted a Shareholder Services
Agreement with respect to all classes of Shares.

These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder Services, to
stimulate distribution activities and to cause services to be provided
to shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to: marketing efforts;
providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.

By adopting the Distribution Plan (Class B Shares and Class C Shares
only), the Directors expect that the Fund will be able to achieve a
more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management
and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, the Fund may be
able to curb sharp fluctuations in rates of redemptions and sales.

Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and
administrative detail; (3) enhancing shareholder recordkeeping
systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.

For the fiscal year ended March 31, 1997, the Class B Shares and Class
C Shares made payments in the amount of $3,022,927 and $437,917,
respectively, pursuant to the Plan, none of which were waived. In
addition, for the fiscal year ended March 31, 1997, the Class A
Shares, Class B Shares, Class C Shares and Class F Shares paid
shareholder services fees in the amount of $1,343,357, $1,007,642,
$145,972, and $180,791, respectively, of which $147,218, $0, $0, and
$5,231, respectively, were waived.

PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES    
The following individuals and their immediate family members may buy
Class A Shares and Class F Shares at net asset value without a sales
charge:

    

* Directors, employees, and sales representatives of the Fund, Federated
  Advisers, and Federated Securities Corp. and its affiliates;

   

* Federated Life Members (Class A Shares only); and

    

* any associated person of an investment dealer who has a sales
  agreement with Federated Securities Corp. Shares may also be sold
  without a sales charge to trusts, pensions, or profit-sharing plans
  for these individuals.

These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not
be resold except through redemption by the Fund.

EXCHANGING SECURITIES FOR FUND SHARES

Investors may exchange convertible securities they already own for
Shares, or they may exchange a combination of convertible securities
and cash for Shares. Any securities to be exchanged must meet the
investment objective and policies of the Fund, must have a readily
ascertainable market value, must be liquid, and must not be subject to
restrictions on resale.

The Fund will prepare a list of securities which are eligible for
acceptance and furnish this list to brokers upon request. The Fund
reserves the right to reject any security, even though it appears on
the list, and the right to amend the list of acceptable securities at
any time without notice to brokers or investors.

An investment broker acting for an investor should forward the
securities in negotiable form with an authorized letter of transmittal
to Federated Securities Corp. Federated Securities Corp. will
determine that transmittal papers are in good order and forward to the
Fund's custodian, State Street Bank and Trust Company. The Fund will
notify the broker of its acceptance and valuation of the securities
within five business days of their receipt by State Street Bank.

The Fund values such securities in the same manner as the Fund values
its portfolio securities. The basis of the exchange will depend upon
the net asset value of Shares on the day the securities are valued.
One Share will be issued for each equivalent amount of securities
accepted.

Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, conversion, or other rights attached to the securities
become the property of the Fund, along with the securities.

TAX CONSEQUENCES

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

DETERMINING NET ASSET VALUE

The Fund's net asset value per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The net
asset value for each class of Shares may differ due to the variance in
daily net income realized by each class.     Net asset value is not
determined on (i) days on which there are not sufficient changes in
the value of the Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no Shares are
tendered for redemption and no orders to purchase Shares are received;
or (iii) the following holidays: New Year's Day, Martin Luther King
Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.      DETERMINING
MARKET VALUE OF SECURITIES

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

* according to the last sale price on a national securities exchange, if
  available;

* in the absence of recorded sales for equity securities, according to
  the mean between the last closing bid and asked prices and for bonds
  and other fixed income securities, as determined by an independent
  pricing service; or

* for short-term obligations, according to the prices as furnished by
  an independent pricing service or for short-term obligations with
  remaining maturities of 60 days or less at the time of purchase, at
  amortized cost or at fair value as determined in good faith by the
  Directors.

Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider yield,
quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data.

REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value after the
Fund receives the redemption request. Shareholder redemptions may be
subject to a contingent deferred sales charge. Redemption procedures
are explained in the respective prospectuses under "Redeeming and
Exchanging Shares." Although the transfer agent does not charge for
telephone redemptions, it reserves the right to charge a fee for the
cost of wire-transferred redemptions of less than $5,000.

REDEMPTION IN KIND

Although the Fund intends to redeem Shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.

Redemption in kind will be made in conformity with applicable SEC
rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner
the Directors determine to be fair and equitable.

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

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

CONTINGENT DEFERRED SALES CHARGE

   

In computing the amount of the applicable Contingent Deferred Sales
Charge, redemptions are deemed to have occurred in the following
order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years
from the date of purchase with respect to Class B Shares and one full
year from the date of purchase with respect to Class C Shares; (3)
Shares held for fewer than six years with respect to Class B Shares
and for less than one full year from the date of purchase with respect
to Class C Shares on a first-in, first-out basis.

ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE-CLASS B SHARES
     To qualify for elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, the redemptions of
Class B Shares must be from an account that is at least 12 months old,
has all Fund distributions reinvested in Fund Shares, and has an
account value of at least $10,000 when the Systematic Withdrawal
Program is established. Qualifying redemptions may not exceed 1.00%
monthly of the account value as periodically determined by the Fund.
The amounts that a shareholder may withdraw under a Systematic
Withdrawal Program that qualify for elimination of the Contingent
Deferred Sales Charge may not exceed 12% annually with reference
initially to the value of the Class B Shares upon establishment of the
Systematic Withdrawal Program and then as calculated at the annual
valuation date. Redemptions on a qualifying Systematic Withdrawal
Program can be made at a rate of 1.00% monthly, 3.00% quarterly, or
6.00% semi-annually with reference to the applicable account valuation
amount. Amounts that exceed the 12.00% annual limit for redemption, as
described, may be subject to the Contingent Deferred Sales Charge. To
the extent that a shareholder exchanges Shares for Class B Shares of
other Federated Funds, the time for which the exchanged-for Shares are
to be held will be added to the time for which exchanged-from Shares
were held for purposes of satisfying the 12-month holding requirement.
However, for purposes of meeting the $10,000 minimum account value
requirement, Class B Share accounts will be not be aggregated. Any
Shares purchased prior to the termination of this program would have
the contingent deferred sales charge eliminated as provided in the
Fund's prospectus at the time of the purchase of the Shares.

TAX STATUS

THE FUND'S TAX STATUS

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable
to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment,
the Fund must, among other requirements:

* derive at least 90% of its gross income from dividends, interest, and
  gains from the sale of securities;

* derive less than 30% of its gross income from the sale of securities
  held less than three months;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
  during the year.

SHAREHOLDERS' TAX STATUS

Shareholders are subject to federal income tax on dividends and
capital gains received as cash or additional shares. The Fund's
dividends, and any short-term capital gains, are taxable as ordinary
income.

CAPITAL GAINS

Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund shares.

TOTAL RETURN

   

The Fund's average annual total returns, based on offering price, for
the following periods ended March 31, 1997 were:

    



 SHARE CLASS   INCEPTION DATE   ONE-YEAR   FIVE-YEARS   TEN-YEARS   SINCE INCEPTION
                                                          

 Class A            2/69         10.95%      14.71%       11.39%         10.56%
 Class B            7/94         10.56%                                  18.95%
 Class C            4/93         15.33%                                  15.40%
 Class F            7/93         15.12%                                  15.48%


The average annual total return for each class of Shares of the Fund
is the average compounded rate of return for a given period that would
equate a $1,000 initial investment to the ending redeemable value of
that investment. The ending redeemable value is computed by
multiplying the number of Shares owned at the end of the period by the
net asset value per Share at the end of the period. The number of
Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any
applicable sales charge, adjusted over the period by any additional
Shares, assuming the quarterly reinvestment of all dividends and
distributions. Any applicable contingent deferred sales charge is
deducted from the ending value of the investment based on the lesser
of the original purchase price or the offering price of Shares
redeemed. Occasionally, total return which does not reflect the effect
of the sales charge may be quoted in advertising.

YIELD

The Fund's yields for the thirty-day period ended March 31, 1997 were:

 SHARE CLASS       YIELD
 Class A           0.84%
 Class B           0.10%
 Class C           0.10%
 Class F           0.86%

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

PERFORMANCE COMPARISONS

The performance of each class of Shares depends upon such variables
as:

* portfolio quality;

* average portfolio maturity;

* type of instruments in which the portfolio is invested;

* changes in interest rates and market value of portfolio securities;

* changes in the Fund's or a class of Shares' expenses; and

* various other factors.

The Fund's performance fluctuates on a daily basis largely because net
earnings and net asset value per Share fluctuate daily. Both net
earnings and net asset value per Share are factors in the computation
of yield and total return.

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

* LIPPER ANALYTICAL SERVICES, INC. -- ranks funds in various fund
  categories by making comparative calculations using total return.
  Total return assumes the reinvestment of all capital gains
  distributions and income dividends and takes into account any change
  in net asset value over a specific period of time. From time to
  time, the Fund will quote its Lipper ranking in the growth and
  income funds category in advertising and sales literature.

* STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500
  COMMON STOCKS -- a composite index of common stocks in industry,
  transportation, and financial and public utility companies, compares
  total returns of funds whose portfolios are invested primarily in
  common stocks. In addition, the Standard & Poor's index assumes
  reinvestment of all dividends paid by stocks listed on the index.
  Taxes due on any of these distributions are not included, nor are
  brokerage or other fees calculated in the Standard & Poor's figures.

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

Advertisements and sales literature for all four classes of Shares may
quote total returns which are calculated on non-standardized base
periods. These total returns also represent the historic change in the
value of an investment in either class of Shares based on quarterly
reinvestment of dividends over a specified period of time.

From time to time as it deems appropriate, the Fund may advertise the
performance of either class of Shares using charts, graphs, and
descriptions, compared to federally insured bank products including
certificates of deposit and time deposits and to money market funds
using the Lipper Analytical Services money market instruments average.
Advertisements may quote performance information which does not
reflect the effect of various sales charges on Class A Shares, Class B
Shares, Class C Shares, and Class F Shares.

Advertising and other promotional literature may include charts,
graphs and other illustrations using the Fund's returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, the Fund can compare its performance, or
performance for the types of securities in which it invests, to a
variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Fund may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Fund portfolio managers and their
views and analysis on how such developments could affect the Funds. In
addition, advertising and sales literature may quote statistics and
give general information about the mutual fund industry, including the
growth of the industry, from sources such as the Investment Company
Institute.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making -- structured,
straightforward, and consistent. This has resulted in a history of
competitive performance with a range of competitive investment
products that have gained the confidence of thousands of clients and
their customers.

The company's disciplined security selection process is firmly rooted
in sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
These traders handle trillions of dollars in annual trading volume.

In the equity sector, Federated Investors has more than 26 years
experience. As of December 31, 1996, Federated managed 31 equity funds
totaling approximately $7.6 billion in assets across growth, value,
equity income, international, index and sector (i.e. utility) styles.
Federated's value-oriented management style combines quantitative and
qualitative analysis and features a structured, computer-assisted
composite modeling system that was developed in the 1970s.

J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high-yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the
more than 6,000 funds available.*

Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of applications, including defined benefit
and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional Sales
Division.

BANK MARKETING

Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Timothy C. Pillion, Senior Vice President, Bank Marketing &
Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage
firms nationwide -- we have over 2,200 broker/dealer and bank
broker/dealer relationships across the country -- supported by more
wholesalers than any other mutual fund distributor. Federated's
service to financial professionals and institutions has earned it high
ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement.
The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended March 31, 1997, are
incorporated herein by reference to the Annual Report of the Fund
dated March 31, 1997 (File Nos. 2-29786 and 811-1704). A copy of the
Report may be obtained without charge by contacting the Fund.

* Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS DEFINITIONS

AAA -- Debt rated AAA has the highest rating assigned by Standard &
Poor's Ratings Group. Capacity to pay interest and repay principal is
extremely strong.

AA -- Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.

A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions than debt
in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher rated categories.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS DEFINITIONS

AAA -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.

BAA -- Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATING DEFINITIONS

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

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

A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

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