FEDERATED AMERICAN LEADERS FUND, INC.

485BPOS 1 falfform.htm FEDERATED AMERICAN LEADERS FUND, INC.





                                                       1933 Act File No. 2-29786
                                                      1940 Act File No. 811-1704

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933             X
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    Pre-Effective Amendment No.
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    Post-Effective Amendment No.   74  .....................        X
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                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     X
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    Amendment No.   48  ....................................        X
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                      FEDERATED AMERICAN LEADERS FUND, INC.

               (Exact Name of Registrant as Specified in Charter)

                            Federated Investors Funds
                              5800 Corporate Drive
                       Pittsburgh, Pennsylvania 15237-7000
                    (Address of Principal Executive Offices)

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

                           John W. McGonigle, Esquire
                            Federated Investors Tower
                               1001 Liberty Avenue
                       Pittsburgh, Pennsylvania 15222-3779
                     (Name and Address of Agent for Service)
                (Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

    immediately upon filing pursuant to paragraph (b)
 X  on May 27, 2005 pursuant to paragraph (b)
    60 days after filing pursuant to paragraph (a)(i)
    on _____________ pursuant to paragraph (a)(i)
    75 days after filing pursuant to paragraph (a)(ii)
    on ____________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

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

                                   Copies To:

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                           Matthew G. Maloney, Esquire
                   Dickstein Shapiro Morin & Oshinsky, LLP
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                               2101 L Street, N.W.
                             Washington, D.C. 20037

Federated
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated American Leaders Fund, Inc.

PROSPECTUS

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May 31, 2005

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

A mutual fund seeking growth of capital and of income by investing in common stocks and other securities of high-quality companies.

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

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 4

What are the Fund's Investment Strategies? 5

What are the Principal Securities in Which the Fund Invests? 7

What are the Specific Risks of Investing in the Fund? 9

What Do Shares Cost? 11

How is the Fund Sold? 21

How to Purchase Shares 22

How to Redeem and Exchange Shares 25

Account and Share Information 29

Who Manages the Fund? 32

Legal Proceedings 34

Financial Information 35

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

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The Fund pursues its investment objective by using the value style of investing to select primarily equity securities of large capitalization companies that are in the top 50% of their industry in terms of revenues, are characterized by sound management, and have the ability to finance expected growth.

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WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

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

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's Share price may decline suddenly or over a sustained period of time.
Risks Relating to Investing for Value. Due to the Fund's value style of investing, the Fund's Share price may lag that of other funds using a different investment style.
Sector Risks. Because the Fund may allocate relatively more of its assets to one or more industry sectors comprising the Standard & Poor's 500 Index (S&P 500) than to other sectors of the Index, the Fund's performance will be more susceptible to any developments which affect the sectors emphasized by the Fund.

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Risks of Investing in ADRs and Domestically Traded Securities of Foreign Issuers. Because the Fund may invest in American Depositary Receipts (ADRs) and other domestically traded securities of foreign companies, the Fund's Share price may be affected by foreign economic and political conditions, taxation policies, and accounting and auditing standards .

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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 or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency.

Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Class A Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The total returns shown in the bar chart for the Fund's Class A Shares do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower.

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The Fund's Class A Shares total return for the three-month period from January 1, 2005 to March 31, 2005 was (1. 53)%.

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Within the period shown in the bar chart, the Fund's Class A Share highest quarterly return was 16.83% (quarter ended June 30, 2003). Its lowest quarterly return was (19.72)% (quarter ended September 30, 2002).

Average Annual Total Return Table

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The Average Annual Total Returns for the Fund's Class A, Class B, Class C, and Class F Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown for all classes. In addition, Return After Taxes is shown for Class A Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for Standard & Poor's 500/Barra Value Index ( S&P 500/Barra Value ), a broad-based market index, and the Lipper Large-Cap Value Average ( LLCVA ), an average of funds with similar investment objectives. Index returns do not reflect taxes, sales charges, expenses, or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index or an average. Lipper averages represent the average of the total returns reported by all mutual funds as designated by Lipper, Inc. as falling in the respective categories indicated.

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(For the Periods Ended December 31, 2004)

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	1 Year	5 Years	10 Years
Class A Shares:
Return Before Taxes	3.56%	0.39%	10.67%
Return After Taxes on Distributions¹	3.04%	(0.11)%	9.08%
Return After Taxes on Distributions and Sale of Fund Shares¹	2.30%	0.09%	8.59%
Class B Shares:
Return Before Taxes	3.17%	0.38%	10.64%
Class C Shares:
Return Before Taxes	6.66%	0.57%	10.36%
Class F Shares:
Return Before Taxes	7.46%	1.33%	11.17%
S&P 500/Barra Value	15.69%	2.48%	11.70%
LLCVA	11.86%	3.17%	11.25%

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1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all Shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns for Class B, Class C, and Class F Shares will differ from those shown above for Class A Shares. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

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What are the Fund's Fees and Expenses?

FEDERATED AMERICAN LEADERS FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold the Fund's Class A, Class B, Class C, and Class F Shares.

Shareholder Fees	Class A	Class B	Class C	Class F
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	1.00%	1.00%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	0.00%	5.50%	1.00%	1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None
Exchange Fee	None	None	None	None

Annual Fund Operating Expenses¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²	0.65%	0.65%	0.65%	0.65%
Distribution (12b-1) Fee	None	0.75%	0.75%	None
Shareholder Services Fee	0.25%	0.25%	0.25%	0.25%
Other Expenses	0.26%	0.27%	0.28%	0.26%
Total Annual Fund Operating Expenses	1.16%	1.92%³	1.93%	1.16%

1 The percentages shown are based on expenses for the entire fiscal year ended March 31, 2005. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage.
2 The management fee equals the sum of 0.55% of the Fund's average daily net assets plus 4.50% of the Fund's gross income.
3 After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about last day of the following month. Class A Shares pay lower operating expenses than the Class B Shares.

EXAMPLE

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This Example is intended to help you compare the cost of investing in the Fund's Class A, Class B, Class C, and Class F Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Fund's Class A, Class B, Class C, and Class F Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. Expenses assuming no redemption are also shown. The Example also assumes that your investment has a 5% return each year and that the Fund's Class A, Class B, Class C, and Class F Shares operating expenses as shown in the table remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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Share Class	1 Year	3 Years	5 Years	10 Years
Class A:
Expenses assuming redemption	<R>$ 662</R>	<R>$ 898</R>	<R>$1, 153</R>	<R>$1, 881</R>
Expenses assuming no redemption	<R>$ 662</R>	<R>$ 898</R>	<R>$1, 153</R>	<R>$1, 881</R>
Class B:
Expenses assuming redemption	<R>$ 745</R>	<R>$1, 003</R>	<R>$1, 237</R>	<R>$2, 046</R>
Expenses assuming no redemption	<R>$ 195</R>	<R>$ 603</R>	<R>$1, 037</R>	<R>$2, 046</R>
Class C:
Expenses assuming redemption	<R>$ 394</R>	<R>$ 700</R>	<R>$1, 131</R>	<R>$2, 331</R>
Expenses assuming no redemption	<R>$ 294</R>	<R>$ 700</R>	<R>$1, 131</R>	<R>$2, 331</R>
Class F:
Expenses assuming redemption	<R>$ 317</R>	<R>$ 565</R>	<R>$ 732</R>	<R>$1, 495</R>
Expenses assuming no redemption	<R>$ 217</R>	<R>$ 465</R>	<R>$ 732</R>	<R>$1, 495</R>

What are the Fund's Investment Strategies?

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The Fund pursues its investment objective by investing primarily in equity securities of companies that are generally leaders in their industries, are characterized by sound management and have the ability to finance expected growth. The Fund's investment adviser (Adviser) attempts to identify good long-term values through disciplined investing and careful fundamental research. The Fund's holdings primarily will be in large capitalization companies that are in the top 50% of their industries with regard to revenues. A description of the various types of securities in which the Fund principally invests, and their risks, immediately follows the strategy discussion.

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Companies with similar characteristics may be grouped together in broad categories called sectors. The Adviser diversifies the Fund's investments, seeking to limit the Fund's risk exposure with respect to individual securities and industry sectors.

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

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

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The Adviser may invest in American Depositary Receipts (ADRs), which represent interests in underlying securities issued by a foreign company, but which are traded in the United States. It may also invest directly in securities issued by a foreign company but traded in the United States. The Adviser invests primarily in the ADRs or securities of companies with significant operations within the United States. Securities of foreign companies may be more affected by foreign economic and political conditions, taxation policies, and accounting and auditing standards than those of U.S. companies.

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Because the Fund refers to American investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less than 80% of its assets in U.S. equity or fixed-income investments.

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TEMPORARY DEFENSIVE INVESTMENTS

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

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What are the Principal Securities in Which the Fund Invests?

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EQUITY SECURITIES

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

Common Stocks

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

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ADRs and Domestically Traded Securities of Foreign Issuers

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American Depositary Receipts which are traded in U.S. markets, represent interest in underlying securities issued by a foreign company and not traded in the United States. ADRs provide a way to buy shares of foreign-based companies in the United States rather than in overseas markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign exchange transactions. The Fund may also invest directly in securities issued by foreign companies and traded in U.S. dollars in U.S. markets. The Fund invests in primarily in ADRs and securities of companies with significant operations within the United States.

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DERIVATIVE CONTRACTS

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

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

Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset or instrument, derivative contracts may increase or decrease the Fund's exposure to interest rate and stock market risks, and may also expose the fund to liquidity and leverage risks.

Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of an underlying asset at a specified price, date, and time. Entering into a contract to buy an underlying asset is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell an underlying asset is commonly referred to as selling a contract or holding a short position in the asset. Futures contracts are considered to be commodity contracts. The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded over-the-counter (OTC) are frequently referred to as "forward contracts ." The Fund can buy or sell financial futures and index futures.

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Options

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Options are rights to buy or sell an underlying asset or instrument for a specified price (the "exercise price") during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the underlying asset from the seller (writer) of the option. A put option gives the holder the right to sell the underlying asset to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of underlying assets or instruments, including financial indices, individual securities, and other derivative instruments, such as futures contracts.

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Swaps

Swaps are contracts in which two parties agree to pay each other (swap) the returns derived from underlying assets with differing characteristics. Most swaps do not involve the delivery of the underlying assets by either party, and the parties might not own the assets underlying the swap. The payments are usually made on a net basis so that, on any given day, the Fund would receive (or pay) only the amount by which its payment under the contract is less than (or exceeds) the amount of the other party's payment. Swap agreements are sophisticated instruments that can take many different forms. Common types of swaps in which the Fund may invest include interest rate swaps and total return swaps.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. The Fund's portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, the Fund's Share price may decline.
The Adviser attempts to manage market risk by limiting the amount the Fund invests in each company's equity securities. However, diversification will not protect the Fund against widespread or prolonged declines in the stock market.

SECTOR RISKS

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

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RISKS RELATING TO INVESTING FOR VALUE

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

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RISKS OF INVESTING IN ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS

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Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's Share price may be affected by foreign economic and political conditions, taxation policies, and accounting and auditing standards . Foreign companies may not provide information as frequently or to as great an extent as companies in the United States. Foreign companies may also receive less coverage than U.S. companies by market analysts and the financial press. In addition, foreign countries may lack uniform accounting, auditing, and financial reporting standards or regulatory requirements comparable to U.S. companies. These factors may prevent the Fund and its Adviser from obtaining information concerning foreign companies that is as frequent, extensive, and reliable as the information available concerning companies in the United States.

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RISKS OF INVESTING IN DERIVATIVES CONTRACTS

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The Fund's use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts may also involve other risks described in this prospectus or the Fund's Statement of Additional Information, such as stock market, liquidity, and leverage risks.

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What Do Shares Cost?

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You can purchase, redeem, or exchange Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form (as described in this prospectus), it is processed at the next calculated net asset value (NAV) plus any applicable front-end sales charge (public offering price). NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open .

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The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated."

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The Fund generally values equity securities according to the last sale price reported by the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

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If prices are not available from an independent pricing service, securities and derivatives contracts traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund's Adviser determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund's NAV is computed. An event is considered significant if there is both an affirmative expectation that the security's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor's ability to seek to profit by estimating the Fund's NAV in advance of the time as of which NAV is calculated.

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In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company's operations or regulatory changes or market developments affecting the issuer's industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events. For securities of foreign issuers, such events could include political or other developments affecting the economy or markets in which the issuer conducts its operations or its securities are traded.

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There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund's NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security's present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price or based on market quotations.

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The following table summarizes the minimum required investment amount and the maximum sales charge, if any, that you will pay on an investment in the Fund. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

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		Maximum Sales Charges
Shares Offered	Minimum Initial/Subsequent Investment Amounts¹	Front-End Sales Charge²	Contingent Deferred Sales Charge³
Class A	$1,500/$100	5.50%	0.00%
Class B	$1,500/$100	None	5.50%
Class C	$1,500/$100	1.00%	1.00%
Class F	$1,500/$100	1.00%	1.00%

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1 The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively. The minimum subsequent investment amounts for Systematic Investment Programs ( SIPs) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund. Orders for $100,000 or more of Class B Shares or $1 million or more of Class C Shares will be invested in Class A Shares instead of Class B Shares or Class C Shares to maximize your return and minimize the sales charges and marketing fees. Accounts held in the name of an investment professional may be treated differently. After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the last day of the following month. This conversion is a non-taxable event.

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2 Front-End Sales Charge is expressed as a percentage of public offering price. See "Sales Charge When You Purchase."

3 See "Sales Charge When You Redeem."

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As shown in the table above, each class of Shares has a different sales charge structure. In addition, the ongoing annual operating expenses ( expense ratios ), as well as the compensation payable to investment professionals, also vary among the classes. Before you decide which class to purchase, you should review the different charges and expenses of each class carefully, in light of your personal circumstances, and consult with your investment professional.

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Among the important factors to consider are the amount you plan to invest and the length of time you expect to hold your investment. You should consider, for example, that it may be possible to reduce the front-end sales charges imposed on purchases of Class A Shares and Class F Shares. Among other ways, Class A Shares and Class F Shares have a series of "breakpoints," which means that the front-end sales charges decrease (and can be eliminated entirely) as the amount invested increases. (The breakpoint schedule is set out below under "Sales Charge When You Purchase.") On the other hand, Class B Shares do not have front-end sales charges, but the deferred sales charges imposed on redemptions of Class B Shares do not vary at all in relation to the amounts invested. Rather, these charges decrease with the passage of time (ultimately going to zero after seven years). Finally, Class C Shares bear a relatively low front-end sales charge and a contingent deferred sales charge only if redeemed within one year after purchase; however, the asset-based 12b-1 fees charged to Class C Shares are greater than those charged to Class A Shares and Class F Shares and comparable to those charged to Class B Shares.

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You should also consider that the expense ratio for Class A Shares will be lower than that for Class B (or Class C) Shares. Thus, the fact that no front-end charges are ever imposed on purchases of Class B Shares (or that a relatively low front- end charge is imposed on purchases of Class C Shares) does not always make them preferable to Class A Shares.

SALES CHARGE WHEN YOU PURCHASE

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The following table lists the sales charges which will be applied to your Share purchase, subject to the breakpoint discounts indicated in the table and described below:

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Class A Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
Less than $50,000	5.50%	5.82%
$50,000 but less than $100,000	4.50%	4.71%
$100,000 but less than $250,000	3.75%	3.90%
$250,000 but less than $500,000	2.50%	2.56%
$500,000 but less than $1 million	2.00%	2.04%
$1 million or greater¹	0.00%	0.00%
Class C Shares:
All Purchases	1.00%	1.01%
Class F Shares:
Less than $1 million	1.00%	1.01%
$1 million or greater	0.00%	0.00%

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1 A contingent deferred sales charge of 0.75% of the redemption amount applies to Shares redeemed up to 24 months after purchase under certain investment programs where an investment professional received an advance payment on the transaction.

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REDUCING THE SALES CHARGE WITH BREAKPOINT DISCOUNTS

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<R>

Your investment may qualify for a reduction or elimination of the sales charge, also known as a breakpoint discount. The breakpoint discounts offered by the Fund are indicated in the tables above. You or your investment professional must notify the Fund's Transfer Agent of eligibility for any applicable breakpoint discount at the time of purchase.

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<R>

In order to receive the applicable breakpoint discount, it may be necessary at the time of purchase for you to inform your investment professional or the Transfer Agent of the existence of other accounts in which there are holdings eligible to be aggregated to meet a sales charge breakpoint (Qualifying Accounts). Qualifying Accounts mean those Share accounts in the Federated funds held directly or through an investment professional or a through a single-participant retirement account by you, your spouse, your parents (if you are under age 21) and/or your children under age 21, which can be linked using tax identification numbers (TINs), social security numbers (SSNs) or broker identification numbers (BINs). Accounts held through 401(k) plans and similar multi-participant retirement plans, or through "Section 529" college savings plans or those accounts which cannot be linked using TINs, SSNs, or BINs, are not Qualifying Accounts.

</R>
<R>

In order to verify your eligibility for a breakpoint discount, you will be required to provide to your investment professional or the Transfer Agent certain information on your New Account Form and may be required to provide account statements regarding Qualifying Accounts. If you purchase through an investment professional, you may be asked to provide additional information and records as required by the investment professional. Failure to provide proper notification or verification of eligibility for a breakpoint discount may result in your not receiving a breakpoint discount to which you are otherwise entitled. Breakpoint discounts apply only to your current purchase and do not apply retroactively to previous purchases. The sales charges applicable to the Shares offered in this prospectus, and the breakpoint discounts offered with respect to such Shares, are described in full in this prospectus. Because the prospectus is available on Federated's website free of charge, Federated does not disclose this information separately on the website.

</R>
<R>

Contingent upon notification to the Transfer Agent, the sales charge at purchase of Class A Shares and Class F Shares only, may be reduced or eliminated by:

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<R>

Larger Purchases

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<R>

purchasing Class A or Class F Shares in greater quantities to reduce the applicable sales charge;

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<R>

Concurrent and Accumulated Purchases

</R>
<R>

combining concurrent purchases of and/or current investments in Class A, Class B, Class C, Class F, and Class K Shares of any Federated fund made or held by Qualifying Accounts; the purchase amount used in determining the sales charge on your additional Share purchase will be calculated by multiplying the maximum public offering price times the number of Class A, Class B, Class C, Class F, and Class K Shares of any Federated fund currently held in Qualifying Accounts and adding the dollar amount of your current purchase; or

</R>
<R>

Letter of Intent

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<R>

signing a letter of intent to purchase a qualifying amount of Class A or Class F Shares within 13 months. (Call your investment professional or the Fund for more information.) The Fund's custodian will hold Shares in escrow equal to the maximum applicable sales charge. If you complete the Letter of Intent, the Custodian will release the Shares in escrow to your account. If you do not fulfill the Letter of Intent, the Custodian will redeem the appropriate amount from the Shares held in escrow to pay the sales charges that were not applied to your purchases.

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ELIMINATING THE SALES CHARGE

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<R>

Contingent upon notification to the Transfer Agent, the sales charge will be eliminated when you purchase Shares:

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<R>

within 120 days of redeeming Shares of an equal or greater amount;

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through a financial intermediary that did not receive a dealer reallowance on the purchase;

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<R>

with reinvested dividends or capital gains;

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as a shareholder that originally became a shareholder of the Fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares at NAV;

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as a Federated Life Member (Federated shareholders who originally were issued shares through the "Liberty Account," which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account) (Class A Shares only);

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as a Director or employee of the Fund, the Adviser, the Distributor and their affiliates, an employee of any investment professional that sells Shares according to a sales agreement with the Distributor, an immediate family member of these individuals or a trust, pension or profit-sharing plan for these individuals; or

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The sales charge will not be eliminated if you purchase Shares of the Fund through an exchange of Shares of Liberty U.S. Government Money Market Trust unless your Liberty Shares were acquired through an exchange of Shares on which the sales charge had previously been paid.

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SALES CHARGE WHEN YOU REDEEM

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Your redemption proceeds may be reduced by a sales charge, commonly referred to as a contingent deferred sales charge (CDSC).

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To keep the sales charge as low as possible, the Fund redeems your Shares in this order:

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Shares that are not subject to a CDSC; and

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Shares held the longest. ( To determine the number of years your Shares have been held, include the time you held shares of other Federated funds that have been exchanged for Shares of this Fund.)

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The CDSC is then calculated using the Share price at the time of purchase or redemption, whichever is lower .

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<R>Class A Shares:</R>
<R>If you make a purchase of Class A Shares in the amount of $1 million or more and your investment professional received an advance commission on the sale, you will pay a 0.75% CDSC on any such shares redeemed within 24 months of the purchase.</R>
<R>Class B Shares:</R>
<R>Shares Held Up To:</R>		<R>CDSC</R>
<R>1 Year</R>		<R>5.50%</R>
<R>2 Years</R>		<R>4.75%</R>
<R>3 Years</R>		<R>4.00%</R>
<R>4 Years</R>		<R>3.00%</R>
<R>5 Years</R>		<R>2.00%</R>
<R>6 Years</R>		<R>1.00%</R>
<R>7 Years or More </R>		<R>0.00%</R>
<R>Class C Shares:</R>
<R>You will pay a 1% CDSC if you redeem Shares within 12 months of the purchase date.</R>
<R>Class F Shares:</R>
<R>Purchase Amount</R>	<R>Shares Held</R>	<R>CDSC</R>
<R>Up to $2 million</R>	<R>4 years or less</R>	<R>1.00%</R>
<R>$2 -but less than $5 million</R>	<R>2 years or less</R>	<R>0.50%</R>
<R>$5 million or more</R>	<R>1 year or less</R>	<R>0.25%</R>

<R>

If your investment qualifies for a reduction or elimination of the CDSC, you or your investment professional must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

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Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

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following the death of the last surviving shareholder on the account or your post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account);

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representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70-1/2;

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purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;

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purchased by Directors and employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of an investment professional that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

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purchased through an investment professional that did not receive an advance commission on the purchase;

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purchased with reinvested dividends or capital gains;

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redeemed by the Fund when it closes an account for not meeting the minimum balance requirements;

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purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period (the holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange);

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Class B Shares only

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

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Class F Shares only

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<R>

representing a total or partial distribution from a qualified plan, which does not include account transfers, rollovers, or redemptions for the purpose of reinvestment. For these purposes, qualified plan does not include an Individual Retirement Account, Keogh Plan, or custodial account following retirement.

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How is the Fund Sold?

<R>

The Fund offers five Share classes: Class A Shares, Class B Shares, Class C Shares, Class F Shares, and Class K Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Class A Shares, Class B Shares, Class C Shares, and Class F Shares. All Share classes have different sales charges and other expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other class.

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The Fund's Distributor, Federated Securities Corp., markets the Shares described in this prospectus to individuals, directly or through investment professionals, as a convenient means of accumulating an interest in a professionally managed, diversified portfolio of common stocks and other securities of high-quality companies.

When the Distributor receives marketing fees and sales charges, it may pay some or all of them to investment professionals. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

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The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution, administration and customer servicing of the Fund's Class B Shares and Class C Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different sales charges and marketing fees.

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<R>

SERVICE FEES

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<R>

The Fund may pay fees (Service Fees) to financial institutions or to Federated Shareholder Services Company (FSSC), a subsidiary of Federated, for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial institutions directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial institutions.

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<R>

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

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<R>

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial institutions that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial institution or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund's prospectus because they are not paid by the Fund.

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<R>

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial institution sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial institution. These payments may be in addition to payments made by the Fund to the financial institution under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial institution may elevate the prominence or profile of the Fund and/or other Federated funds within the financial institution's organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial institution's organization. You can ask your financial institution for information about any payments it receives from the Distributor or the Fund and any services provided.

</R>

How to Purchase Shares

You may purchase Shares through an investment professional, directly from the Fund, or through an exchange from another Federated fund. The Fund reserves the right to reject any request to purchase or exchange Shares.

<R>

Where the Fund offers more than one Share class and you do not specify the class choice on your New Account Form or form of payment (e.g., Federal Reserve wire or check ), you automatically will receive Class A Shares.

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THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within three business days. You will become the owner of Shares and receive dividends when the Fund receives your payment.

Investment professionals should send payments according to the instructions in the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

<R>

You will become the owner of Shares and your Shares will be priced at the next calculated NAV after the Fund receives your wire or your check. If your check does not clear, your purchase will be canceled and you could be liable for any losses or fees incurred by the Fund or State Street Bank and Trust Company, the Fund's transfer agent.

</R>

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are restricted.

By Check

Make your check payable to The Federated Funds , note your account number on the check, and send it to:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that requires a street address, send it to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same share class of another Federated fund. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

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BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

</R>

Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the SIP section of the New Account Form or by contacting the Fund or your investment professional.

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a depository institution that is an ACH member. This purchase option can be established by completing the appropriate sections of the New Account Form.

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and IRAs or transfer or rollover of assets). Call your investment professional or the Fund for information on retirement investments. We suggest that you discuss retirement investments with your tax adviser. You may be subject to an annual IRA account fee.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

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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. Redemption requests may be made by telephone or in writing.

</R>

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed or exchanged;
signatures of all shareholders exactly as registered; and
if exchanging , the Fund Name and Share Class, account number and account registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees

<R>

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

</R>

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days;
a redemption is payable to someone other than the shareholder(s) of record; or
if exchanging (transferring) into another fund with a different shareholder registration.

<R>

A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion signature guarantee from a bank or trust company, savings association, credit union or broker, dealer, or securities exchange member. A notary public cannot provide a signature guarantee.

</R>

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The following payment options are available if you complete the appropriate section of the New Account Form or an Account Service Options Form. These payment options require a signature guarantee if they were not established when the account was opened:

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

In the absence of your specific instructions, 10% of the value of your redemption from a retirement account in the Fund may be withheld for taxes. This withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund into shares of the same class of another Federated fund. To do this, you must:

ensure that the account registrations are identical;
meet any minimum initial investment requirements; and
receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a taxable transaction.

<R>

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund's frequent trading policies. See "Account and Share Information-Frequent Trading Policies."

</R>

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

<R>

You may automatically redeem or exchange Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your investment professional or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income. Generally, it is not advisable to continue to purchase Class A Shares, Class C Shares, and Class F Shares subject to a sales charge while redeeming Shares using this program.

</R>

Systematic Withdrawal Program (SWP) on Class B Shares

You will not be charged a CDSC on SWP redemptions if:

you redeem 12% or less of your account value in a single year;
you reinvest all dividends and capital gains distributions; and
your account has at least a $10,000 balance when you establish the SWP. (You cannot aggregate multiple Class B Share accounts to meet this minimum balance.)

You will be subject to a CDSC on redemption amounts that exceed the 12% annual limit. In measuring the redemption percentage, your account is valued when you establish the SWP and then annually at calendar year-end. You can redeem monthly, quarterly, or semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions

The Fund will record your telephone instructions. If the Fund does not follow reasonable procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions.

Share Certificates

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

<R>

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

</R>

DIVIDENDS AND CAPITAL GAINS

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

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

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

<R>

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

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<R>

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

</R>
<R>

FREQUENT TRADING POLICIES

</R>
<R>

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund's investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund's NAV in advance of the time as of which NAV is calculated.

</R>
<R>

The Fund's Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund's Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of 12 months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund's management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund's portfolio and its performance.

</R>
<R>

The Fund's objective is that its fees and restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

</R>
<R>

PORTFOLIO HOLDINGS INFORMATION

</R>
<R>

Information concerning the Fund's portfolio holdings is available in the "Products" section of Federated's website at FederatedInvestors.com . A complete listing of the Fund's portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund's top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

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<R>

To access this information from the "Products" section of the website, click on "Portfolio Holdings" and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the "Products" section, and from the Fund's page click on the "Portfolio Holdings" or "Composition" link. A user is required to register on the website the first time the user accesses this information.

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<R>

You may also access from the "Products" section of the website portfolio information as of the end of the Fund's fiscal quarters. The Fund's annual and semi-annual reports, which contain complete listings of the Fund's portfolio holdings as of the end of the Fund's second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on "Prospectuses and Regulatory Reports" and selecting the link to the appropriate PDF. Complete listings of the Fund's portfolio holdings as of the end of the Fund's first and third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the "Products" section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC's website at www.sec.gov.

</R>

Who Manages the Fund?

The Board of Directors (the "Board") governs the Fund. The Board selects and oversees the Adviser, Federated Equity Management Company of Pennsylvania. The Adviser manages the Fund's assets, including buying and selling portfolio securities. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides research, quantitative analysis, equity trading and transaction settlement and certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

<R>

The Adviser and other subsidiaries of Federated advise approximately 133 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $ 179 billion in assets as of December 31, 2004. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1, 385 employees. Federated provides investment products to more than 5, 700 investment professionals and institutions.

</R>
<R>

PORTFOLIO MANAGEMENT INFORMATION

</R>
<R>

William Dierker

</R>
<R>

William Dierker has been the primary Portfolio Manager of the Fund since October 2004. Mr. Dierker joined Federated in September 2004 as a Senior Portfolio Manager/Senior Vice President of the Fund's adviser. Mr. Dierker was a Senior Portfolio Manager and Managing Director of the value equity team at Banc One Investment Advisers from April 2003 to September 2004. He served as an Investment Officer with Nationwide Insurance Enterprise from March 1998 through September 1999; as Vice President, Equity Securities with Nationwide from September 1999 to January 2002; and as Vice President/Portfolio Manager with Gartmore Global Investments, a subsidiary of Nationwide, from January 2002 to April 2003. Mr. Dierker is a Chartered Financial Analyst. He received his B.S.B.A. in accounting from Xavier University.

</R>

Kevin R. McCloskey

<R>

Kevin R. McCloskey has been designated as a back-up Portfolio Manager for the Fund, and as such does not have primary responsibility for the day-to-day management of the Fund's portfolio. Mr. McCloskey joined Federated in 1999 as a Portfolio Manager and is a Vice President of the Fund's Adviser. From September 1994 to July 1999, he served as a portfolio manager, and from January 1994 to September 1994, he served as an investment/quantitative analyst at Killian Asset Management Corporation. Mr. McCloskey is a Chartered Financial Analyst. He received his M.B.A. from the University of Dayton.

</R>
<R>

The Fund's SAI provides additional information about the Portfolio Manager's compensation, management of other accounts, and ownership of securities in the Fund.

</R>

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.55% of the Fund's average daily net assets plus 4.50% of the Fund's gross income. The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

Gross income includes, in general, discounts 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.

Legal Proceedings

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Like many other mutual fund companies, in September 2003, Federated Investors, Inc., the parent company of the Federated funds' advisers and distributor (collectively, "Federated"), received detailed requests for information on shareholder trading activities in the Federated funds ( Funds ) from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Since that time, Federated has received additional inquiries from regulatory authorities on these and related matters, and more such inquiries may be received in the future.

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As a result of these inquiries, Federated and the Funds have conducted an internal investigation of the matters raised, which revealed instances in which a few investors were granted exceptions to Federated's internal procedures for limiting frequent transactions and that one of these investors made an additional investment in another Federated fund. The investigation has also identified inadequate procedures which permitted a limited number of investors (including several employees) to engage in undetected frequent trading activities and/or the placement and acceptance of orders to purchase shares of fluctuating net asset value funds after the funds' closing times. Federated has issued a series of press releases describing these matters in greater detail and emphasizing that it is committed to compensating the Funds for any detrimental impact these transactions may have had on them. In that regard, on February 3, 2004, Federated and the independent directors of the Funds announced the establishment by Federated of a restoration fund that is intended to cover any such detrimental impact. The press releases and related communications are available in the "About Us" section of Federated's website at FederatedInvestors.com , and any future press releases on this subject will also be posted there.

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Shortly after Federated's first public announcement concerning the foregoing matters, and notwithstanding Federated's commitment to taking remedial actions, Federated and various Funds were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts.

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The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

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Financial Information

FINANCIAL HIGHLIGHTS

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

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

Financial Highlights - Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$23.56			$17.23			$23.41			$23.68			$24.74
Income From Investment Operations:
Net investment income	0.26			0.24			0.23			0.17			0.25
Net realized and unrealized gain (loss) on investments	0.98			6.33			(6.19	)		(0.06	)		(0.28	)
TOTAL FROM INVESTMENT OPERATIONS	1.24			6.57			(5.96	)		0.11			(0.03	)
Less Distributions:
Distributions from net investment income	(0.34	)		(0.24	)		(0.22	)		(0.14	)		(0.24	)
Distributions from net realized gain on investments	--			--			--			(0.24	)		(0.79	)
TOTAL DISTRIBUTIONS	(0.34	)		(0.24	)		(0.22	)		(0.38	)		(1.03	)
Net Asset Value, End of Period	$24.46			$23.56			$17.23			$23.41			$23.68
Total Return¹	5.29	%²		38.28	%		(25.50	)%		0.42	%		(0.17	)%

Ratios to Average Net Assets:
Expenses	1.16	%³		1.21	%³		1.18	%³		1.12	%		1.16	%
Net investment income	1.11	%		1.12	%		1.13	%		0.73	%		1.04	%
Expense waiver/reimbursement⁴	0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵
Supplemental Data:
Net assets, end of period (000 omitted)	$1,577,454		$1,562,277			$1,139,851			$1,626,954			$1,648,584
Portfolio turnover	58	%		29	%		25	%		30	%		23	%

1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

2 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.04% on total return. (See Notes to Financial Statements, Note 5.)

3 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The expense ratios for the years ended March 31, 2005, 2004, and 2003 are 1.16%, 1.19%, and 1.17%, respectively, after taking into account these expense reductions.

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

5 Represents less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated March 31, 2005, which can be obtained free of charge.

Financial Highlights - Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$23.61			$17.22			$23.28			$23.59			$24.67
Income From Investment Operations:
Net investment income (loss)	0.11			0.09			0.07			(0.01	)		0.07
Net realized and unrealized gain (loss) on investments	0.96			6.31			(6.13	)		(0.06	)		(0.28	)
TOTAL FROM INVESTMENT OPERATIONS	1.07			6.40			(6.06	)		(0.07	)		(0.21	)
Less Distributions:
Distributions from net investment income	(0.16	)		(0.01	)		--			--			(0.08	)
Distributions from net realized gain on investments	--			--						(0.24	)		(0.79	)
TOTAL DISTRIBUTIONS	(0.16	)		(0.01	)		--			(0.24	)		(0.87	)
Net Asset Value, End of Period	$24.52			$23.61			$17.22			$23.28			$23.59
Total Return¹	4.52	%²		37.19	%		(26.03	)%		(0.36	)%		(0.90	)%

Ratios to Average Net Assets:
Expenses	1.92	%³		1.96	%³		1.93	%³		1.87	%		1.91	%
Net investment income (loss)	0.34	%		0.38	%		0.38	%		(0.02	)%		0.31	%
Expense waiver/reimbursement⁴	0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵
Supplemental Data:
Net assets, end of period (000 omitted)	$798,138		$991,586			$850,023			$1,421,563			$1,510,064
Portfolio turnover	58	%		29	%		25	%		30	%		23	%

2 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.04% on total return. (See Notes to Financial Statements, Note 5.)

3 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The expense ratios for the years ended March 31, 2005, 2004, and 2003 are 1.92%, 1.94%, and 1.92%, respectively, after taking into account these expense reductions.

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

5 Represents less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated March 31, 2005, which can be obtained free of charge.

Financial Highlights - Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$23.63			$17.22			$23.29			$23.60			$24.68
Income From Investment Operations:
Net investment income (loss)	0.09			0.09			0.07			(0.01	)		0.07
Net realized and unrealized gain (loss) on investments	0.97			6.33			(6.14	)		(0.06	)		(0.27	)
TOTAL FROM INVESTMENT OPERATIONS	1.06			6.42			(6.07	)		(0.07	)		(0.20	)
Less Distributions:
Distributions from net investment income	(0.16	)		(0.01	)		--			--			(0.09	)
Distributions from net realized gain on investments	--			--			--			(0.24	)		(0.79	)
TOTAL DISTRIBUTIONS	(0.16	)		(0.01	)		--			(0.24	)		(0.88	)
Net Asset Value, End of Period	$24.53			$23.63			$17.22			$23.29			$23.60
Total Return¹	4.48	%²		37.26	%		(26.06	)%		(0.36	)%		(0.88	)%

Ratios to Average Net Assets:
Expenses	1.93	%³		1.96	%³		1.93	%³		1.87	%		1.91	%
Net investment income (loss)	0.33	%		0.37	%		0.38	%		(0.02	)%		0.29	%
Expense waiver/reimbursement⁴	0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵
Supplemental Data:
Net assets, end of period (000 omitted)	$121,085		$126,806			$105,820			$168,012			$176,693
Portfolio turnover	58	%		29	%		25	%		30	%		23	%

2 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.04% on total return. (See Notes to Financial Statements, Note 5.)

3 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The expense ratio for the years ended March 31, 2005, 2004, and 2003 are 1.93%, 1.94%, and 1.92%, respectively, after taking into account these expense reductions.

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

5 Represents less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated March 31, 2005, which can be obtained free of charge.

Financial Highlights - Class F Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2005			2004			2003			2002			2001
Net Asset Value, Beginning of Period	$23.53			$17.21			$23.37			$23.65			$24.71
Income From Investment Operations:
Net investment income	0.28			0.25			0.25			0.18			0.27
Net realized and unrealized gain (loss) on investments	0.95			6.31			(6.19	)		(0.08	)		(0.30	)
TOTAL FROM INVESTMENT OPERATIONS	1.23			6.56			(5.94	)		0.10			(0.03	)
Less Distributions:
Distributions from net investment income	(0.34	)		(0.24	)		(0.22	)		(0.14	)		(0.24	)
Distributions from net realized gain on investments	--			--			--			(0.24	)		(0.79	)
TOTAL DISTRIBUTIONS	(0.34	)		(0.24	)		(0.22	)		(0.38	)		(1.03	)
Net Asset Value, End of Period	$24.42			$23.53			$17.21			$23.37			$23.65
Total Return¹	5.27	%²		38.29	%		(25.46	)%		0.37	%		(0.17	)%

Ratios to Average Net Assets:
Expenses	1.16	%³		1.19	%³		1.18	%³		1.12	%		1.16	%
Net investment income	1.11	%		1.15	%		1.13	%		0.73	%		1.07	%
Expense waiver/reimbursement⁴	0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵		0.00	%⁵
Supplemental Data:
Net assets, end of period (000 omitted)	$66,364		$71,908			$57,804			$95,918			$104,302
Portfolio turnover	58	%		29	%		25	%		30	%		23	%

2 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.05% on total return. (See Notes to Financial Statements, Note 5.)

3 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The expense ratios for the years ended March 31, 2005, 2004, and 2003 are 1.15%, 1.17%, and 1.17%, respectively, after taking into account these expense reductions.

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

5 Represents less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated March 31, 2005, which can be obtained free of charge.

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A Statement of Additional Information (SAI) dated May 31, 2005, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund's SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report's Management's Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The SAI contains a description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated's website at FederatedInvestors.com.

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You can obtain information about the Fund (including the SAI) by writing to or visiting the SEC's Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC's website at www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room's operations and copying fees.

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Investment Company Act File No. 811-1704

Federated
World-Class Investment Manager

Federated American Leaders Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

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Cusip 313914103
Cusip 313914202
Cusip 313914301
Cusip 313914400

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G01085-01 (5/ 05)

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Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.

Federated
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated American Leaders Fund, Inc.

PROSPECTUS

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May 31, 2005

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CLASS K SHARES

A mutual fund seeking growth of capital and of income by investing in common stocks and other securities of high-quality companies.

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 4

What are the Fund's Investment Strategies? 5

What are the Principal Securities in Which the Fund Invests? 6

What are the Specific Risks of Investing in the Fund? 9

What Do Shares Cost? 10

How is the Fund Sold? 12

How to Purchase Shares 13

How to Redeem and Exchange Shares 15

Account and Share Information 18

Who Manages the Fund? 21

Legal Proceedings 23

Financial Information 24

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

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

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

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Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's Share price may decline suddenly or over a sustained period of time.
Risks Relating to Investing for Value. Due to the Fund's value style of investing, the Fund's Share price may lag that of other funds using a different investment style.
Sector Risks. Because the Fund may allocate relatively more of its assets to one or more industry sectors comprising the Standard & Poor's 500 Index (S&P 500) than to other sectors of the Index, the Fund's performance will be more susceptible to any developments which affect the sectors emphasized by the Fund.

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Risks of Investing in ADRs and Domestically Traded Securities of Foreign Issuers. Because the Fund may invest in American Depositary Receipts (ADRs) and other domestically traded securities of foreign companies, the Fund's Share price may be affected by foreign economic and political conditions, taxation policies, and accounting and auditing standards .

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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 or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation , the Federal Reserve Board, or any other government agency.

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Risk/Return Bar Chart and Table

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The Fund's Class K Shares is a new class of shares, and commenced operation on April 8, 2003. The Fund offers four other classes of shares, Class A Shares, Class B Shares, Class C Shares, and Class F Shares. For the period prior to the commencement of operations of the Class K Shares, the performance information shown in the bar chart below is for the Fund's Class A Shares, adjusted to reflect the expenses of the Class K Shares. This performance information will help you to analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Class K Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

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The Fund's Class K Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

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The Fund's Class K Shares total return for the three-month period from January 1, 2005 to March 31, 2005 was (1. 63)%.

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Within the period shown in the bar chart, the Fund's Class A Shares highest quarterly return was 16. 69% (quarter ended June 30, 2003). Its lowest quarterly return was (19. 82)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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As previously discussed, the Fund's Class K Shares is a new class of shares, which commenced operations on April 8, 2003. Accordingly, for the period prior to the commencement of operations, the performance information shown in the Average Annual Total Return Table is for the Fund's Class A Shares, adjusted to reflect the expenses of the Class K Shares. Return Before Taxes is shown for the Fund's Class K Shares. In addition, Return After Taxes is shown to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table shows returns for the Standard & Poor's 500/Barra Value Index (S&P 500/Barra Value), a broad-based market index, and the Lipper Large-Cap Value Average (LLCVA), an average of funds with similar investment objectives. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index or average. Lipper averages represent the average of the total returns reported by all mutual funds as designated by Lipper, Inc. as falling in the respective categories indicated.

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(For the Periods Ended December 31, 2004)

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	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	<R> 9. 03%</R>	<R> 1. 05%</R>	<R> 10.77%</R>
Return After Taxes on Distributions¹	<R> 8. 64%</R>	<R>0. 69%</R>	<R> 9. 38%</R>
Return After Taxes on Distributions and Sale of Fund Shares¹	<R> 5. 86%</R>	<R>0. 73%</R>	<R> 8. 84%</R>
S&P 500/Barra Value	<R> 15. 69%</R>	<R> 2. 48%</R>	<R> 11. 70%</R>
LLCVA	<R> 11. 86%</R>	<R> 3. 17%</R>	<R> 11. 25%</R>

1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all Shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund's Fees and Expenses?

FEDERATED AMERICAN LEADERS FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold the Fund's Class K Shares.

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

Annual Fund Operating Expenses¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.65%
Distribution (12b-1) Fee		0.50%
Other Expenses		0.48%
Total Annual Fund Operating Expenses		1.63%

1 The percentages shown are based on expenses for the entire fiscal year ended March 31, 2005. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage.
2 The management fee equals the sum of 0.55% of the Fund's average daily net assets plus 4.50% of the Fund's gross income.

EXAMPLE

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

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

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1 Year		<R>$ 166</R>
3 Years		<R>$ 514</R>
5 Years		<R>$ 887</R>
10 Years		<R>$ 1, 933</R>

What are the Fund's Investment Strategies?

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The Fund pursues its investment objective by investing primarily in equity securities of companies that are generally leaders in their industries are characterized by sound management and have the ability to finance expected growth. The Fund's investment adviser (Adviser) attempts to identify good long-term values through disciplined investing and careful fundamental research. The Fund's holdings primarily will be in large capitalization companies that are in the top 50% of their industries with regard to revenues. A description of the various types of securities in which the Fund principally invests, and their risks, immediately follows the strategy discussion.

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

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TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

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

Common Stocks

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ADRs and Domestically Traded Securities of Foreign Issuers

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DERIVATIVE CONTRACTS

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Futures Contracts

Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of an underlying asset at a specified price, date and time. Entering into a contract to buy an underlying asset is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell an underlying asset is commonly referred to as selling a contract or holding a short position in the asset. Futures contracts are considered to be commodity contracts. The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded over-the-counter (OTC) are frequently referred to as forward contracts. The Fund can buy or sell financial futures and index futures.

Options

Options are rights to buy or sell an underlying asset or instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the underlying asset from the seller (writer) of the option. A put option gives the holder the right to sell the underlying asset to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of underlying assets or instruments, including financial indices, individual securities, and other derivative instruments, such as futures contracts.

Swaps

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. The Fund's portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, the Fund's Share price may decline.
The Adviser attempts to manage market risk by limiting the amount the Fund invests in each company's equity securities. However, diversification will not protect the Fund against widespread or prolonged declines in the stock market.

SECTOR RISKS

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

RISKS RELATING TO INVESTING FOR VALUE

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

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RISKS OF INVESTING IN ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS

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Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's Share price may be affected by foreign economic and political conditions, taxation policies, and accounting and auditing standards . Foreign companies may not provide information as frequently or to as great an extent as companies in the United States. Foreign companies may also receive less coverage than U.S. companies by market analysts and the financial press. In addition, foreign countries may lack uniform accounting, auditing, and financial reporting standards or regulatory requirements comparable to U.S. companies. These factors may prevent the Fund and its Adviser from obtaining information concerning foreign companies that is as frequent, extensive and reliable as the information available concerning companies in the United States.

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RISKS OF INVESTING IN DERIVATIVES CONTRACTS

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The Fund's use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts may also involve other risks described in this prospectus or the Fund's Statement of Additional Information, such as stock market, liquidity, and leverage risks.

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What Do Shares Cost?

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You can purchase, redeem or exchange Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form (as described in this prospectus), it is processed at the next calculated net asset value (NAV). The Fund's Class K Shares do not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated." The Fund generally values equity securities according to the last sale price reported by the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

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If prices are not available from an independent pricing service, securities, and derivatives contracts traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund's Board. The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund's Adviser determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively.

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An institutional investor's minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through investment professionals may be subject to a smaller minimum investment amount. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

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How is the Fund Sold?

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The Fund offers five Share classes: Class A Shares, Class B Shares, Class C Shares, Class F Shares, and Class K Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Class K Shares. All Share classes have different sales charges and other expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other classes.

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The Fund's Distributor, Federated Securities Corp., markets the Shares described in this prospectus generally to 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing and money purchase pension plans, defined benefit plans and non-qualified deferred compensation plans and IRA rollovers from such plans directly or through investment professionals. Class K Shares are generally available only to retirement plans where plan level omnibus accounts are held on the books of the Fund.

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When the Distributor receives marketing fees and sales charges, it may pay some or all of them to investment professionals. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

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RULE 12B-1 PLAN

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The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution, administration and customer servicing of the Fund's Class K Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different sales charges and marketing fees.

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SERVICE FEES

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ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

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How to Purchase Shares

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THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

Investment professionals should send payments according to the instructions in the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

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An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

You cannot purchase Shares by wire on holidays when wire transfers are restricted.

By Check

Make your check payable to The Federated Funds , note your account number on the check, and send it to:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that requires a street address, send it to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

THROUGH AN EXCHANGE

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BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

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BY AUTOMATED CLEARING HOUSE (ACH)

RETIREMENT INVESTMENTS

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

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THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed or exchanged;
signatures of all shareholders exactly as registered; and
if exchanging , the Fund Name and Share Class, account number and account registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees

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Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

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your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days;
a redemption is payable to someone other than the shareholder(s) of record; or
if exchanging (transferring) into another fund with a different shareholder registration.

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PAYMENT METHODS FOR REDEMPTIONS

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund into shares of the same class of another Federated fund. To do this, you must:

ensure that the account registrations are identical;
meet any minimum initial investment requirements; and
receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a taxable transaction.

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SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

ADDITIONAL CONDITIONS

Telephone Transactions

The Fund will record your telephone instructions. If the Fund does not follow reasonable procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions.

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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DIVIDENDS AND CAPITAL GAINS

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ACCOUNTS WITH LOW BALANCES

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TAX INFORMATION

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FREQUENT TRADING POLICIES

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PORTFOLIO HOLDINGS INFORMATION

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You may also access from the "Products" section of the website portfolio information as of the end of the Fund's fiscal quarters. The Fund's annual and semiannual reports, which contain complete listings of the Fund's portfolio holdings as of the end of the Fund's second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on "Prospectuses and Regulatory Reports" and selecting the link to the appropriate PDF. Complete listings of the Fund's portfolio holdings as of the end of the Fund's first and third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the "Products" section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC's website at www.sec.gov.

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Who Manages the Fund?

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PORTFOLIO MANAGEMENT INFORMATION

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William Dierker

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Kevin R. McCloskey

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The Fund's SAI provides additional information about the Portfolio Manager's compensation, management of other accounts, and ownership of securities in the Fund.

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ADVISORY FEES

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Legal Proceedings

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Like many other mutual fund companies, in September 2003, Federated Investors, Inc., the parent company of the Federated funds' advisers and distributor (collectively, "Federated"), received detailed requests for information on shareholder trading activities in the Federated funds ("Funds") from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Since that time, Federated has received additional inquiries from regulatory authorities on these and related matters, and more such inquiries may be received in the future.

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Financial Information

FINANCIAL HIGHLIGHTS

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

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Financial Highlights - Class K Shares

(For a Share Outstanding Throughout Each Period)

	Year Ended		Period Ended
	3/31/2005		3/31/2004	¹
Net Asset Value, Beginning of Period	$23.57		$17.74
Income From Investment Operations:
Net investment income	0.17		0.13
Net realized and unrealized gain on investments	0.95		5.85
TOTAL FROM INVESTMENT OPERATIONS	1.12		5.98
Less Distributions:
Distributions from net investment income	(0.23	)	(0.15	)
Net Asset Value, End of Period	$24.46		$23.57
Total Return²	4.78	%³	33.76	%

Ratios to Average Net Assets:
Expenses	1.63	%⁴	1.66	%^4,5
Net investment income	0.64	%	0.54	%⁵
Expense waiver/reimbursement⁶	0.00	%⁷	0.00	%^5,7
Supplemental Data:
Net assets, end of period (000 omitted)	$18,095		$3,082
Portfolio turnover	58	%	29	%⁸

1 Reflects operations for the period from April 8, 2003 (start of performance) to March 31, 2004.

2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

3 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.04% on total return. (See Notes to Financial Statements, Note 5).

4 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The expense ratios for the year ended March 31, 2005 and period ended March 31, 2004 are 1.63%, and 1.64%, respectively, after taking into account these expense reductions.

5 Computed on an annualized basis.

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

7 Represents less than 0.01%.

8 Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the fiscal year ended March 31, 2004.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated March 31, 2005, which can be obtained free of charge.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated's website at FederatedInvestors.com.

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Investment Company Act File No. 811-1704

Federated
World-Class Investment Manager

Federated American Leaders Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Cusip 313914509

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28210 (5/ 05)

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Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.

FEDERATED AMERICAN LEADERS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION

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MAY 31, 2005

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

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Class A Shares, Class B Shares,
Class C Shares, Class F Shares and Class K Shares of Federated American Leaders
Fund, Inc. (Fund), dated May 31, 2005. This SAI incorporates by reference the
Fund's Annual Report. Obtain the prospectuses or the Annual Report without
charge by calling 1-800-341-7400.

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CONTENTS
How is the Fund Organized?...............................
Securities in Which the Fund Invests.....................
What Do Shares Cost?.....................................
How is the Fund Sold?....................................
Exchanging Securities for Shares.........................
Subaccounting Services...................................
Redemption in Kind.......................................
Account and Share Information............................
Tax Information..........................................
Who Manages and Provides Services to the Fund?...........
How Does the Fund Measure Performance?...................
Who is Federated Investors, Inc.?........................
Financial Information....................................
Investment Ratings.......................................
Addresses................................................
Appendix.................................................

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HOW IS THE FUND ORGANIZED?

The Fund is a diversified open-end, management investment company that was
established under the laws of the State of Maryland on July 22, 1968.

The Board of Directors (the "Board") has established five classes of shares of
the Fund, known as Class A Shares, Class B Shares, Class C Shares, Class F
Shares and Class K Shares (Shares). This SAI relates to all classes of Shares.
The Fund's investment adviser is Federated Equity Management Company of
Pennsylvania (Adviser). Prior to January 1, 2004, Federated Investment
Management Company was the Adviser to the Fund. Both the current Adviser and the
former Adviser are wholly owned subsidiaries of Federated Investors, Inc.
(Federated).

SECURITIES IN WHICH THE FUND INVESTS

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES

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

Common Stocks

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

Preferred Stocks

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

Interests in Other Limited Liability Companies

Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.

Real Estate Investment Trusts (REITs)

REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.

Warrants

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

FIXED INCOME SECURITIES

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

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

The following describes the types of fixed income securities in which the Fund
may invest:

Treasury Securities

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

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity (GSE) acting under federal authority. Some GSE
securities are supported by the full faith and credit of the United States.
These include the Government National Mortgage Association, Small Business
Administration, Farm Credit System Financial Assistance Corporation, Farmer's
Home Administration, Federal Financing Bank, General Services Administration,
Department of Housing and Urban Development, Export-Import Bank, Overseas
Private Investment Corporation, and Washington Metropolitan Area Transit
Authority Bonds. Other GSE securities receive support through federal subsidies,
loans or other benefits. For example, the U.S. Treasury is authorized to
purchase specified amounts of securities issued by (or otherwise make funds
available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
These include the Farm Credit System, Financing Corporation, and Resolution
Funding Corporation.

Investors regard agency securities as having low credit risks, but not
as low as Treasury securities.
A Fund treats mortgage-backed securities guaranteed by a GSE as if
issued or guaranteed by a federal agency. Although such a guarantee
protects against credit risks, it does not reduce market and prepayment
risks.

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

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

COMMERCIAL PAPER

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the market and credit risks as
compared to other debt securities of the same issuer.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.

Zero Coupon Securities

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security. There are many
forms of zero coupon securities. Some are issued at a discount and are referred
to as zero coupon or capital appreciation bonds. Others are created from
interest bearing bonds by separating the right to receive the bond's coupon
payments from the right to receive the bond's principal due at maturity, a
process known as coupon stripping. Treasury STRIPs, IOs and POs are the most
common forms of stripped zero coupon securities. In addition, some securities
give the issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These are
referred to as pay-in-kind or PIK securities.

CONVERTIBLE SECURITIES

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

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

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

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FOREIGN SECURITIES

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

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

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

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

Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.

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Depositary Receipts

Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are not traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.

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DERIVATIVE CONTRACTS

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

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

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

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

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

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

Futures Contracts

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. The Fund has claimed an exclusion from
the definition of the term "commodity pool operator" under the Commodity
Exchange Act and, therefore, is not subject to registration or regulation as a
commodity pool operator under that Act. Futures contracts traded OTC are
frequently referred to as forward contracts. The Fund can buy or sell financial
futures and index futures.

Options

Options are rights to buy or sell an underlying asset or instrument for a
specified price (the exercise price) during, or at the end of, a specified
period. The seller (or writer) of the option receives a payment, or premium,
from the buyer, which the writer keeps regardless of whether the buyer uses (or
exercises) the option. Options can trade on exchanges or in the OTC market and
may be bought or sold on a wide variety of underlying assets or instruments,
including financial indices, individual securities, and other derivative
instruments, such as futures contracts. Options that are written on futures
contracts will be subject to margin requirements similar to those applied to
futures contracts.

The Fund may buy/sell the following types of options:

CALL OPTIONS

A call option gives the holder (buyer) the right to buy the underlying asset
from the seller (writer) of the option. The Fund may use call options in the
following ways:

o Buy call options on indices, individual securities, index futures and
financial futures in anticipation of an increase in the value of the
underlying asset or instrument; and

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

PUT OPTIONS

A put option gives the holder the right to sell the underlying asset to the
writer of the option. The Fund may use put options in the following ways:

o Buy put options on indices, individual securities, index futures and
financial futures in anticipation of a decrease in the value of the
underlying asset; and

o Write put options on indices, portfolio securities, index futures and
financial futures to generate income from premiums, and in anticipation of
an increase or only limited decrease in the value of the underlying asset.
In writing puts, there is a risk that the Fund may be required to take
delivery of the underlying asset when its current market price is lower
than the exercise price.

The Fund may also buy or write options, as needed, to close out existing option
positions.

Swaps

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not own the assets underlying the swap. The payments are
usually made on a net basis so that, on any given day, the Fund would receive
(or pay) only the amount by which its payment under the contract is less than
(or exceeds) the amount of the other party's payment. Swap agreements are
sophisticated instruments that can take many different forms, and are known by a
variety of names including caps, floors, and collars. Common swap agreements
that the Fund may use include:

INTEREST RATE SWAPS

Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities, in return for payments equal to a different
fixed or floating rate times the same principal amount, for a specific period.
For example, a $10 million LIBOR swap would require one party to pay the
equivalent of the London Interbank Offer Rate of interest (which fluctuates) on
$10 million principal amount in exchange for the right to receive the equivalent
of a stated fixed rate of interest on $10 million principal amount.

TOTAL RATE OF RETURN SWAPS

Total rate of return swaps are contracts in which one party agrees to make
payments of the total return from the underlying asset during the specified
period, in return for payments equal to a fixed or floating rate of interest or
the total return from another underlying asset.

SPECIAL TRANSACTIONS

Inter-Fund Borrowing and Lending Arrangements

The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending Federated
funds, and an inter-fund loan is only made if it benefits each participating
Federated fund. Federated Investors, Inc. (Federated) administers the program
according to procedures approved by the Fund's Board, and the Board monitors the
operation of the program. Any inter-fund loan must comply with certain
conditions set out in the exemption, which are designed to assure fairness and
protect all participating Federated funds.

For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated fund than
the rate of interest that would be charged by an unaffiliated bank for
short-term borrowings (Bank Loan Rate), as determined by the Board. The interest
rate imposed on inter-fund loans is the average of the Repo Rate and the Bank
Loan Rate.

Repurchase Agreements

Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed-upon
time and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the Fund owns the security
subject to repurchase. The agreed-upon interest rate is unrelated to the
interest rate on the underlying security. The Funds will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Adviser to be creditworthy.

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

Repurchase agreements are subject to credit risk.

Reverse Repurchase Agreements

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

Securities Lending

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

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

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

Securities lending activities are subject to market risks and credit risks.

Asset Coverage

In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations. This may
cause the Fund to miss favorable trading opportunities or to realize losses on
derivative contracts or special transactions.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

EQUITY SECURITIES INVESTMENT RISKS

Stock Market Risks

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

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

Sector Risks

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

Liquidity Risks

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

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

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

Risks Related to Investing for Value

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

Credit Risks

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

Leverage Risks

o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.

o Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.

Risks of Foreign Investing

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

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

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

FIXED INCOME SECURITIES INVESTMENT RISKS

Interest Rate Risks

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

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

Credit Risks

o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services
assign ratings to securities by assessing the likelihood of issuer default.
Lower credit ratings correspond to higher credit risk. If a security has
not received a rating, the Fund must rely entirely upon the Adviser's
credit assessment.

o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.

Liquidity Risks

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

o Liquidity risk also refers to the possibility that the Fund may not be able
to sell a security when it wants to. If this happens, the Fund will be
required to continue to hold the security and the Fund could incur losses.

Risks Associated with Noninvestment Grade Securities

o The Fund may invest in convertible securities rated below investment grade,
also known as junk bonds. Such convertible securities generally entail
greater market, credit and liquidity risks than investment grade
securities. For example, their prices are more volatile, economic downturns
and financial setbacks may affect their prices more negatively, and their
trading market may be more limited.

Call Risks

o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market
price. An increase in the likelihood of a call may reduce the security's
price.

o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.

Sector Risks

o A substantial part of the Fund's portfolio may be comprised of securities
issued or credit enhanced by companies in similar businesses, or with other
similar characteristics. As a result, the Fund will be more susceptible to
any economic, business, political, or other developments which generally
affect these issuers.

RISKS OF INVESTING IN DERIVATIVES CONTRACTS

o The Fund's use of derivative contracts involves risks different from, or
possibly greater than, the risks associated with investing directly in
securities and other traditional investments. First, changes in the value
of the derivative contracts in which the Fund invests may not be correlated
with changes in the value of the underlying asset or if they are
correlated, may move in the opposite direction than originally anticipated.
Second, while some strategies involving derivatives may reduce the risk of
loss, they may also reduce potential gains or, in some cases, result in
losses by offsetting favorable price movements in portfolio holdings.
Third, there is a risk that derivatives contracts may be mispriced or
improperly valued and, as a result, the Fund may need to make increased
cash payments to the counterparty. Finally, derivative contracts may cause
the Fund to realize increased ordinary income or short-term capital gains
(which are treated as ordinary income for Federal income tax purposes) and,
as a result, may increase taxable distributions to shareholders. Derivative
contracts may also involve other risks, such as stock market, credit,
liquidity and leverage risks.

FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

The Fund's fundamental 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 may not be changed by the
Fund's directors without shareholder approval.

Whenever deemed appropriate to the attainment of its investment objective, the
Fund may make investments in a particular industry which would result in up to
25% of its total assets, taken at market value, being invested in such industry.
If through market action the market value of the Fund's assets invested in a
particular industry exceeds 25% of the market value of its total assets, the
Fund will not be required to make any reduction of its holdings in the
particular industry.

INVESTMENT LIMITATIONS

Selling Short and Buying on Margin

The Fund will not sell any securities short or purchase any securities on
margin, but it may obtain such short-term credits as may be necessary for
clearance or purchase and sales of securities.

Borrowing Money

The Fund will not borrow money except from banks as a temporary measure for
extraordinary or emergency purposes and then: (1) only in amounts not in excess
of 5% of the value of its total assets; or (2) in an amount up to one-third of
the value of its total assets, including the amount borrowed, in order to meet
redemption requests without immediately selling any portfolio instruments. 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 any
portfolio instruments. The use of repurchase agreements and the borrowing
provision in (2) above, 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 is deemed to 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 purchase the securities of any issuer if such purchase at the
time thereof would cause more than 5% of the total assets (taken at market
value) to be invested in the securities of such issuer, except U.S. government
securities as defined in the Investment Company Act of 1940 (1940 Act), 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 or
investment trusts, except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary brokerage commissions or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation.

Investing In New Issuers

The Fund will not invest more than 5% of its total assets (taken at market
value) in securities of issuers which have a record of less than three years of
continuous operation, including, however, in such three years the operation of
any predecessor company or companies, partnership, or individual enterprise if
the issuer whose securities are proposed as investment for funds of the Fund has
come into existence as a result or a merger, consolidation, reorganization or
the purchase of substantially all of the assets of such predecessor company or
companies, partnership or individual enterprise.

Investing in Issuers whose Securities are Owned by Officers of the Fund The Fund
will not purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer or
Director of the Fund or is a member, officer, director or trustee of the
investment adviser, if at the time of or after the purchase of the securities of
such issuer by the Fund one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities, or both (all taken at market value) of
such issuer and such persons owning more than one-half of one percent (1/2%) of
such shares or together own beneficially more than 5% of such shares or
securities, or both (all taken at market value).

Underwriting

The Fund will not underwrite or engage in agency distribution of securities
issued by others; provided, however, that this shall not be construed to prevent
or limit in any manner the power of the Fund to purchase securities for
investment as herein provided.

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 U.S. government securities, bonds,
debentures, notes, certificates of indebtedness or other debt securities of an
issuer, repurchase agreements covering U.S. government securities, 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 any class 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.

The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitations 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
limitation.

DETERMINING MARKET VALUE OF SECURITIES

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

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

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

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

o for fixed income securities, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that fixed
income securities with remaining maturities of less than 60 days at the
time of purchase may be valued at amortized cost; and

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o for all other securities at fair value as determined in accordance with
procedures established by and under the general supervision of the Board.

</R>

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

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Fund's Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

HOW IS THE FUND SOLD?

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

FRONT-END SALES CHARGE REALLOWANCES

The Distributor receives a front-end sales charge on certain Share sales. The
Distributor pays a portion of this charge to investment professionals that are
eligible to receive it (the "Dealer Reallowance") and retains any remaining
portion of the front-end sales charge.

When an investment professional's customer purchases Shares, the investment
professional may receive a Dealer Reallowance as follows:
------------------------------------------------------------------------------

Class A Shares
Dealer
Reallowance
Purchase Amount as a percentage
of
Public Offering
Price
Less than $50,000 5.00%
$50,000 but less than $100,000 4.00%
$100,000 but less than $250,000 3.25%
$250,000 but less than $500,000 2.25%
$500,000 but less than $1 million 1.80%
$1 million or greater 0.00%

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

Class C Shares
Dealer Reallowance
as a Percentage of
Public Offering
Price
All Purchase Amounts 1.00%

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

Class F Shares
Dealer
Reallowance
Purchase Amount as a Percentage
of
Public Offering
Price
Less than $1 million 1.00%
$1 million or greater 0.00%

ADVANCE COMMISSIONS
-------------------------------------------------------------------------
When an investment professional's customer purchases Shares, the investment
professional may receive an advance commission as follows:

Class A Shares (for purchases over $1 million)

Advance Commission
as a Percentage of
Purchase Amount Public Offering
Price
First $1 million - $5 0.75%
million
Next $5 million - $20 0.50%
million
Over $20 million 0.25%

Advance commissions are calculated on a year by year basis based on amounts
invested during that year. Accordingly, with respect to additional purchase
amounts, the advance commission breakpoint resets annually to the first
breakpoint on the anniversary of the first purchase.
-------------------------------------------------------------------------

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance commission will be paid only
on those purchases that were not previously subject to a front-end sales charge
or dealer advance commission. Certain retirement accounts may not be eligible
for this program.

Advance Commission
as a Percentage of
Class B Shares Public Offering Price
All Purchase Amounts Up to 5.50%
Advance Commission
as a Percentage of
Class C Shares Public Offering Price
All Purchase Amounts 1.00%
Class F Shares
Advance Commission
as a Percentage of
Purchase Amount Public Offering Price
Less than $2 million 1.00%
$2 million but less than 0.50%
$5 million
$5 million or greater 0.25%

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

RULE 12b-1 PLAN (CLASS B SHARES, CLASS C SHARES AND CLASS K SHARES)

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As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor for activities principally intended to result in the sale of Shares
such as advertising and marketing of Shares (including printing and distributing
prospectuses and sales literature to prospective shareholders and financial
institutions) and providing incentives to investment professionals to sell
Shares. The Plan is also designed to cover the cost of administrative services
performed in conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services, as well
as the costs of implementing and operating the Plan. The Rule 12b-1 Plan allows
the Distributor to contract with investment professionals to perform activities
covered by the Plan. The Rule 12b-1 Plan is expected to benefit the Fund in a
number of ways. For example, it is anticipated that the Plan will help the Fund
attract and retain assets, thus providing cash for orderly portfolio management
and Share redemptions and possibly helping to stabilize or reduce other
operating expenses. In addition, the Plan is integral to the multiple class
structure of the Fund, which promotes the sale of Shares by providing a range of
options to investors. The Fund's service providers that receive asset-based fees
also benefit from stable or increasing Fund assets.

</R>

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

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

Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
provided the funds to make advance commission payments to investment
professionals.

<R>

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial institutions. In some cases, such payments
may be made by, or funded from the resources of, companies affiliated with the
Distributor (including the Adviser). While NASD regulations limit the sales
charges that you may bear, there are no limits with regard to the amounts that
the Distributor may pay out of its own resources. In addition to the payments
which are generally described herein and in the prospectus, the financial
institution also may receive payments under the Rule 12b-1 Plan and/or Service
Fees. In connection with these payments, the financial institution may elevate
the prominence or profile of the Fund and/or other Federated funds within the
financial institution's organization by, for example, placement on a list of
preferred or recommended funds, and/or granting the Distributor preferential or
enhanced opportunities to promote the funds in various ways within the financial
institution's organization. You can ask your financial institution for
information about any payments it receives from the Distributor or the Federated
funds and any services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial institutions.

Supplemental Payments

The Distributor may make supplemental payments to certain financial institutions
that are holders or dealers of record for accounts in one or more of the
Federated funds. These payments may be based on such factors as the number or
value of Shares the financial institution sells or may sell; the value of client
assets invested; or the type and nature of services or support furnished by the
financial institution.

Processing Support Payments

The Distributor may make payments to financial institutions that sell Federated
fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing. The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
institution's mutual fund trading system.

Retirement Plan Program Servicing Payments

The Distributor may make payments to certain financial institutions who sell
Federated fund shares through retirement plan programs. A financial institution
may perform retirement plan program services itself or may arrange with a third
party to perform retirement plan program services. In addition to participant
recordkeeping, reporting, or transaction processing, retirement plan program
services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.

Other Benefits to Financial Institutions

From time to time, the Distributor, at its expense, may provide additional
compensation to financial institutions that sell or arrange for the sale of
Shares. Such compensation may include financial assistance to financial
institutions that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial institution-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
institutions and may pay the travel and lodging expenses of attendees. The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial institutions. Other compensation may be
offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.

UNDERWRITING COMMISSIONS

The following chart reflects the total front-end sales charges and contingent
deferred sales charges paid in connection with the sale of Class A Shares, Class
B Shares, Class C Shares and Class F Shares of the Fund and the amount retained
by the Distributor for the last three fiscal years ended March 31:

2005 2004 2003
Total Total
Sales Amount Sales Amount
Charges Retained Charges Retained Total Amount
Sales Retained
Charges
Class A $2,904,409 $319,059 $3,959,209 $425,385 $3,867,419 $425,614
Shares
Class B $1,394,423 0 $1,873,888 0 $3,005,441 00
Shares
Class C $53,349 $11,193 $76,044 $4,340 $4,950 $4,950
Shares
Class F $10,091 $3,172 $7,796 $1,643 $19,059 $5,106
Shares

-----------
</R>

EXCHANGING SECURITIES FOR SHARES
-------------------------------------------------------------------------

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

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

All Shares of the Fund have equal voting rights, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.

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

<R>

As of May 2, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class A Shares: Edward Jones & Co., Maryland
Heights, MO owned approximately 23,912,937 Shares (37.19%).

As of May 2, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class B Shares: Edward Jones & Co., Maryland
Heights, MO owned approximately 4,132,739 Shares (13.01%).

As of May 2, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class C Shares: Edward Jones & Co., Maryland
Heights, MO owned approximately 692,905 Shares (14.13%); MLPF&S,
Jacksonville, FL owned approximately 571,750 Shares (11.66%); Citigroup Global
Markets, Inc., New York, NY owned approximately 329,050 Shares (6.71%).

As of May 2, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class F Shares: MLPF&S Jacksonville, FL
owned approximately 334,592 Shares (12.52%); Edward Jones & Co., Maryland
Heights, MO owned approximately 329,116 Shares (12.31%); Nationwide Trust
Company FSB, Columbus, OH owned approximately 169,785 Shares (6.35%).

As of May 2, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class K Shares: PlanMember Services Corp., A/O
UMB Bank NA Kansas City, MO owned approximately 810,813 Shares (95.62%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

Edward Jones & Co. is organized in the state of Missouri and is a subsidiary
of Jones Financial Companies, L.P., LLP; organized in the state of Missouri.

PlanMember Services Corp., is organized in the state of California and is a
subsidiary of PlanMember Financial Corporation organized in the state of
California.

</R>

TAX INFORMATION

FEDERAL INCOME TAX

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

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF DIRECTORS

<R>

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders. The
following tables give information about each Board member and the senior
officers of the Fund. Where required, the tables separately list Board members
who are "interested persons" of the Fund (i.e., "Interested" Board members) and
those who are not (i.e., "Independent" Board members). Unless otherwise noted,
the address of each person listed is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA. As of December 31, 2004, the Fund comprised one
portfolio, and the Federated Fund Complex consisted of 44 investment companies
(comprising 133 portfolios). Unless otherwise noted, each Officer is elected
annually. Unless otherwise noted, each Board member oversees all portfolios in
the Federated Fund Complex and serves for an indefinite term.

As of May 2, 2005, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Class A Shares, Class B Shares, Class C Shares, Class
F Shares and Class K Shares.

</R>

<R>

INTERESTED DIRECTORS BACKGROUND AND COMPENSATION

Name
Birth Date Aggregate Total
Address Principal Occupation(s) for Past Compensation Compensation
Positions Held with Five Years, Other Directorships From Fund From Fund and
Fund Held and Previous Position(s) (past Federated Fund
Date Service Began fiscal year) Complex
(past calendar
year)
Principal Occupations: Chairman $0 $0
John F. Donahue* and Director or Trustee of the
Birth Date: July Federated Fund Complex; Chairman
28, 1924 and Director, Federated
CHAIRMAN AND Investors, Inc.
DIRECTOR
Began serving: July Previous Positions: Trustee,
1968 Federated Investment Management
Company and Chairman and
Director, Federated Investment
Counseling.

Principal Occupations: Principal $0 $0
J. Christopher Executive Officer and President
Donahue* of the Federated Fund Complex;
Birth Date: April Director or Trustee of some of
11, 1949 the Funds in the Federated Fund
PRESIDENT AND Complex; President, Chief
DIRECTOR Executive Officer and Director,
Began serving: Federated Investors, Inc.;
October 1999 Chairman and Trustee, Federated
Investment Management Company;
Trustee, Federated Investment
Counseling; Chairman and
Director, Federated Global
Investment Management Corp.;
Chairman, Federated Equity
Management Company of
Pennsylvania, Passport Research,
Ltd. and Passport Research II,
Ltd.; Trustee, Federated
Shareholder Services Company;
Director, Federated Services
Company.

Previous Positions: President,
Federated Investment Counseling;
President and Chief Executive
Officer, Federated Investment
Management Company, Federated
Global Investment Management
Corp. and Passport Research, Ltd.

Principal Occupations: Director $2,783.23 $148,500
Lawrence D. Ellis, or Trustee of the Federated Fund
M.D.* Complex; Professor of Medicine,
Birth Date: October University of Pittsburgh;
11, 1932 Medical Director, University of
3471 Fifth Avenue Pittsburgh Medical Center
Suite 1111 Downtown; Hematologist,
Pittsburgh, PA Oncologist and Internist,
DIRECTOR University of Pittsburgh Medical
Began serving: Center.
August 1987
Other Directorships Held:
Member, National Board of
Trustees, Leukemia Society of
America.

Previous Positions: Trustee,
University of Pittsburgh;
Director, University of
Pittsburgh Medical Center.

* Family relationships and reasons for "interested" status: John F. Donahue
is the father of J. Christopher Donahue; both are "interested" due to the
positions they hold with Federated and its subsidiaries. Lawrence D. Ellis,
M.D. is "interested" because his son-in-law is employed by the Fund's
principal underwriter, Federated Securities Corp.

INDEPENDENT DIRECTORS BACKGROUND AND COMPENSATION

Name
Birth Date Aggregate Total
Address Principal Occupation(s) for Past Compensation Compensation
Positions Held with Five Years, Other Directorships From Fund From Fund and
Fund Held and Previous Position(s) (past Federated
Date Service Began fiscal year) Fund Complex
(past
calendar year)
Principal Occupation: Director $3,061.56 $163,350
Thomas G. Bigley or Trustee of the Federated Fund
Birth Date: Complex.
February 3, 1934
15 Old Timber Trail Other Directorships Held:
Pittsburgh, PA Director, Member of Executive
DIRECTOR Committee, Children's Hospital
Began serving: of Pittsburgh; Director,
November 1994 University of Pittsburgh.

Previous Position: Senior
Partner, Ernst & Young LLP.

Principal Occupations: Director $3,061.56 $163,350
John T. Conroy, Jr. or Trustee of the Federated Fund
Birth Date: June Complex; Chairman of the Board,
23, 1937 Investment Properties
Investment Corporation; Partner or Trustee
Properties in private real estate ventures
Corporation in Southwest Florida.
3838 North Tamiami
Trail Previous Positions: President,
Suite 402 Investment Properties
Naples, FL Corporation; Senior Vice
DIRECTOR President, John R. Wood and
Began serving: Associates, Inc., Realtors;
August 1991 President, Naples Property
Management, Inc. and Northgate
Village Development Corporation.

Principal Occupation: Director $3,061.56 $163,350
Nicholas P. or Trustee of the Federated Fund
Constantakis Complex.
Birth Date:
September 3, 1939 Other Directorships Held:
175 Woodshire Drive Director and Member of the Audit
Pittsburgh, PA Committee, Michael Baker
DIRECTOR Corporation (engineering and
Began serving: energy services worldwide).
October 1999
Previous Position: Partner,
Anderson Worldwide SC.

Principal Occupation: Director $2,783.23 $148,500
John F. Cunningham or Trustee of the Federated Fund
Birth Date: March Complex.
5, 1943
353 El Brillo Way Other Directorships Held:
Palm Beach, FL Chairman, President and Chief
DIRECTOR Executive Officer, Cunningham
Began serving: & Co., Inc. (strategic
April 1999 business consulting); Trustee
Associate, Boston College.

Previous Positions: Director,
Redgate Communications and EMC
Corporation (computer storage
systems); Chairman of the Board
and Chief Executive Officer,
Computer Consoles, Inc.;
President and Chief Operating
Officer, Wang Laboratories;
Director, First National Bank of
Boston; Director, Apollo
Computer, Inc.

Principal Occupation: Director $2,783.23 $148,500
Peter E. Madden or Trustee of the Federated Fund
Birth Date: March Complex.
16, 1942
One Royal Palm Way Other Directorships Held: Board
100 Royal Palm Way of Overseers, Babson College.
Palm Beach, FL
DIRECTOR Previous Positions:
Began serving: Representative, Commonwealth of
August 1991 Massachusetts General Court;
President, State Street Bank and
Trust Company and State Street
Corporation (retired); Director,
VISA USA and VISA International;
Chairman and Director,
Massachusetts Bankers
Association; Director,
Depository Trust Corporation;
Director, The Boston Stock
Exchange.

Principal Occupations: Director $3,061.56 $163,350
Charles F. or Trustee of the Federated Fund
Mansfield, Jr. Complex; Management Consultant;
Birth Date: April Executive Vice President, DVC
10, 1945 Group, Inc. (marketing,
80 South Road communications and technology)
Westhampton Beach, (prior to 9/1/00).
NY
DIRECTOR Previous Positions: Chief
Began serving: Executive Officer, PBTC
April 1999 International Bank; Partner,
Arthur Young & Company (now
Ernst & Young LLP); Chief
Financial Officer of Retail
Banking Sector, Chase Manhattan
Bank; Senior Vice President,
HSBC Bank USA (formerly, Marine
Midland Bank); Vice President,
Citibank; Assistant Professor of
Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University.

Principal Occupations: Director $3,339.86 $178,200
John E. Murray, or Trustee of the Federated Fund
Jr., J.D., S.J.D. Complex; Chancellor and Law
Birth Date: Professor, Duquesne University;
December 20, 1932 Partner, Murray, Hogue &
Chancellor, Lannis.
Duquesne University
Pittsburgh, PA Other Directorships Held:
DIRECTOR Director, Michael Baker Corp.
Began serving: (engineering, construction,
February 1995 operations and technical
services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean
and Professor of Law, Villanova
University School of Law.

Principal Occupations: Director $2,783.23 $148,500
Marjorie P. Smuts or Trustee of the Federated Fund
Birth Date: June Complex; Public
21, 1935 Relations/Marketing
4905 Bayard Street Consultant/Conference
Pittsburgh, PA Coordinator.
DIRECTOR
Began serving: Previous Positions: National
February 1984 Spokesperson, Aluminum Company
of America; television producer;
President, Marj Palmer Assoc.;
Owner, Scandia Bord.

Principal Occupations: Director $2,783.23 $148,500
John S. Walsh or Trustee of the Federated Fund
Birth Date: Complex; President and Director,
November 28, 1957 Heat Wagon, Inc. (manufacturer
2604 William Drive of construction temporary
Valparaiso, IN heaters); President and
DIRECTOR Director, Manufacturers
Began serving: Products, Inc. (distributor of
April 1999 portable construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products, Inc.

Previous Position: Vice
President, Walsh & Kelly,
Inc.

</R>

OFFICERS**

Name
Birth Date
Address
Positions Held with Fund Principal Occupation(s) and Previous Position(s)
Date Service Began
Principal Occupations: Executive Vice President
John W. McGonigle and Secretary of the Federated Fund Complex;
Birth Date: October 26, Executive Vice President, Secretary and Director,
1938 Federated Investors, Inc.
EXECUTIVE VICE PRESIDENT
AND SECRETARY Previous Positions: Trustee, Federated Investment
Began serving: May 1969 Management Company and Federated Investment
Counseling; Director, Federated Global Investment
Management Corp., Federated Services Company and
Federated Securities Corp.

Principal Occupations: Principal Financial Officer
Richard J. Thomas and Treasurer of the Federated Fund Complex;
Birth Date: June 17, 1954 Senior Vice President, Federated Administrative
TREASURER Services.
Began serving: November
1998 Previous Positions: Vice President, Federated
Administrative Services; held various management
positions within Funds Financial Services Division
of Federated Investors, Inc.

Principal Occupations: Vice Chairman or Vice
Richard B. Fisher President of some of the Funds in the Federated
Birth Date: May 17, 1923 Fund Complex; Vice Chairman, Federated Investors,
VICE PRESIDENT Inc.; Chairman, Federated Securities Corp.
Began serving: May 1976
Previous Positions: President and Director or
Trustee of some of the Funds in the Federated Fund
Complex; Executive Vice President, Federated
Investors, Inc. and Director and Chief Executive
Officer, Federated Securities Corp.

Principal Occupations: Chief Investment Officer of
Stephen F. Auth this Fund and various other Funds in the Federated
Birth Date: September 3, Fund Complex; Executive Vice President, Federated
1956 Investment Counseling, Federated Global Investment
CHIEF INVESTMENT OFFICER Management Corp., Federated Equity Management
Began serving: November Company of Pennsylvania and Passport Research II,
2002 Ltd.

Previous Positions: Executive Vice President,
Federated Investment Management Company, and
Passport Research, Ltd.; Senior Vice President,
Global Portfolio Management Services Division;
Senior Vice President, Federated Investment
Management Company and Passport Research, Ltd.;
Senior Managing Director and Portfolio Manager,
Prudential Investments.

------------------------------------------------------------------------------
** Officers do not receive any compensation from the Fund.
------------------------------------------------------------------------------

<R>

COMMITTEES OF THE BOARD
Meetings
Board Committee Held
Committee Members Committee Functions During
Last
Fiscal
Year

Executive In between meetings of the full Board, Seven
John F. Donahue the Executive Committee generally may
John E. Murray, exercise all the powers of the full Board
Jr., J.D., S.J.D. in the management and direction of the
business and conduct of the affairs of
the Corporation in such manner as the
Executive Committee shall deem to be in
the best interests of the Corporation.
However, the Executive Committee cannot
elect or remove Board members, increase
or decrease the number of Directors,
elect or remove any Officer, declare
dividends, issue shares or recommend to
shareholders any action requiring
shareholder approval.

Audit The purposes of the Audit Committee are Ten
Thomas G. Bigley to oversee the accounting and financial
John T. Conroy, reporting process of the Fund, the Fund`s
Jr. internal control over financial
Nicholas P. reporting, and the quality, integrity and
Constantakis independent audit of the Fund`s financial
Charles F. statements. The Committee also oversees
Mansfield, Jr. or assists the Board with the oversight
of compliance with legal requirements
relating to those matters, approves the
engagement and reviews the
qualifications, independence and
performance of the Fund`s independent
registered public accounting firm, acts
as a liaison between the independent
registered public accounting firm and the
Board and reviews the Fund`s internal
audit function.

Nominating One
Thomas G. Bigley The Nominating Committee, whose members
John T. Conroy, consist of all Independent Directors,
Jr. selects and nominates persons for
Nicholas P. election to the Fund`s Board when
Constantakis vacancies occur. The Committee will
John F. consider candidates recommended by
Cunningham shareholders, Independent Directors,
Peter E. Madden officers or employees of any of the
Charles F. Fund`s agents or service providers and
Mansfield, Jr. counsel to the Fund. Any shareholder who
John E. Murray, desires to have an individual considered
Jr. for nomination by the Committee must
Marjorie P. Smuts submit a recommendation in writing to the
John S. Walsh Secretary of the Fund, at the Fund's
address appearing on the back cover of
this Statement of Additional Information.
The recommendation should include the
name and address of both the shareholder
and the candidate and detailed
information concerning the candidate's
qualifications and experience. In
identifying and evaluating candidates for
consideration, the Committee shall
consider such factors as it deems
appropriate. Those factors will
ordinarily include: integrity,
intelligence, collegiality, judgment,
diversity, skill, business and other
experience, qualification as an
"Independent Director," the existence of
material relationships which may create
the appearance of a lack of independence,
financial or accounting knowledge and
experience, and dedication and
willingness to devote the time and
attention necessary to fulfill Board
responsibilities.

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

</R>

<R>

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF
INVESTMENT COMPANIES AS OF DECEMBER 31, 2004
Aggregate
Dollar Range of
Dollar Range of Shares Owned in
Interested Shares Owned Federated
Board Member Name in Fund[s] Family of
Investment
Companies
John F. Donahue Over $100,000 Over $100,000
J. Christopher Donahue $50,001 - $100,000 Over $100,000
Lawrence D. Ellis, M.D. $10,001 - $50,000 Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis None Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. Mansfield, Jr. None Over $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Marjorie P. Smuts $10,001 - $50,000 Over $100,000
John S. Walsh None Over $100,000

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

</R>

INVESTMENT ADVISER

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

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Fund.

As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment
advisory contract. The Board's decision to approve the contract reflects the
exercise of its business judgment on whether to continue the existing
arrangements. During its review of the contract, the Board considers many
factors, among the most material of which are: the Fund's investment objectives
and long term performance; the Adviser's management philosophy, personnel and
processes; the preferences and expectations of Fund shareholders and their
relative sophistication; the continuing state of competition in the mutual fund
industry; comparable fees in the mutual fund industry; the range and quality of
services provided to the Fund and its shareholders by the Federated organization
in addition to investment advisory services; and the Fund's relationship to the
Federated funds.

In assessing the Adviser's performance of its obligations, the Board also
considers whether there has occurred a circumstance or event that would
constitute a reason for it to not renew an advisory contract. In this regard,
the Board is mindful of the potential disruptions of the Fund's operations and
various risks, uncertainties and other effects that could occur as a result of a
decision to terminate or not renew an advisory contract. In particular, the
Board recognizes that most shareholders have invested in the Fund on the
strength of the Adviser's industry standing and reputation and in the
expectation that the Adviser will have a continuing role in providing advisory
services to the Fund.

The Board also considers the compensation and benefits received by the Adviser.
This includes fees received for services provided to the Fund by other entities
in the Federated organization and research services received by the Adviser from
brokers that execute fund trades, as well as advisory fees. In this regard, the
Board is aware that various courts have interpreted provisions of the 1940 Act
and have indicated in their decisions that the following factors may be relevant
to an Adviser's compensation: the nature and quality of the services provided by
the Adviser, including the performance of the Fund; the Adviser's cost of
providing the services; the extent to which the Adviser may realize "economies
of scale" as the Fund grows larger; any indirect benefits that may accrue to the
Adviser and its affiliates as a result of the Adviser's relationship with the
Fund; performance and expenses of comparable funds; and the extent to which the
independent Board members are fully informed about all facts bearing on the
Adviser's service and fee. The Fund's Board is aware of these factors and takes
them into account in its review of the Fund's advisory contract.

The Board considers and weighs these circumstances in light of its substantial
accumulated experience in governing the Fund and working with Federated on
matters relating to the Federated funds, and is assisted in its deliberations by
the advice of independent legal counsel. In this regard, the Board requests and
receives a significant amount of information about the Fund and the Federated
organization. Federated provides much of this information at each regular
meeting of the Board, and furnishes additional reports in connection with the
particular meeting at which the Board's formal review of the advisory contracts
occurs. In between regularly scheduled meetings, the Board may receive
information on particular matters as the need arises. Thus, the Board's
evaluation of an advisory contract is informed by reports covering such matters
as: the Adviser's investment philosophy, personnel, and processes; the Fund's
short- and long-term performance (in absolute terms as well as in relationship
to its particular investment program and certain competitor or "peer group"
funds), and comments on the reasons for performance; the Fund's expenses
(including the advisory fee itself and the overall expense structure of the
Fund, both in absolute terms and relative to similar and/or competing funds,
with due regard for contractual or voluntary expense limitations); the use and
allocation of brokerage commissions derived from trading the Fund's portfolio
securities; the nature and extent of the advisory and other services provided to
the Fund by the Adviser and its affiliates; compliance and audit reports
concerning the Federated funds and the Federated companies that service them;
and relevant developments in the mutual fund industry and how the Federated
funds and/or Federated are responding to them.

The Board also receives financial information about Federated, including reports
on the compensation and benefits Federated derives from its relationships with
the Federated funds. These reports cover not only the fees under the advisory
contracts, but also fees received by Federated's subsidiaries for providing
other services to the Federated funds under separate contracts (e.g., for
serving as the Federated funds' administrator). The reports also discuss any
indirect benefit Federated may derive from its receipt of research services from
brokers who execute Federated fund trades.

The Board bases its decision to approve an advisory contract on the totality of
the circumstances and relevant factors, and with a view to past and future
long-term considerations. Not all of the factors and considerations identified
above are relevant to every Federated fund, nor does the Board consider any one
of them to be determinative. Because the totality of circumstances includes
considering the relationship of each Federated fund, the Board does not approach
consideration of every Federated fund's advisory contract as if that were the
only Federated fund.

<R>

Portfolio Manager Information

The following information about the Fund's Portfolio Manager is provided as of
March 31, 2005.

Total Number of
Other Accounts Managed by Other
William Dierker Accounts Managed/
Total Assets*
--------------------------------------------------------
--------------------------------------------------------
Registered Investment 3 funds / $595.05
Companies million
--------------------------------------------------------
--------------------------------------------------------
Other Pooled Investment 0
Vehicles
--------------------------------------------------------
--------------------------------------------------------
Other Accounts 0
--------------------------------------------------------
*None of the Accounts has an advisory fee that is based
on the performance of the account.
---------------------------------------------------------

Dollar value range of shares owned in the Fund: $100,001-$500,000

William Dierker is paid a fixed base salary and a variable annual incentive.
Base salary is determined within a market competitive position-specific salary
range, based on the portfolio manager's experience and performance. The annual
incentive amount is determined based on multiple performance criteria using a
Balanced Scorecard methodology, and may be paid entirely in cash, or in a
combination of cash and restricted stock of Federated Investors, Inc.
(Federated). There are four weighted performance categories in the Balanced
Scorecard. Investment Product Performance is the predominant factor. Of lesser
importance are: Leadership/Teamwork/Communication, Client Satisfaction and
Service, and Financial Success. The total Balanced Scorecard "score" is applied
against an annual incentive opportunity that is competitive in the market for
this portfolio manager role to determine the annual incentive payment.

Investment Product Performance is measured on a rolling 1, 3, and 5 calendar
year pre-tax gross return basis vs. the Fund's benchmark (i.e. Standard &
Poor's 500/Barra Value Index), and on a rolling 3 and 5 calendar year pre-tax
gross return basis vs. the Fund's designated peer group of comparable funds
(e.g., funds in the same category as established by Lipper). These performance
periods are adjusted if the portfolio manager has been managing the fund for
less than five years; funds with less than one year of performance history under
the portfolio manager may be excluded. As noted above, Mr. Dierker is also the
portfolio manager for other accounts in addition to the Fund. The Balanced
Scorecard Investment Product Performance score is calculated with an equal
weighting of each account managed by the portfolio manager. The Investment
Product Performance score can be reduced based on management's assessment of the
Fund's comparative risk profile.

Leadership/Teamwork/Communication is assessed by the Chief Investment Officer in
charge of the portfolio manager's group, with input from the portfolio manager's
co-workers.

Client Satisfaction and Service is assessed by Federated's senior management
based on the quality, amount and effectiveness of client support activities,
with input from sales management.

Financial success is assessed to tie the portfolio manager's bonus, in part, to
Federated's overall financial health. In making this assessment, Federated's
senior management considers the following factors: growth of the portfolio
manager's funds (assets under management and revenues), net fund flows relative
to industry trends for the product category, supporting the appropriate number
of funds to improve efficiency and enhance strong fund performance, growth in
assets under management and revenues attributable to the portfolio manager's
Department, and Departmental expense management. Although a number of these
factors are quantitative in nature, the overall assessment for this category is
based on management's judgment. The financial success score is lowered if
Federated's overall financial targets are not achieved.

As part of Mr. Dierker's employment offer in 2004, he was guaranteed a minimum
incentive payment for 2004 and 2005.

As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might
conflict with one another to the possible detriment of the Fund. Alternatively,
to the extent that the same investment opportunities might be desirable for more
than one account, possible conflicts could arise in determining how to allocate
them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection
of brokers or dealers to execute fund portfolio trades and/or specific uses of
commissions from Fund portfolio trades (for example, research, or "soft
dollars"). The Adviser has structured the portfolio managers' compensation in a
manner, and the Fund has adopted policies and procedures, reasonably designed to
safeguard the Fund from being negatively affected as a result of any such
potential conflicts.

Kevin McCloskey is the back-up portfolio manager and is not responsible for the
day-to-day management of the Fund.

</R>

Services Agreement
Federated Advisory Services Company, an affiliate of the Adviser, provides
research, quantitative analysis, equity trading and transaction settlement and
certain support services to the Adviser. The fee for these services is paid by
the Adviser and not by the Fund.

Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

<R>

As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Directors, and certain other employees. Although they
do permit these people to trade in securities, including those that the Fund
could buy, as well as Shares of the Fund, they also contain significant
safeguards designed to protect the Fund and its shareholders from abuses in this
area, such as requirements to obtain prior approval for, and to report,
particular transactions.

</R>

VOTING PROXIES ON FUND PORTFOLIO SECURITIES
The Board has delegated to the Adviser authority to vote proxies on the
securities held in the Fund's portfolio. The Board has also approved the
Adviser's policies and procedures for voting the proxies, which are described
below.

Proxy Voting Policies
The Adviser's general policy is to cast proxy votes in favor of proposals that
the Adviser anticipates will enhance the long-term value of the securities being
voted. Generally, this will mean voting for proposals that the Adviser believes
will: improve the management of a company; increase the rights or preferences of
the voted securities; and/or increase the chance that a premium offer would be
made for the company or for the voted securities.

The following examples illustrate how these general policies may apply to
proposals submitted by a company's board of directors. However, whether the
Adviser supports or opposes a proposal will always depend on the specific
circumstances described in the proxy statement and other available information.

On matters of corporate governance, generally the Adviser will vote for
proposals to: require independent tabulation of proxies and/or confidential
voting by shareholders; reorganize in another jurisdiction (unless it would
reduce the rights or preferences of the securities being voted); and repeal a
shareholder rights plan (also known as a "poison pill"). The Adviser will
generally vote against the adoption of such a plan (unless the plan is designed
to facilitate, rather than prevent, unsolicited offers for the company).

On matters of capital structure, generally the Adviser will vote: against
proposals to authorize or issue shares that are senior in priority or voting
rights to the securities being voted; for proposals to grant preemptive rights
to the securities being voted; and against proposals to eliminate such
preemptive rights.

On matters relating to management compensation, generally the Adviser will vote:
for stock incentive plans that align the recipients' interests with the
interests of shareholders without creating undue dilution; and against proposals
that would permit the amendment or replacement of outstanding stock incentives
with new stock incentives having more favorable terms.

On matters relating to corporate transactions, the Adviser will vote proxies
relating to proposed mergers, capital reorganizations, and similar transactions
in accordance with the general policy, based upon its analysis of the proposed
transaction. The Adviser will vote proxies in contested elections of directors
in accordance with the general policy, based upon its analysis of the opposing
slates and their respective proposed business strategies. Some transactions may
also involve proposed changes to the company's corporate governance, capital
structure or management compensation. The Adviser will vote on such changes
based on its evaluation of the proposed transaction or contested election. In
these circumstances, the Adviser may vote in a manner contrary to the general
practice for similar proposals made outside the context of such a proposed
transaction or change in the board. For example, if the Adviser decides to vote
against a proposed transaction, it may vote for anti-takeover measures
reasonably designed to prevent the transaction, even though the Adviser
typically votes against such measures in other contexts.

The Adviser generally votes against proposals submitted by shareholders without
the favorable recommendation of a company's board. The Adviser believes that a
company's board should manage its business and policies, and that shareholders
who seek specific changes should strive to convince the board of their merits or
seek direct representation on the board.

In addition, the Adviser will not vote if it determines that the consequences or
costs outweigh the potential benefit of voting. For example, if a foreign market
requires shareholders casting proxies to retain the voted shares until the
meeting date (thereby rendering the shares "illiquid" for some period of time),
the Adviser will not vote proxies for such shares.

Proxy Voting Procedures
The Adviser has established a Proxy Voting Committee (Proxy Committee), to
exercise all voting discretion granted to the Adviser by the Board in accordance
with the proxy voting policies. The Adviser has hired Investor Responsibility
Research Center (IRRC) to obtain, vote, and record proxies in accordance with
the Proxy Committee's directions. The Proxy Committee directs IRRC by means of
Proxy Voting Guidelines, and IRRC may vote any proxy as directed in the Proxy
Voting Guidelines without further direction from the Proxy Committee (and may
make any determinations required to implement the Proxy Voting Guidelines).
However, if the Proxy Voting Guidelines require case-by-case direction for a
proposal, IRRC will provide the Proxy Committee with all information that it has
obtained regarding the proposal and the Proxy Committee will provide specific
direction to IRRC. The Adviser's proxy voting procedures generally permit the
Proxy Committee to amend the Proxy Voting Guidelines, or override the directions
provided in such Guidelines, whenever necessary to comply with the proxy voting
policies.

Conflicts of Interest
The Adviser has adopted procedures to address situations where a matter on which
a proxy is sought may present a potential conflict between the interests of the
Fund (and its shareholders) and those of the Adviser or Distributor. This may
occur where a significant business relationship exists between the Adviser (or
its affiliates) and a company involved with a proxy vote. A company that is a
proponent, opponent, or the subject of a proxy vote, and which to the knowledge
of the Proxy Committee has this type of significant business relationship, is
referred to as an "Interested Company."

The Adviser has implemented the following procedures in order to avoid concerns
that the conflicting interests of the Adviser have influenced proxy votes. Any
employee of the Adviser who is contacted by an Interested Company regarding
proxies to be voted by the Adviser must refer the Interested Company to a member
of the Proxy Committee, and must inform the Interested Company that the Proxy
Committee has exclusive authority to determine how the Adviser will vote. Any
Proxy Committee member contacted by an Interested Company must report it to the
full Proxy Committee and provide a written summary of the communication. Under
no circumstances will the Proxy Committee or any member of the Proxy Committee
make a commitment to an Interested Company regarding the voting of proxies or
disclose to an Interested Company how the Proxy Committee has directed such
proxies to be voted. If the Proxy Voting Guidelines already provide specific
direction on the proposal in question, the Proxy Committee shall not alter or
amend such directions. If the Proxy Voting Guidelines require the Proxy
Committee to provide further direction, the Proxy Committee shall do so in
accordance with the proxy voting policies, without regard for the interests of
the Adviser with respect to the Interested Company. If the Proxy Committee
provides any direction as to the voting of proxies relating to a proposal
affecting an Interested Company, it must disclose to the Fund's Board
information regarding: the significant business relationship; any material
communication with the Interested Company; the matter(s) voted on; and how, and
why, the Adviser voted as it did.

If the Fund holds shares of another investment company for which the Adviser (or
an affiliate) acts as an investment adviser, the Proxy Committee will vote the
Fund's proxies in the same proportion as the votes cast by shareholders who are
not clients of the Adviser at any shareholders' meeting called by such
investment company, unless otherwise directed by the Board.

<R>

Proxy Voting Report
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website. Go to
FederatedInvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX.

PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of Federated's website at FederatedInvestors.com. A complete
listing of the Fund's portfolio holdings as of the end of each calendar quarter
is posted on the website 30 days (or the next business day) after the end of the
quarter and remains posted until replaced by the information for the succeeding
quarter. Summary portfolio composition information as of the close of each month
is posted on the website 15 days (or the next business day) after month-end and
remains until replaced by the information for the succeeding month. The summary
portfolio composition information may include identification of the Fund's top
ten holdings, recent purchase and sale transactions and a percentage breakdown
of the portfolio by sector.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link. A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Funds' fiscal quarters. The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF. Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund. Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter. This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Adviser prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors. Employees of the Adviser or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information. Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Fund may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services. The Fund may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies. Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest. A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Adviser and of the Chief Compliance Officer of
the Fund. The President of the Adviser and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders. In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Adviser and its affiliates, the following procedures apply. No consideration may
be received by the Fund, the Adviser, any affiliate of the Adviser or any of
their employees in connection with the disclosure of portfolio holdings
information. Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security. Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided. Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished. The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.

</R>

BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). The
Adviser may also direct certain portfolio trades to a broker that, in turn, pays
a portion of the Fund's operating expenses. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Fund's Board.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. Except as noted below, when the Fund and one or
more of those accounts invests in, or disposes of, the same security, available
investments or opportunities for sales will be allocated among the Fund and the
account(s) in a manner believed by the Adviser to be equitable. While the
coordination and ability to participate in volume transactions may benefit the
Fund, it is possible that this procedure could adversely impact the price paid
or received and/or the position obtained or disposed of by the Fund. Investments
for Federated Kaufmann Fund and other accounts managed by that fund's portfolio
managers in initial public offerings ("IPO") are made independently from any
other accounts, and much of their non-IPO trading may also be conducted
independently from other accounts.

<R>

On March 31, 2005, the Fund owned securities of the following regular
broker/dealers:

Broker Market Value
------ ------------
Morgan Stanley $78,844,700
Goldman Sachs $26,419,598
Bank of America $81,673,200
Wachovia Bank $52,870,035
JP Morgan $50,152,700
Citigroup $38,868,606

</R>

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

<R>

For the fiscal year ended, March 31, 2005, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. The
total amount of these transactions was $2,575,599,059 for which the Fund paid
$3,680,488 in brokerage commissions.

</R>

ADMINISTRATOR

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

Average Aggregate Daily
Maximum Net Assets of the
Administrative Fee Federated Funds
0.150 of 1% on the first $5 billion
0.125 of 1% on the next $5 billion
0.100 of 1% on the next $10 billion
0.075 of 1% on assets over $20 billion

The administrative fee received during any fiscal year shall be at least
$150,000 per portfolio and $40,000 per each additional class of Shares. FAS may
voluntarily waive a portion of its fee and may reimburse the Fund for expenses.

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

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

CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

<R>

State Street Bank and Trust Company, the Fund's registered transfer agent,
maintains all necessary shareholder records.

</R>

<R>

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund, Deloitte &
Touche LLP, conducts its audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States), which require it to plan and
perform its audits to provide reasonable assurance about whether the Fund's
financial statements and financial highlights are free of material misstatement.

</R>

<R>

FEES PAID BY THE FUND FOR SERVICES

For the Year Ended March 31 2005 2004 2003
Advisory Fee Earned $17,223,105 $16,770,358 $16,943,091
Advisory Fee Reduction $0 $0 $10,143
Advisory Fee Reimbursement $936 $3,469 $0
Brokerage Commissions $4,487,160 $1,897,203 $2,697,226
Administrative Fee $2,007,139 $1,937,414 $1,948,626
12b-1 Fee:
Class B Shares $6,553,754 -- --
Class C Shares $918,580 -- --
Class K Shares $45,376 -- --
Shareholder Services Fee:
Class A Shares $3,899,338 -- --
Class B Shares $2,184,585 -- --
Class C Shares $306,193 -- --
Class F Shares $170,719 -- --

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

</R>

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's standard methods for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.

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

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

<R>

AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
March 31, 2005. Yield is given for the 30-day period ended March 31, 2005.

30-Day Period 1 Year 5 Years 10 Years
Class A Shares:
Total Return
Before Taxes NA (0.49)% 0.54% 9.53%
After Taxes on NA (0.98)% 0.03% 7.96%
Distributions
After Taxes on
Distributions and NA (0.33)% 0.21% 7.56%
Sale of Shares
Yield 1.09% NA NA NA

30-Day Period 1 Year 5 Years 10 Years
Class B Shares:
Total Return
Before Taxes NA (0.98)% 0.54% 9.49%
After Taxes on NA (1.21)% 0.29% 8.16%
Distributions
After Taxes on
Distributions and NA (0.64)% 0.36% 7.71%
Sale of Shares
Yield 0.39% NA NA NA

30-Day Period 1 Year 5 Years 10 Years
Class C Shares:
Total Return
Before Taxes NA 2.44% 0.72% 9.21%
After Taxes on NA 2.21% 0.47% 7.94%
Distributions
After Taxes on
Distributions and NA 1.58% 0.52% 7.49%
Sale of Shares
Yield 0.32% NA NA NA

30-Day Period 1 Year 5 Years 10 Years
Class F Shares:
Total Return
Before Taxes NA 3.21% 1.48% 10.02%
After Taxes on NA 2.70% 0.96% 8.45%
Distributions
After Taxes on
Distributions and NA 2.08% 1.01% 8.01%
Sale of Shares
Yield 1.08% NA NA NA

30-Day Period 1 Year 5 Years 10 Years
Class K Shares:
Total Return
Before Taxes NA 4.78% 1.21% 9.63%
After Taxes on NA 4.43% 0.83% 8.26%
Distributions
After Taxes on
Distributions and NA 3.11% 0.86% 7.81%
Sale of Shares
Yield 0.64% NA NA NA

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

</R>

TOTAL RETURN

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

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $10,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $10,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions. Total returns after taxes are calculated in a
similar manner, but reflect additional standard assumptions required by the SEC.

YIELD

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

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

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

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

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

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

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

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

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

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

Lipper, 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.

S&P 500 Index

An unmanaged capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries.

S&P 500/Barra Value Index
A market capitalization-weighted index of the stocks in the Standard
& Poor's 500 Index having the lowest price to book ratios. The
index consists of approximately half of the S&P 500 on a market
capitalization basis.

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.

WHO IS FEDERATED INVESTORS, INC.?

<R>

Federated and its subsidiaries are dedicated to providing you with
world-class investment management. With offices in Pittsburgh, New
York City and Frankfurt, Federated is a firm with independent research,
product breadth and industry standing.

Federated seeks to achieve superior and sustainable investment
performance for a broad array of global clients through a disciplined
investment process and an information advantage created by proprietary
fundamental research. Federated is distinctive in our disciplined
process that integrates proprietary research with trading and portfolio
management.

FEDERATED FUNDS OVERVIEW

Equities
As of December 31, 2004, Federated managed 34 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity
income, international, index and sector allocation styles.

Taxable Fixed Income
As of December 31, 2004, Federated managed 31 taxable bond funds
including: high-yield, multi-sector, mortgage-backed, U.S. government,
U.S. corporate and international, with assets approximating $17.7
billion.

Tax Free Fixed Income
As of December 31, 2004, Federated managed 15 municipal bond funds with
approximately $3.4 billion in assets and 22 municipal money market
funds with approximately $24.4 billion in total assets.

Money Market Funds
As of December 31, 2004, Federated managed $110.6 billion in assets
across 53 money market funds, including 19 government, 11 prime, 22
municipal and 1 euro-denominated with assets approximating $43.9
billion, $42.1 billion, $24.4 billion and $58.9 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA for
Global Equity; Robert J. Ostrowski, CFA for Taxable Fixed Income; Mary
Jo Ochson, CFA for Tax Free Fixed Income; and Deborah A. Cunningham,
CFA for Money Market Funds.

</R>

FINANCIAL INFORMATION

<R>

The Financial Statements for the Fund for the fiscal year ended March
31, 2005 are incorporated herein by reference to the Annual Report to
Shareholders of Federated American Leaders Fund, Inc. dated March 31,
2005.

</R>

INVESTMENT RATINGS

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Highest credit quality. 'AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

AA--Very high credit quality. 'AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity for
timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.

A--High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.

BBB--Good credit quality. 'BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity. This is the lowest investment-grade category.

BB--Speculative. 'BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time; however, business or financial alternatives may be
available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

B--Highly speculative. 'B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favourable business and
economic environment.

CCC, CC, C--High default risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon sustained,
favourable business or economic developments. A 'CC' rating indicates
that default of some kind appears probable. 'C' ratings signal imminent
default.

<R>

MOODY'S INVESTORS SERVICE LONG-TERM DEBT RATINGS
Aaa-- Bonds and preferred stock 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 and preferred stock 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 risk appear somewhat larger than the Aaa securities.

A-- Bonds and preferred stock 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 some time in the future.

NR--Indicates that both the bonds and the obligor or credit enhancer
are not currently rated by S&P or Moody's with respect to
short-term indebtedness. However, management considers them to be of
comparable quality to securities rated A-1 or P-1.

NR(1)--The underlying issuer/obligor/guarantor has other outstanding
debt rated AAA by S&P or Aaa by Moody's.

NR(2)--The underlying issuer/obligor/guarantor has other outstanding
debt rated AA by S&P or Aa by Moody's.

NR(3)--The underlying issuer/obligor/guarantor has other outstanding
debt rated A by S&P or Moody's.

FITCH RATINGS LONG-TERM DEBT RATING DEFINITIONS
AAA--Highest credit quality. 'AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

</R>

MOODY'S INVESTORS SERVICE COMMERCIAL PAPER RATINGS
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics: leading market positions in well established
industries, high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample asset
protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, and well-established access
to a range of financial markets and assured sources of alternate
liquidity.

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

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1-- A short-term obligation rated 'A-1' is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is strong. Within this category,
certain obligations are designated with a plus sign (+). This indicates
that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.

A-2-- A short-term obligation rated 'A-2' is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories. However, the
obligor's capacity to meet its financial commitment on the obligation
is satisfactory.

FITCH RATINGS COMMERCIAL PAPER RATING DEFINITIONS
F-1--Indicates the strongest capacity for timely payment of financial
commitments relative to other issuers or issues in the same country.
Under their national rating scale, this rating is assigned to the
"best" credit risk relative to all others in the same country and is
normally assigned to all financial commitments issued or guaranteed by
the sovereign state. Where the credit risk is particularly strong, a
"+" is added to the assigned rating.

F-2-- Indicates a satisfactory capacity for timely payment of financial
commitments relative to other issuers or issues in the same country.
However, the margin of safety is not as great as in the case of the
higher ratings.

<R>

A.M. BEST LONG-TERM DEBT RATINGS
An A.M. Best Long-Term Debt Rating (issue credit rating) is an opinion
as to the issuer's ability to meet its financial obligations to
security holders when due. These ratings are assigned to debt and
preferred stock issues.

aaa--Exceptional. Assigned to issues where the issuer has, in A.M.
Best's opinion, an exceptional ability to meet the terms of the
obligation.

aa--Very Strong. Assigned to issues where the issuer has, in A.M.
Best's opinion, a very strong ability to meet the terms of the
obligation.

a--Strong. Assigned to issues where the issuer has, in A.M. Best's
opinion, a strong ability to meet the terms of the obligation.

bbb--Adequate. Assigned to issues where the issuer has, in A.M. Best's
opinion, an adequate ability to meet the terms of the obligation;
however, is more susceptible to changes in economic or other conditions.

bb--Speculative. Assigned to issues where the issuer has, in A.M.
Best's opinion, speculative credit characteristics, generally due to a
moderate margin of principal and interest payment protection and
vulnerability to economic changes. .

b--Very Speculative. Assigned to issues where the issuer has, in A.M.
Best's opinion, very speculative credit characteristics, generally due
to a modest margin of principal and interest payment protection and
extreme vulnerability to economic changes. .

ccc, cc, c--Extremely Speculative. Assigned to issues where the issuer
has, in A.M. Best's opinion, extremely speculative credit
characteristics, generally due to a minimal margin of principal and
interest payment protection and/or limited ability to withstand adverse
changes in economic or other conditions.

d--In Default. In default on payment of principal, interest or other
terms and conditions. The rating also is utilized when a bankruptcy
petition, or similar action, has been filed.

Ratings from "aa" to "ccc" may be enhanced with a "+" (plus) or "-"
(minus) to indicate whether credit quality is near the top or bottom of
a category. A company's Long-Term Credit Rating also may be assigned
an Under Review modifier ("u") that generally is event-driven
(positive, negative or developing) and indicates that the company's
A.M. Best Rating opinion is under review and may be subject to
near-term change. Ratings prefixed with an ("i") denote indicative
ratings. Ratings may also be assigned a Public Data modifier ("pd")
which indicates that a company does not subscribe to A.M. Best's
interactive rating process.

A.M. BEST SHORT-TERM DEBT RATINGS
An A.M. Best Short-Term Debt Rating (issue credit rating) is an opinion
as to the issuer's ability to meet its obligations having maturities
generally less than one year, such as commercial paper.

AMB-1+ --Strongest. Assigned to issues where the issuer has, in A.M.
Best's opinion, the strongest ability to repay short-term debt
obligations.

AMB-1 --Outstanding. Assigned to issues where the issuer has, in A.M.
Best's opinion, an outstanding ability to repay short-term debt
obligations.

AMB-2 --Satisfactory. Assigned to issues where the issuer has, in A.M.
Best's opinion, a satisfactory ability to repay short-term debt
obligations.

AMB-3 --Adequate. Assigned to issues where the issuer has, in A.M.
Best's opinion, an adequate ability to repay short-term debt
obligations; however, adverse economic conditions will likely lead to a
reduced capacity to meet its financial commitments on short-term debt
obligations.

AMB-4 --Speculative. Assigned to issues where the issuer has, in A.M.
Best's opinion, speculative credit characteristics and is vulnerable to
economic or other external changes, which could have a marked impact on
the company's ability to meet its commitments on short-term debt
obligations.

d--In Default. In default on payment of principal, interest or other
terms and conditions. The rating also is utilized when a bankruptcy
petition, or similar action, has been filed.

A company's Short-Term Credit Rating also may be assigned an Under
Review modifier ("u") that generally is event-driven (positive,
negative or developing) and indicates that the company's A.M. Best
Rating opinion is under review and may be subject to near-term change.
Ratings prefixed with an ("i") denote indicative ratings.

A.M. BEST RATING OUTLOOK
A.M. Best Credit Ratings (aaa to c) are assigned a Rating Outlook that
indicates the potential direction of a company's rating for an
intermediate period, generally defined as the next 12 to 36 months.
Public Data Ratings are not assigned an Outlook. Ratings Outlooks are
as follows:

Positive--Indicates a company's financial/market trends are favorable,
relative to its current rating level, and if continued, the company has
a good possibility of having its rating upgraded.

Negative--Indicates a company is experiencing unfavorable
financial/market trends, relative to its current rating level, and if
continued, the company has a good possibility of having its rating
downgraded.

Stable--Indicates a company is experiencing stable financial/market
trends and that there is a low likelihood that its rating will change
in the near term.

</R>
ADDRESSES

FEDERATED AMERICAN LEADERS FUND, INC.

Class A Shares
Class B Shares
Class C Shares
Class F Shares
Class K Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

Investment Adviser
Federated Equity Management Company of Pennsylvania
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<R>

Custodian, Transfer Agent and Dividend Disbursing Agent

</R>
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

<R>

Independent Registered Public Accounting Firm

</R>

Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

<R>

APPENDIX

The following is a list of persons other than the Adviser and its
affiliates that may receive nonpublic portfolio holdings information
concerning the Fund:

CUSTODIAN
State Street Bank and Trust Company

SECURITIES LENDING AGENT
State Street Bank and Trust Company

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deliotte & Touche LLP

LEGAL COUNSEL
Dickstein Shapiro Morin & Oshinsky LLP
Reed Smith LLP

SERVICE PROVIDERS
Bloomberg
Factset
Investor Responsibility Research Center
Wilshire Associates, Inc.

SECURITY PRICING SERVICES
FT Interactive Data
Reuters

RATINGS AGENCIES
Standard & Poor's

PERFORMANCE REPORTING/PUBLICATIONS
Fidelity-Strategic Advisors
Lipper, Inc.
Morningstar
NASDAQ
Value Line
Wiesenberger/Thomson Financial

OTHER
Investment Company Institute

</R>

PART C. OTHER INFORMATION.

Item 23. Exhibits:
--------

(a) (i) Conformed copy of Articles of Incorporation of
the Registrant as restated; (4)
(ii) Conformed copy of Amendment 9 to the Articles of
Incorporation of the Registrant as restated; (4)
(iii) Conformed copy of Amendment 10 to the Articles
of Incorporation of the Registrant as restated; (11)
(iv) Conformed copy of Amendment 11 to the Articles
of Incorporation of the Registrant as restated; (11)
(v) Conformed copy of Amendment 12 to the Articles of Incorporation of the
Registrant as restated; (11)
(vi) Conformed copy of Amendment 13 to the Articles of Incorporation of the
Registrant as restated; +
(b) (i) Copy of Amended and Restated By-Laws of the
Registrant; (4)
(ii) Copy of Amendment No. 12 to the By-Laws of the
Registrant; (8)
(iii) Copy of Amendment No. 13 to the By-Laws of the
Registrant; (8)
(iv) Copy of Amendment No. 14 to the By-Laws of the
Registrant; (8)
(v) Copy of Amendment No. 15 to the By-Laws of the Registrant; (12)
(vi) Copy of Amendment No. 16 to the By-Laws of the Registrant; +
(c) Copy of Specimen Certificate for Shares of
Capital Stock of the Registrant; (1)
(d) (i) Conformed copy of Investment Advisory Contract
of the Registrant; (4)
(ii) Conformed copy of Amendment to the Investment Advisory Contract of the
Registrant; (11)
(iii) Conformed copy of Assignment to the Investment Advisory Contract; (14)
(e) (i) Conformed copy of Distributor's Contract of the
Registrant including Exhibits A, B and C; (3)
(ii) Conformed copy of Exhibit D to the Distributor's
Contract of the Registrant; (4)
(iii) Conformed copy of Exhibit E to the Distributor's
Contract of the Registrant; (13)
(iv) Conformed copy of Amendment to the Distributor's
Contract of the Registrant; (11)
(v) Conformed copy of Distributor's Contract (Class
B Shares); (7)
(vi) Conformed copy of Amendment to Distributor's
Contract (Class B Shares); (11)
(vii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and
Service Agreement; Mutual Funds Service
Agreement; and Plan Trustee/Mutual Funds Service
Agreement from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form N-1A,
filed with the Commission on July 24, 1995.
(File Nos. 33-38550 and 811-6269);
(f) Not applicable;
(g) (i) Conformed copy of Custodian Agreement of the
Registrant; (4)
(ii) Conformed copy of Custodian Fee Schedule; (7)
(iii) Conformed copy of Amendment to the Custodian
Agreement of the Registrant; (12)
(h) (i) Conformed copy of Amended and Restated Agreement
for Fund Accounting Services, Administrative
Services, Transfer Agency Services, and Custody
Services Procurement; (8)
(ii) Conformed copy of Amendment to Agreement for
Fund Accounting Services, Administrative
Services, Transfer Agency Services, and Custody
Services Procurement; (12)
(iii) Conformed copy of Principal Shareholder Services
Agreement (Class B Shares); (7)
(iv) Conformed copy of Shareholder Services Agreement
(Class B Shares); (7)
(v) The responses described in Item 23(e)(vi) are
hereby incorporated by reference;
(vi) The Registrant hereby incorporates the conformed
copy Amendment No. 2 to the Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency
Services and Custody Services Procurement from
Item 23 (h)(v) of the Federated U.S. Government
Securities: 2-5 Years Registration Statement on
Form N-1A, filed with the Commission on March
30, 2004. (File Nos. 2-75769 and 811-3387);
(vii) The Registrant hereby incorporates the conformed
copy Amendment No. 3 to the Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency
Services and Custody Services Procurement from
Item 23 (h)(v) of the Federated U.S. Government
Securities: 2-5 Years Registration Statement on
Form N-1A, filed with the Commission on March
30, 2004. (File Nos. 2-75769 and 811-3387);
(viii) The Registrant hereby incorporates by reference
the conformed copy of the Agreement for
Administrative Services from Item 23 (h) (vix)
of the Federated Index Trust Registration
Statement on Form N-1A, filed with the
Commission on December 30, 2003. (File Nos.
33-33852 and 811-8161).
(ix) The Registrant hereby incorporates by
reference the conformed copy of the Financial
Administration and Accounting Services Agreement
from Item 23 (h) (v) of the Federated
Limited Duration Government Fund, Inc. Registration
Statement on Form N-1A, filed with the Commission on
April 26, 2004. (File Nos. 33-41004 and 811-6307).
(x) The Registrant hereby incorporates by reference
the conformed copy of the Second Amended and Restated
Services Agreement, with attached Schedule 1 revised
6/30/04, from Item (h) (vii) of Cash Trust Series, Inc.
Registration Statement on Form N-1A, filed with the
Commission on July 29, 2004. (File Nos. 33-29838 and
811-5843)
(xi) The Registrant hereby incorporates by reference
the conformed copy of the Financial Administration and
Accounting Services Agreement, with attached Exhibit A
revised 6/30/04, from Item (h) (vii) of Cash Trust
Series, Inc. Registration Statement on Form N-1A,
filed with the Commission on July 29, 2004. (File Nos.
33-29838 and 811-5843);
(xii) The Registrant hereby incorporates the
conformed copy of Transfer Agency and Service Agreement
between the Federated Funds and State Street Bank and
Trust Company from Item (h)(ix)of the Federated Total
Return Government Bond Fund Registration Statement on Form
N-1A, filed with the Commission on April 28,
2005. (File Nos. 33-60411 and 811-07309);
(i) Conformed copy of Opinion of Consent of Counsel
as to legality of shares being registered; (1)
(j) Conformed Copy of Consent of Independent Public
Accountants; +
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (1)
(m) (i) Conformed copy of Rule 12b-1 Plan of the
Registrant; (3)
(ii) Conformed copy of Exhibit A to the Rule 12b-1
Plan of the Registrant; (4)
(iii) Conformed copy of Exhibit C to the Rule 12b-1
Plan of the Registrant; (13)
(iv) Conformed Copy of Exhibit 1 and Schedule A to the 12b-1 Distribution Plan
(Class B Shares) of the Registrant; (7)
(v) Conformed copy of Distribution Plan of the Registrant; (14)
(vi) The responses described in Item 23(e)(vi) are
hereby incorporated by reference;
(n) The Registrant hereby incorporates the conformed
copy of the Multiple Class Plan from Item (n) of
the Federated Income Trust Registration
Statement on Form N-1A, filed with the
Commission on March 31, 2005. (File Nos. 2-75366
and 811-3352).
(o) (i) Conformed copy of Power of Attorney of the
Registrant; (10)
(ii) Conformed copy of Power of Attorney of Director
of the Registrant; (9)
(iii) Conformed copy of Power of Attorney of Chairman
and President of the Registrant; (12)
(iv) Conformed copy of Power of Attorney of Chief
Investment Officer of the Registrant; (12)
(p) The Registrant hereby incorporates the conformed
copy of the Federated Investors, Inc. Code of
Ethics for Access Persons, effective 1/1/2005,
from Item 23(p) of the Money Market Obligations
Trust Registration Statement on Form N-1A filed
with the Commission on February 25, 2005. (File
Nos. 33-31602 and 811-5950).

--------------------------------------------------------------------------------
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form S-5 filed August 5, 1968. (File Nos.
2-29786 and 811-1704.)
2. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 47 on Form N-1A filed July 26, 1989. (File Nos. 2-29786
and 811-1704)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 59 on Form N-1A filed May 26, 1994. (File Nos. 2-29786 and
811-1704)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 60 on Form N-1A filed May 25, 1995. (File Nos. 2-29786 and
811-1704)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 64 on Form N-1A filed May 28, 1998. (File Nos. 2-29786 and
811-1704)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 65 on Form N-1A filed March 30, 1999. (File Nos. 2-29786
and 811-1704)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 66 on Form N-1A filed May 27, 1999. (File Nos. 2-29786 and
811-1704)
10. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 67 on Form N-1A filed May 25, 2000. (File Nos. 2-29786 and
811-1704)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 69 on Form N-1A filed May 29, 2002. (File Nos. 2-29786 and
811-1704)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment 70 on form N-1A filed February 7, 2003. (File Nos. 2-29786 and
811-1704)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment 71 on form N-1A filed March 31, 2003. (File Nos. 2-29786 and
811-1704)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment 73 on form N-1A filed June 1, 2004. (File Nos. 2-29786 and
811-1704)

Item 24. Persons Controlled by or Under Common Control with the Fund:
None.

Item 25. Indemnification: (2)

Item 26. Business and Other Connections of Investment Adviser:
----------------------------------------------------

<R>
For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund?" in Part A. The affiliations
with the Registrant of two of the Trustees and two of the Officers of the
investment adviser are included in Part B of this Registration Statement
under "Who Manages and Provides Services to the Fund?" The remaining
Trustees of the investment adviser and, in parentheses, their principal
occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated
Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and
Mark D. Olson (a principal of the firm, Mark D. Olson & Company,
L.L.C. and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Delaware
Avenue, P.O. Box 2305, Wilmington, DE 19899-2305.
</R>

The remaining Officers of the investment adviser are:

President/ Chief Executive Officer
and Trustee: Keith M. Schappert

Vice Chairman: William D. Dawson, III

Senior Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Donald T. Ellenberger
Susan R. Hill
Robert M. Kowit
Jeffrey A. Kozemchak
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Richard Tito

Vice Presidents: Todd A. Abraham
Randall S. Bauer
Nancy J.Belz
G. Andrew Bonnewell
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Eamonn G. Folan
Richard J. Gallo
John T. Gentry
Patricia L. Heagy
William R. Jamison
Nathan H. Kehm
John C. Kerber
J. Andrew Kirschler
Marian R. Marinack
Kevin McCloskey
Natalie F. Metz
Thomas J. Mitchell
Joseph M. Natoli
Mary Kay Pavuk
Jeffrey A. Petro
Ihab L. Salib
Roberto Sanchez-Dahl, Sr.
John Sidawi
Michael W. Sirianni, Jr.
Christopher Smith
Timothy G. Trebilcock
Paolo H. Valle
Stephen J. Wagner
Paige M. Wilhelm
George B. Wright

Assistant Vice Presidents: Lori Andrews
Hanan Callas
Jerome Conner
James R. Crea, Jr.
Karol M. Crummie
Richard Cumberledge
Kathyrn P. Glass
James Grant
Chungwai Hsia
Tracey L. Lusk
Ann Manley
Karl Mocharko
Gene Neavin
Bob Nolte
Liam O'Connell
Rae Ann Rice
Brian Ruffner
Kyle D. Stewart
Mary Ellen Tesla
Nichlas S. Tripodes
Mark Weiss

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Treasurer: Denis McAuley, III

The business address of each of the Officers of the investment adviser is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority of the
investment advisers to the investment companies in the Federated Fund
Complex described in Part B of this Registration Statement.

Item 27. Principal Underwriters:

(a) Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant:

Cash Trust Series, Inc.; Cash Trust Series II; Federated Adjustable Rate
Securities Fund; Federated American Leaders Fund, Inc.; Federated Core
Trust; Federated Core Trust II, L.P.; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fixed Income Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated High Income Bond Fund, Inc.; Federated High Yield Municipal
Income Fund; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated International Series, Inc.;
Federated Investment Series Funds, Inc.; Federated Limited Duration
Government Fund, Inc.; Federated Managed Allocation Portfolios; Federated
Municipal High Yield Advantage Fund, Inc.; Federated Municipal Securities
Fund, Inc.; Federated Municipal Securities Income Trust; Federated Premier
Intermediate Municipal Income Fund; Federated Premier Municipal Income
Fund; Federated Short-Term Municipal Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Total Return Government Bond Fund;
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 World Investment Series,
Inc.; Intermediate Municipal Trust; Edward Jones Money Market Fund; Money
Market Obligations Trust; Regions Morgan Keegan Select Funds and SouthTrust
Funds.

(b)

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
--------------------- ----------------- ----------------------

Chairman: Richard B. Fisher Vice President

President-Institutional
Sales and Director: John B. Fisher

Executive Vice
Vice President, Assistant
Secretary and Director: Thomas R. Donahue

President-Broker/Dealer
And Director: James F. Getz

Vice President, Assistant
Secretary and Director: Peter J. Germain

Treasurer and Director: Denis McAuley III

Senior Vice Presidents: Mark W. Bloss
Richard W. Boyd
Laura M. Deger
Peter W. Eisenbrandt
Theodore Fadool, Jr.
Christopher Fives
James S. Hamilton
James M. Heaton
Anne H. Kruczek
Amy Michaliszyn
Keith Nixon
Solon A. Person, IV
Ronald M. Petnuch
Colin B. Starks
Thomas E. Territ
Robert F. Tousignant
Paul Uhlman

Vice Presidents: Irving Anderson
Dan Berry
John B. Bohnet
Edward R. Bozek
Jane E. Broeren-Lambesis
Bryan Burke
Craig Burness
David J. Callahan
Mark Carroll
Dan Casey
Scott Charlton
Steven R. Cohen
Mary J. Combs
James Conely
Kevin J. Crenny
G. Michael Cullen
Beth C. Dell
Robert J. Deuberry
Ron Dorman
William C. Doyle
Donald C. Edwards
Lee England
Timothy Franklin
Joseph D. Gibbons
Scott Gundersen
Dayna C. Haferkamp
Raymond J. Hanley
Vincent L. Harper, Jr.
Bruce E. Hastings
Teresa M. Johnson
Christopher L. Johnston
Stephen Kittel
Michael W. Koenig
Ed Koontz
Theodore J. Kravits, Jr.
Christopher A. Layton
Michael H. Liss
Michael R. Manning
Martin J. McCaffrey
Mary A. McCaffrey
Richard C. Mihm
Chris Milliken
Vincent T. Morrow
Doris T. Muller
Alec H. Neilly
Rebecca Nelson
James E. Ostrowski
Mark Patsy
Thomas A. Peter III
Robert F. Phillips
Chris Randal
Josh Rasmussen
Richard A. Recker
Christopher Renwick
Diane M. Robinson
Brian S. Ronayne
Timothy A. Rosewicz
Thomas S. Schinabeck
Edward J. Segura
Peter Siconolfi
Edward L. Smith
John A. Staley
Jeffrey A. Stewart
Mark Strubel
Kevin Stutz
William C. Tustin
Michael Vahl
G. Walter Whalen
Stephen White
Jeff Wick
Patrick M. Wiethorn
Lewis Williams
Edward J. Wojnarowski
Michael P. Wolff

Assistant Vice Presidents: Lisa A. Toma
Robert W. Bauman
Charles L. Davis, Jr.
Brian F. Palusa
William Rose

The business address of each of the Officers of Federated Securities Corp. is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779.

Item 28. Location of Accounts and Records:
--------------------------------

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

Registrant Reed Smith LLP
----------
Investment Management Group (IMG)
Federated Investors Tower
12th Floor
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent for Service
at the above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

Item 29. Management Services: Not applicable.
-------------------

Item 30. Undertakings:
------------

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED AMERICAN LEADERS FUND,
INC., certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 27th day of May,
2005.

FEDERATED AMERICAN LEADERS FUND, INC.

BY: /s/ Nelson W. Winter
Nelson W. Winter Assistant Secretary

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

NAME TITLE DATE
---- ----- ----

By: /s/ Nelson W. Winter Attorney In Fact May 27, 2005
Nelson W. Winter For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

John F. Donahue* Chairman and Director

J. Christopher Donahue* President and Director
(Principal Executive Officer)

Richard J. Thomas* Treasurer
(Principal Financial Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

John F. Cunningham* Director

Lawrence D. Ellis, M.D.* Director

Peter E. Madden* Director

Charles F. Mansfield, Jr.* Director

John E. Murray, Jr.* Director

Marjorie P. Smuts* Director

John S. Walsh* Director

*By Power of Attorney

Federated World-Class Investment Manager

Federated American Leaders Fund, Inc.

PROSPECTUS

CLASS A SHARESCLASS B SHARESCLASS C SHARESCLASS F SHARES

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Risk/Return Bar Chart and Table

Average Annual Total Return Table

(For the Periods Ended December 31, 2004)

What are the Fund's Fees and Expenses?

FEDERATED AMERICAN LEADERS FUND

FEES AND EXPENSES

EXAMPLE

What are the Fund's Investment Strategies?

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

ADRs and Domestically Traded Securities of Foreign Issuers

DERIVATIVE CONTRACTS

Futures Contracts

Options

Swaps

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

SECTOR RISKS

RISKS RELATING TO INVESTING FOR VALUE

RISKS OF INVESTING IN ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS

RISKS OF INVESTING IN DERIVATIVES CONTRACTS

What Do Shares Cost?

SALES CHARGE WHEN YOU PURCHASE

REDUCING THE SALES CHARGE WITH BREAKPOINT DISCOUNTS

Larger Purchases

Concurrent and Accumulated Purchases

Letter of Intent

ELIMINATING THE SALES CHARGE

SALES CHARGE WHEN YOU REDEEM

Class B Shares only

Class F Shares only

How is the Fund Sold?

RULE 12B-1 PLAN

SERVICE FEES

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

How to Purchase Shares

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Wire

By Check

THROUGH AN EXCHANGE

BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

BY AUTOMATED CLEARING HOUSE (ACH)

RETIREMENT INVESTMENTS

How to Redeem and Exchange Shares

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

By Mail

Signature Guarantees

PAYMENT METHODS FOR REDEMPTIONS

Redemption in Kind

LIMITATIONS ON REDEMPTION PROCEEDS

REDEMPTIONS FROM RETIREMENT ACCOUNTS

EXCHANGE PRIVILEGE

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

Systematic Withdrawal Program (SWP) on Class B Shares

ADDITIONAL CONDITIONS

Telephone Transactions

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

FREQUENT TRADING POLICIES

PORTFOLIO HOLDINGS INFORMATION

Who Manages the Fund?

PORTFOLIO MANAGEMENT INFORMATION

William Dierker

Federated
World-Class Investment Manager

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

Federated
World-Class Investment Manager

Federated
World-Class Investment Manager