0000745968 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member fef2:C000068994Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member fef2:C000068995Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member fef2:C000068996Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member rr:AfterTaxesOnDistributionsMember fef2:C000068994Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member rr:AfterTaxesOnDistributionsAndSalesMember fef2:C000068994Member 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member fef2:StandardAndPoorsFivehundredInverseDailyIndexMember 2011-12-01 2012-11-30 0000745968 fef2:S000023465Member fef2:StandardAndPoorsFivehundredIndexMember 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member fef2:C000073699Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member fef2:C000073700Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member fef2:C000096922Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member fef2:C000073701Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member rr:AfterTaxesOnDistributionsMember fef2:C000073699Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member rr:AfterTaxesOnDistributionsAndSalesMember fef2:C000073699Member 2011-12-01 2012-11-30 0000745968 fef2:S000024784Member fef2:RussellTwoThousandValueIndexMember 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:C000073694Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:C000073695Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:C000073696Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:C000073697Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:C000073698Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member rr:AfterTaxesOnDistributionsMember fef2:C000073694Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member rr:AfterTaxesOnDistributionsAndSalesMember fef2:C000073694Member 2011-12-01 2012-11-30 0000745968 fef2:S000024783Member fef2:RussellOneHundredValueIndexMember 2011-12-01 2012-11-30 pure iso4217:USD 2012-11-30 485BPOS false FEDERATED EQUITY FUNDS 0000745968 2012-11-28 2012-11-28 2012-09-30 Federated Prudent Bear Fund (the "Fund") RISK/RETURN SUMMARY: INVESTMENT OBJECTIVE The Fund's investment objective is to seek capital appreciation. Risk/Return Summary: FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold Class A Shares (A), Class C Shares (C) and Institutional Shares (IS) of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A Class) of Federated funds. More information about these and other discounts is available from your financial professional and in the "What Do Shares Cost?" section of the Prospectus on page 12. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A Class) of Federated funds. 50000 Shareholder Fees (fees paid directly from your investment) Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) 0.055 0 0 0 0.01 0 0 0 0 0 0 0 Example 0 0 0 This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 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 operating expenses are as shown in the table above and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be: Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 480% of the average value of its portfolio. 0.0125 0.0125 0.0125 0.0005 0.0075 0 0.0001 0.0001 0.0001 0.0073 0.0073 0.0073 0.0049 0.0049 0.0024 0.0253 0.0323 0.0223 4.8 RISK/RETURN SUMMARY: INVESTMENTS, RISKS and PERFORMANCE What are the Fund's Main Investment Strategies? What are the Main Risks of Investing in the Fund? 792 426 226 The Fund pursues its investment objective primarily through short sales of domestically traded equity securities. In order to cover its obligation to purchase such securities in the future, the Fund holds short-term liquid securities such as money market funds, U.S. Treasury securities or government agency securities for liquidity purposes and to cover the Fund's obligations in connection with outstanding short positions. The Fund also seeks capital appreciation through long positions on equity securities which the Fund's investment adviser, Federated Equity Management Company of Pennsylvania (the "Adviser"), believes are undervalued. Long positions on equity securities will normally include equity securities of companies which mine or explore for precious metals or other natural resources, and can include other investments, such as hybrid instruments, whose performance is linked to the price of precious metals or other natural resources. The Adviser will allocate the Fund's portfolio between "short" equity and "long" equity positions at its discretion. At all times the Fund will have both "short" and "long" equity positions as the Adviser believes in all market conditions there will exist some companies whose stocks are undervalued by the market and some companies whose stocks are overvalued by the market. Measures used by the Adviser to analyze market valuations include the dividend yield on the market, the price earnings ratio, the cash flow ratio, the price to book value ratio, as well as broader measures of overall economic activity and creditworthiness of the economy. Long positions can consist both of individual long positions in stocks of companies, as well as long positions on futures instruments of stock market indices, call options on such indices and other related instruments. Normally, however, the Fund is expected to have more short exposure than long exposure on securities and/or the overall market. The Fund can also purchase restricted securities in private placement transactions, exchange-traded funds (ETFs) and derivative and hybrid instruments. The Adviser actively manages the Fund's portfolio. The Fund's annual portfolio turnover rate usually will exceed 100%. 1294 995 697 1821 1688 1195 Performance: Bar Chart and Table Risk/Return Bar Chart 3258 3531 2565 792 326 226 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: <ul type="square"><li>Short Selling Risk. The Fund can sell securities short to the maximum extent permitted under the Investment Company Act of 1940 (the "1940 Act"). A short sale by the Fund involves borrowing a security from a lender which is then sold in the open market. At a future date, the security is repurchased by the Fund and returned to the lender. While the security is borrowed, the proceeds from the sale are deposited with the lender and the Fund may be required to pay interest and/or the equivalent of any dividend payments paid by the security to the lender. If the value of the security declines between the time the Fund borrows the security and the time it repurchases and returns the security to the lender, the Fund makes a profit on the difference (less any expenses the Fund is required to pay the lender). There is no assurance that a security will decline in value during the period of the short sale and make a profit for the Fund. If the value of the security sold short increases between the time that the Fund borrows the security and the time it repurchases and returns the security to the lender, the Fund will realize a loss on the difference (plus any expenses the Fund is required to pay to the lender). This loss is theoretically unlimited as there is no limit as to how high the security sold short can appreciate in value, thus increasing the cost of buying that security to cover a short position. The Fund may incur expenses in selling securities short and such expenses are investment expenses of the Fund.</li></ul> <ul type="square"><li>Stock Market Risk. 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.</li></ul> <ul type="square"><li>Asset Allocation Risk. The Fund's investment results will suffer if there is a general stock market advance when the Fund has significant "short" equity positions, or if there is a general stock market decline when the Fund has significant "long" equity positions. This risk is in addition to the market risks associated with each of the Fund's investments.</li></ul> <ul type="square"><li>Credit Risk. 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.</li></ul> <ul type="square"><li>Risk of Investing in Commodities. Because the Fund may invest in instruments (including exchange-traded funds) whose performance is linked to the price of an underlying commodity or commodity index, the Fund may be subject to the risks of investing in physical commodities. These types of risks include regulatory, economic and political developments, weather events and natural disasters, pestilence, market disruptions and the fact that commodity prices may have greater volatility than investments in traditional securities.</li></ul> <ul type="square"><li>Risk of Investing in Derivative Contracts and Hybrid Instruments. Derivative contracts and hybrid instruments involve risks different from, or possibly greater than, risks associated with investing directly in securities and other traditional investments. Specific risk issues related to the use of such contracts and instruments include valuation and tax issues, increased potential for losses and/or costs to the Fund and a potential reduction in gains to the Fund. Each of these issues is described in greater detail in this Prospectus. Derivative contracts and hybrid instruments may also involve other risks described in this Prospectus or the Fund's Statement of Additional Information (SAI), such as stock market, interest rate, credit, currency, liquidity and leverage risks.</li></ul> <ul type="square"><li>Gold and Other Precious Metals Investing Risk. The prices of gold and other precious metals and the prices of securities whose performance is linked to the price of gold and other precious metals have been subject to substantial price fluctuations over short periods of time. They may be adversely affected by unpredictable international monetary and political developments such as currency devaluations or revolutions, economic and social conditions within a country, trade imbalances or trade or currency restrictions between countries.</li></ul> <ul type="square"><li>Leverage Risk. Leverage risk is created when an instrument (such as a derivative transaction) 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.</li></ul> <ul type="square"><li>Risk Related to Investing for Value. Due to their relatively low valuations, value stocks are typically less volatile than growth stocks. For instance, the price of a value stock may experience a smaller increase on a forecast of higher earnings, a positive fundamental development or positive market development. Further, value stocks tend to have higher dividends than growth stocks. This means they depend less on price changes for returns and may lag behind growth stocks in an up market.</li></ul> <ul type="square"><li>Liquidity Risk. The equity securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price than other securities. Liquidity risk also refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract or short sale when it wants to.</li></ul> <ul type="square"><li>Exchange-Traded Funds Risk. An investment in an exchange-traded fund (ETF) generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange-traded) that has the same investment objectives, strategies and policies. The price of an ETF can fluctuate up or down, and the Fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down.</li></ul> <ul type="square"><li>Risk of Foreign Investing. Because the Fund may invest in securities issued by foreign companies, the Fund's Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than could otherwise be the case.</li></ul> <ul type="square"><li>Risk of Investing in ADRs and Domestically Traded Securities of Foreign Issuers. Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than would otherwise be the case.</li></ul> <ul type="square"><li>Currency Risk. Exchange rates for currencies fluctuate daily. The combination of currency risk and market risk tends to make securities traded in foreign markets more volatile than securities traded exclusively in the United States.</li></ul> <ul type="square"><li>Technology Risk. Proprietary and third party data and systems are utilized to support decision making for the Fund. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect Fund performance.</li></ul> 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. 1294 995 697 All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. 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. The Fund is the successor to the Prudent Bear Fund ("Predecessor Fund") pursuant to a reorganization on or about December 5, 2008 (the "Reorganization"). Prior to that date, the Fund had no investment operations. Accordingly, the performance information and financial information, including information on fees and expenses, provided in this Prospectus for periods prior to the first business day following the Reorganization is historical information for the Predecessor Fund's No Load Shares and Class C Shares, which commenced operations on December 28, 1995 and February 8, 1999, respectively. The performance information shown has been adjusted to reflect the fees and expenses applicable to the relevant share class. The Predecessor Fund was managed by David W. Tice & Associates, LLC and had the same investment objectives and similar strategies as the Fund. Holders of No Load Shares and Class C Shares of the Predecessor Fund received A and C classes of the Fund, respectively, as a result of the Reorganization. The Fund's IS class commenced operations on the first business day following the Reorganization. For the periods prior to the commencement of operations of the IS class, the performance information is historical information for the Predecessor Fund's No Load Shares. The performance information of the Predecessor Fund has not been adjusted to reflect the fees and expenses of the IS class since the IS class are estimated to have a lower expense ratio than the expense ratio of the Predecessor Fund's No Load Shares. The performance of the Predecessor Fund shown in the table has been adjusted to remove any voluntary waiver of the Fund expenses related to the Predecessor Fund's No Load Shares that may have occurred during the period prior to commencement of operations of the IS class. The bar chart and performance table below reflect historical performance data for the Fund and are intended to help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's A class 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 for each class shown. The Fund's performance will fluctuate, and past performance (before and after taxes) is not necessarily an indication of future results. Updated performance information for the Fund is available under the "Products" section at FederatedInvestors.com or by calling 1-800-341-7400. The bar chart shows the variability of the Fund's A class total returns on a calendar year-by-year basis. 1-800-341-7400 FederatedInvestors.com The Fund's performance will fluctuate, and past performance (before and after taxes) is not necessarily an indication of future results. 1821 1688 1195 Federated Prudent Bear Fund - A Class 3258 3531 2565 The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The Fund's A class total return for the nine-month period from January 1, 2012 to September 30, 2012, was (14.42)%. Within the periods shown in the bar chart, the Fund's A class highest quarterly return was 35.18% (quarter ended June 30, 2002). Its lowest quarterly return was (12.25)% (quarter ended December 31, 2011). The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The Fund's A class total return for the nine-month period 2012-09-30 -0.1442 highest quarterly return 2002-06-30 0.3518 lowest quarterly return 2011-12-31 -0.1225 0.6287 Average Annual Total Return Table -0.1044 -0.1413 0.0202 0.091 In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. After-tax returns are shown only for A class and after-tax returns for the C class and IS class will differ from those shown for A class. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. 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. 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 a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plan. (For the Period Ended December 31, 2011) In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. 0.1342 Federated Clover Small Value Fund (the "Fund") RISK/RETURN SUMMARY: INVESTMENT OBJECTIVE The Fund's investment objective is to seek capital appreciation. RISK/RETURN SUMMARY: FEES AND EXPENSES After-tax returns are not relevant to investors holding Shares through a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plan. 0.2685 This table describes the fees and expenses that you may pay if you buy and hold the Fund's Class A Shares (A), Class C Shares (C), Class R Shares (R) and Institutional Shares (IS). You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A class) of Federated Funds. More information about these and other discounts is available from your financial professional and in the "What Do Shares Cost?" section of the Prospectus on page 11. Shareholder Fees (fees paid directly from your investment) Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) December 1, 2013 up to but not including the later of (the "Termination Date"): (a) December 1, 2013; or (b) the date of the Fund's next effective Prospectus. Portfolio Turnover -0.1854 The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 72% of the average value of its portfolio. 0.72 You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A class) of Federated Funds. 50000 Example -0.1321 This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 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 operating expenses are as shown in the table above and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be: RISK/RETURN SUMMARY: INVESTMENTS, RISKS and PERFORMANCE What are the Fund's Main Investment Strategies? -0.0761 The Fund primarily invests in common stocks and other equity securities of U.S. companies with small market capitalizations. The Fund's investment adviser ("Adviser") seeks to achieve the Fund's investment objective by investing in common stocks and other equity securities of U.S. companies with small market capitalizations that the Adviser believes are undervalued relative to the market or their historic valuations. Small-cap companies are defined for this purpose as companies with similar market capitalizations at the time of purchase as those in the range of the Russell 2000 Index. The Fund invests in securities of U.S. companies operating in a broad range of industries based primarily on value characterizations such as price-cash flow, price-earnings and price-book value ratios. In selecting securities for the Fund, the Adviser will seek to identify companies whose stock is out-of-favor with investors. In searching for undervalued companies in which to invest, the Adviser seeks companies with the fundamental strength to capitalize on change agents, such as internal changes (e.g., management changes, restructuring or merger and acquisition activity or sales mix shifts), external changes (e.g., regulatory changes, marketplace shifts or technological advances) or companies with deep seated advantages (e.g., captive customers, pricing power, patents or strong brand names) that are undergoing short-term challenges. The Adviser generally will consider selling a security when its price target for the security has been achieved, its investment thesis has been invalidated or if it finds a more compelling investment alternative. As more fully described in this Prospectus, the Fund's investments may include, but are not limited to, the following: equity securities of domestic issuers (including American Depositary Receipts (ADRs) and other domestically traded securities of foreign companies); derivative instruments and/or hybrid instruments such as futures and options; and exchange-traded funds (ETFs). Because the Fund refers to small capitalization investments in its name, the Fund will notify shareholders at least 60 days in advance of any change in its investment policies that would permit the Fund to normally invest less than 80% of its assets (plus any borrowings for investment purposes) in investments in small companies. 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: <ul type="square"><li>Stock Market Risk. 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. </li></ul> <ul type="square"><li>Small Company Risk. Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Market capitalization is determined by multiplying the number of its outstanding shares by the current market price per share. </li></ul> <ul type="square"><li>Risk Related to Investing for Value. Due to their relatively low valuations, value stocks are typically less volatile than growth stocks. Additionally, 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. </li></ul> <ul type="square"><li>Sector Risk. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund. </li></ul> <ul type="square"><li>Risk of Investing in Derivative Contracts and Hybrid Instruments. Derivative contracts and hybrid instruments involve risks different from, or possibly greater than, risks associated with investing directly in securities and other traditional investments. Specific risk issues related to the use of such contracts and instruments include valuation and tax issues, increased potential for losses and/or costs to the Fund and a potential reduction in gains to the Fund. Each of these issues is described in greater detail in this Prospectus. Derivative contracts and hybrid instruments may also involve other risks described in this Prospectus or the Fund's Statement of Additional Information (SAI), such as stock market, interest rate, credit, currency, liquidity and leverage risks. </li></ul> <ul type="square"><li>Credit Risk. 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. </li></ul> <ul type="square"><li>Liquidity Risk. The securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price than other securities. 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. </li></ul> <ul type="square"><li>Leverage Risk. Leverage risk is created when an investment (such as a derivative transaction) 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. </li></ul> <ul type="square"><li>Risk of Investing in ADRs and Domestically Traded Securities of Foreign Issuers. Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than would otherwise be the case. </li></ul> <ul type="square"><li>Exchange-Traded Funds Risk. An investment in an ETF generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange traded) that has the same investment objectives, strategies and policies. The price of an ETF can fluctuate up or down, and the Fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down. </li></ul> <ul type="square"><li>Technology Risk. Proprietary and third-party data and systems are utilized to support decision making for the Fund. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect Fund performance. </li></ul> 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. All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. 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. Performance: Bar Chart and Table Risk/Return Bar Chart The Fund is the successor to the Touchstone Diversified Small Cap Value Fund (the "Touchstone Small Fund"), a portfolio of Touchstone Funds Group Trust, pursuant to a reorganization that took place on August 28, 2009. As a result of the reorganization, the Touchstone Small Fund became the accounting survivor. Accordingly, the performance information and financial information provided in this Prospectus for the periods prior to August 28, 2009, is historical information of the Touchstone Small Fund adjusted, with respect to the R class to reflect the fees and expenses applicable to the R class. The performance and financial information for the IS class for the periods prior to August 28, 2009, is historical information of the Touchstone Small Fund and has not been adjusted to reflect the expenses of the IS class since the IS class has a lower expense ratio than the A class. The Touchstone Small Fund was managed by the same portfolio management team as the Fund. Touchstone Small Fund Shareholders received A class or C class shares of the Fund as a result of the reorganization. The bar chart and performance table below reflect historical performance data for the Fund and are intended to help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's A class 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 not necessarily an indication of future results. Updated performance information for the Fund is available under the "Products" section at FederatedInvestors.com or by calling 1-800-341-7400. The bar chart shows the variability of the Fund's A class total returns on a calendar year-by-year basis. FederatedInvestors.com 1-800-341-7400 The Fund's performance will fluctuate, and past performance (before and after taxes) is not necessarily an indication of future results. Federated Clover Small Value Fund - A Class -0.1277 -0.1277 -0.083 -0.0931 -0.0756 -0.0694 0.0211 The total returns shown in the bar chart 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. -0.0234 The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The Fund's A class total return for the nine-month period from January 1, 2012 to September 30, 2012, was 11.51%. Within the periods shown in the bar chart, the Fund's A class highest quarterly return was 24.85% (quarter ended June 30, 2003). Its lowest return was (22.37)% (quarter ended September 30, 2002). -0.0344 -0.0228 -0.02 -0.011 -0.0349 -0.0025 Average Annual Total Return Table 0.0216 0.0107 0.0144 0.0197 0.0281 -0.0347 0.0292 R class and IS class commenced operations on December 1, 2010 and August 29, 2009, respectively. For the period prior to the commencement of operations of R class and IS class, the performance information shown is for A class adjusted as appropriate. In relation to IS class, the performance of A class has been adjusted to remove any voluntary waiver of Fund expenses related to the A class that may have occurred during the period prior to the commencement of IS class. Additionally, for both the R class and IS class, the performance information shown below has been adjusted to reflect the absence of sales charges applicable to A class. In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. After-tax returns are shown only for A class, and after-tax returns for the C, R and IS classes will differ from those shown for A class. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. 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. 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 a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plans. (For the Period Ended December 31, 2011) The stated returns assume the highest historical federal income and capital gains tax rates. 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 a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plans. In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. -0.2075 0.4548 0.2014 0.0306 0.1583 -0.0297 -0.2544 0.2764 0.2637 -0.0571 The Fund's A class total return for the nine-month period 2012-09-30 0.1151 highest quarterly return 2003-06-30 0.2485 lowest return 2002-09-30 -0.2237 0.055 0 0 0 0 0.01 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.009 0.009 0.009 0.009 0.0005 0.0075 0.005 0 0.0065 0.0067 0.0051 0.0034 0.0003 0.0003 0.0003 0.0003 0.0163 0.0235 0.0194 0.0127 -0.0034 -0.0031 -0.004 -0.0023 0.0129 0.0204 0.0154 0.0104 707 338 197 129 1036 733 609 403 1388 1255 1047 697 2377 2686 2264 1534 707 238 197 129 1036 733 609 403 1388 1255 1047 697 2377 2686 2264 1534 -0.1089 -0.1113 -0.0687 -0.0729 -0.0586 -0.0546 -0.055 0.0078 -0.009 0.0002 0.0132 0.016 0.0206 -0.0187 0.0557 0.0382 0.0433 0.0546 0.0586 0.0623 0.064 <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleShareholderFeesFederatedPrudentBearFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualFundOperatingExpensesFederatedPrudentBearFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleTransposedFederatedPrudentBearFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleNoRedemptionTransposedFederatedPrudentBearFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualTotalReturnsFederatedPrudentBearFundBarChart column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAverageAnnualTotalReturnsTransposedFederatedPrudentBearFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleShareholderFeesFederatedCloverSmallValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAverageAnnualTotalReturnsTransposedFederatedCloverSmallValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualTotalReturnsFederatedCloverSmallValueFundBarChart column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleNoRedemptionTransposedFederatedCloverSmallValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleTransposedFederatedCloverSmallValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualFundOperatingExpensesFederatedCloverSmallValueFund column period compact * ~</div> Federated Clover Value Fund (the "Fund") RISK/RETURN SUMMARY: INVESTMENT OBJECTIVE The Fund's investment objective is to seek capital appreciation. RISK/RETURN SUMMARY: FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold the Fund's Class A Shares (A), Class B Shares (B), Class C Shares (C), Class R Shares (R) and Institutional Shares (IS). You may qualify for certain sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A class) of Federated funds. More information about these and other discounts is available from your financial professional and in the "What Do Shares Cost?" section of the Prospectus on page 12. Shareholder Fees (fees paid directly from your investment) Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) December 1, 2013 up to but not including the later of (the "Termination Date"): (a) December 1, 2013; or (b) the date of the Fund's next effective Prospectus. Example This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 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 operating expenses are as shown in the table above and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be: Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 63% of the average value of its portfolio. 0.63 You may qualify for certain sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in certain classes (e.g., A class) of Federated funds. 50000 RISK/RETURN SUMMARY: INVESTMENTS, RISKS and PERFORMANCE What are the Fund's Main Investment Strategies? The Fund seeks to achieve its investment objective by investing primarily in common stocks and other equity securities of U.S. companies with large market capitalizations that the Adviser believes are undervalued relative to the market or their historic valuations. Securities with mid- or small-market capitalizations may also be held. Large-cap companies are considered to be companies with market capitalizations similar to those in the Russell 1000® Index. The Fund seeks to invest in securities of U.S. companies operating in a broad range of industries based primarily on value characteristics such as price-cash flow, price-earnings and price-book value ratios. In selecting securities of the Fund, the Adviser will seek to identify companies whose stock is out of favor with investors. In searching for undervalued companies in which to invest, the Adviser seeks companies with the fundamental strength to capitalize on change agents, such as internal changes (e.g., management changes, restructuring or merger and acquisition activity or sales mix shifts), external changes (e.g., regulatory changes, marketplace shifts or technological advances) or companies with deep seated advantages (e.g., captive customers, pricing power, patents or strong brand names) that are undergoing short-term challenges. The Adviser generally will consider selling a security when its price target for the security has been achieved, its investment thesis has been invalidated or if it finds a more compelling investment alternative. As more fully described in this Prospectus, the Fund's investments may include, but are not limited to, the following: equity securities of domestic issuers (including American Depositary Receipts (ADRs) and other domestically traded securities of foreign companies), derivative instruments and/or hybrid instruments, such as futures and options and exchange-traded funds (ETFs). 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: <ul type="square"><li>Stock Market Risk. 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. </li></ul><ul type="square"><li>Large-Sized Company Risk. The Fund may invest in large-size companies. Although diminished in larger-cap companies, the risks of investing in all companies include business failure and reliance on erroneous reports. Larger, more established companies may be unable to respond quickly to new competitive challenges like changes in consumer tastes or innovative smaller competitors. </li></ul><ul type="square"><li>Medium-Sized Companies Risk. The Fund may invest in mid-size companies. Mid-capitalization companies often have narrower markets and limited managerial and financial resources compared to larger, more established companies. </li></ul><ul type="square"><li>Small Company Risk. The Fund may invest in smaller-capitalization companies. Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Market capitalization is determined by multiplying the number of its outstanding shares by the current market price per share. </li></ul><ul type="square"><li>Risk Related to Investing for Value. Due to their relatively low valuations, value stocks are typically less volatile than growth stocks. Additionally, 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. </li></ul><ul type="square"><li>Sector Risk. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund. </li></ul><ul type="square"><li>Risk of Investing in Derivative Contracts and Hybrid Instruments. Derivative contracts and hybrid instruments involve risks different from, or possibly greater than, risks associated with investing directly in securities and other traditional investments. Specific risk issues related to the use of such contracts and instruments include valuation and tax issues, increased potential for losses and/or costs to the Fund, and a potential reduction in gains to the Fund. Each of these issues is described in greater detail in this Prospectus. Derivative contracts and hybrid instruments may also involve other risks described in this Prospectus or the Fund's Statement of Additional Information (SAI), such as stock market, interest rate, credit, currency, liquidity and leverage risks. </li></ul><ul type="square"><li>Counterparty Credit Risk. A party to a transaction (such as a derivative transaction) involving the Fund may fail to meet its obligations. This could cause the Fund to lose money or to lose the benefit of the transaction or prevent the Fund from selling or buying other securities to implement its investment strategy. </li></ul><ul type="square"><li>Liquidity Risk. The securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price than other securities. 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. </li></ul><ul type="square"><li>Leverage Risk. Leverage risk is created when an investment (such as a derivative transaction) 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. </li></ul><ul type="square"><li>Risk of Investing in ADRs and Domestically Traded Securities of Foreign Issuers. Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than would otherwise be the case. </li></ul><ul type="square"><li>Exchange-Traded Funds Risk. An investment in an ETF generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange traded) that has the same investment objectives, strategies and policies. The price of an ETF can fluctuate up or down, and the Fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down. </li></ul><ul type="square"><li>Technology Risk. Proprietary and third-party data and systems are utilized to support decision making for the Fund. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect Fund performance. </li></ul>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. All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. 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. Performance: Bar Chart and Table Risk/Return Bar Chart The Fund is the successor to the Touchstone Value Opportunities Fund (the "Touchstone Value Fund"), a portfolio of Touchstone Funds Group Trust, pursuant to a reorganization that took place on August 28, 2009. As a result of the reorganization, the Touchstone Value Fund became the accounting survivor. Accordingly, the performance information and financial information provided in this Prospectus for the periods prior to August 28, 2009, is historical information of the Touchstone Value Fund adjusted, with respect to the B class and R class to reflect the fees and expenses applicable to the B class and R class. The performance and financial information for the IS class for the periods prior to August 28, 2009, is historical information of the Touchstone Value Fund and has not been adjusted to reflect the expenses of the IS class since the IS class has a lower expense ratio than the expense ratio of the A class. The Touchstone Value Fund was managed by the same portfolio management team as the Fund. Touchstone Value Fund shareholders received A class or C class shares of the Fund as a result of the reorganization. The bar chart and performance table below reflect historical performance data for the Fund and are intended to help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's A class 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 not necessarily an indication of future results. Updated performance information for the Fund is available under the "Products" section at FederatedInvestors.com or by calling 1-800-341-7400. The bar chart shows the variability of the Fund's A class total returns on a calendar year-by-year basis. 1-800-341-7400 FederatedInvestors.com The Fund's performance will fluctuate, and past performance (before and after taxes) is not necessarily an indication of future results. Federated Clover Value Fund - A Class The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The Fund's A class total return for the nine-month period from January 1, 2012 to September 30, 2012, was 11.50%. Within the periods shown in the bar chart, the Fund's A class highest quarterly return was 19.28% (quarter ended June 30, 2003). Its lowest quarterly return was (22.28)% (quarter ended December 31, 2008). Average Annual Total Return Table The stated returns assume the highest historical federal income and capital gains tax rates. 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 a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plan. In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. B, R and IS classes commenced operations on August 29, 2009. Performance results shown before that date are for the Fund's A class, adjusted as appropriate. In relation to the IS class, the performance of A class has been adjusted to remove any voluntary waiver of Fund expenses related to the A class that may have occurred during the period prior to the commencement of IS class. Additionally, for the R and IS classes, the performance information shown below has been adjusted to reflect the absence of sales charges applicable to A class. In addition to Return Before Taxes, Return After Taxes is shown for the Fund's A class to illustrate the effect of federal taxes on Fund returns. After-tax returns are shown only for A class, and after-tax returns for B, C, R and IS classes will differ from those shown below for A class. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. 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. 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 a 401(k) plan, an Individual Retirement Account or other tax-advantaged investment plan. (For the Period Ended December 31, 2011) 0.055 0 0 0 0 0 0.055 0.01 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0075 0.0075 0.0075 0.0075 0.0075 0.0005 0.0075 0.0075 0.005 0 0.0058 0.0072 0.0061 0.0048 0.0025 0.0001 0.0001 0.0001 0.0001 0.0001 0.0139 0.0223 0.0212 0.0174 0.0101 -0.0019 -0.003 -0.0019 -0.0031 -0.0006 0.012 0.0193 0.0193 0.0143 0.0095 684 776 315 177 103 966 1097 664 548 322 1269 1395 1139 944 558 2127 2353 2452 2052 1236 684 226 215 177 103 966 697 664 548 322 1269 1195 1139 944 558 2127 2353 2452 2052 1236 -0.1204 0.3265 0.1777 0.1209 0.1518 0.0828 -0.3577 0.2168 0.1083 0.0166 The Fund's A class total return for the nine-month period 2012-09-30 0.115 highest quarterly return 2003-06-30 0.1928 lowest quarterly return 2008-12-31 -0.2228 -0.0393 -0.0418 -0.0256 -0.0462 -0.0011 0.0143 0.0192 0.0039 -0.0206 -0.0254 -0.0181 -0.0203 -0.0163 -0.0136 -0.0082 -0.0264 0.048 0.0376 0.0393 0.0476 0.0465 0.0493 0.0547 0.0389 <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleShareholderFeesFederatedCloverValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualFundOperatingExpensesFederatedCloverValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleTransposedFederatedCloverValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleExpenseExampleNoRedemptionTransposedFederatedCloverValueFund column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAnnualTotalReturnsFederatedCloverValueFundBarChart column period compact * ~</div> <div style="display:none">~ http://www.federatedinvestors.com/role/ScheduleAverageAnnualTotalReturnsTransposedFederatedCloverValueFund column period compact * ~</div> The stated returns assume the highest historical federal income and capital gains tax rates. These after-tax returns do not reflect the effect of any applicable state and local taxes. The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (excluding Acquired Fund Fees and Expenses) paid by the Fund's A, C, R and IS classes (after the voluntary waivers and/or reimbursements) will not exceed 1.26%, 2.01%, 1.51% and 1.01% (the "Fee Limit"), respectively, up to but not including the later of (the "Termination Date"): (a) December 1, 2013; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Fund's Board of Trustees. The Russell 2000 Value Index measures the performance of those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Standard & Poor's 500 Inverse Daily Index is designed to provide the inverse performance of the Standard & Poor's 500 Index, representing a short position in the index. The Standard & Poor's 500 Index is a broad-based market index that measures the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Russell 1000 Value Index measures the performance of the 1,000 largest of the 3,000 largest U.S.-domiciled companies (based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (excluding Acquired Fund Fees and Expenses) paid by the Fund's A, B, C, R and IS classes (after the voluntary waivers and/or reimbursements) will not exceed 1.19%, 1.92%, 1.92%, 1.42% and 0.94% (the "Fee Limit"), respectively, up to but not including the later of (the "Termination Date"): (a) December 1, 2013; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Fund's Board of Trustees.