FEDERATED EQUITY FUNDS

485APOS 1 form.htm FEDERATED EQUITY FUNDS

                                          1933 Act File No. 2-91090
                                          1940 Act File No. 811-4017

                             SECURITIES AND EXCHANGE COMMISSION
                                    Washington, DC 20549

                                         Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933             X

    Pre-Effective Amendment No.      .......................

    Post-Effective Amendment No.  58_.......................        X

                                           and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     X

    Amendment No.  51 ......................................        X

                                   FEDERATED EQUITY FUNDS

                     (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
                             Pittsburgh, Pennsylvania 15222-3779
                          (Name and Address of Agent for Service)

It is proposed that this filing will become effective:

___ immediately upon filing pursuant to paragraph (b)
__  on __________________pursuant to paragraph (b)
    60 days after filing pursuant to paragraph (a) (i)
    on _________________ pursuant to paragraph (a) (i).
 X  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.

                                          Copy to:

                                Matthew G. Maloney, Esquire
                         Dickstein Shapiro Morin & Oshinsky, LLP
                                     2101 L Street, NW
                                    Washington, DC 20037

[Logo of Federated]

Federated Market Opportunity Fund

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A Portfolio of Federated Equity Funds

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PROSPECTUS

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February 28, 2003

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CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

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A mutual fund seeking to provide moderate capital appreciation and high current income by investing in equity securities that are undervalued or out of favor, or securities that appear to have defensive characteristics (i.e., securities that appear to have low volatility in share price relative to the overall equity market during periods of market turbulence).

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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

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?		10
What Do Shares Cost?		11
How is the Fund Sold?		15
How to Purchase Shares		15
How to Redeem and Exchange Shares		18
Account and Share Information		21
Who Manages the Fund?		22
Financial Information		23

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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The Fund's investment objective is to provide moderate capital appreciation and high current income. 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.

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WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing, under normal market conditions, its assets in equity securities (including convertible securities) of companies that, in the Adviser's opinion, are undervalued or out of favor, or securities that appear to display defensive characteristics (i.e. securities that appear to have low volatility in share price relative to the overall equity market during periods of market turbulence). A description of the various types of securities in which the Fund invests, and their risks, immediately follows the strategy discussion.

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.

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Risks Relating to Investing for Value. The Fund uses a "value" style of investing, so that the Fund's share price may lag that of other funds using a different investment style.

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Risks of Investing in American Depositary Receipts. Because the Fund may invest in American Depositary Receipts (ADRs) 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 would otherwise be the case.

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

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 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 Class A Shares total return for the nine-month period from January 1, 2002 to September 30, 2002 was (2.10)%.

Within the period shown in the bar chart, the Fund's Class A Shares highest quarterly return was 7.59% (quarter ended June 30, 2001). Its lowest quarterly return was (1.53)% (quarter ended September 30, 2001).

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Average Annual Total Return Table

The Average Annual Total Returns for the Fund's Class A Shares, Class B Shares and Class C 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 the Russell Midcap Value Index (RMCV), a broad-based market index. 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.

(For the periods ended December 31, 2001)

	1 Year	Start of Performance¹
Class A Shares:
Return Before Taxes	9.36%	12.85%
Return After Taxes on Distributions²	7.61%	10.82%
Return After Taxes on Distributions and Sale of Fund Shares²	5.64%	9.23%
Class B Shares:
Return Before Taxes	9.29%	13.75%
Class C Shares:
Return Before Taxes	13.68%	18.02%
RMCV	2.33%	7.62%

1 The Fund's Class A, Class B and Class C Shares start of performance date was December 5, 2000.

2 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 and Class C 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 MARKET OPPORTUNITY FUND

FEES AND EXPENSES

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

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

Annual Fund Operating Expenses (Before Waiver)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee	0.75%		0.75%		0.75%
Distribution (12b-1) Fee	0.25%	²	0.75%		0.75%
Shareholder Services Fee	0.25%		0.25%		0.25%
Other Expenses	0.31%		0.31%		0.31%
Total Annual Fund Operating Expenses	1.56%		2.06%	³	2.06%
1 Although not contractually obligated to do so, the distributor waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2002.
Total Waivers of Fund Expenses	0.25%		0.00%		0.00%
Total Actual Annual Fund Operating Expenses (after waiver)	1.31%		2.06%		2.06%
2 Class A Shares did not pay or accrue the distribution (12b-1) fee for the fiscal year ended October 31, 2002. Class A Shares have no present intention of paying or accruing the distribution (12b-1) fee for the fiscal year ending October 31, 2003.
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 the last day of the following month. Class A Shares pay lower operating expenses than Class B Shares.

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EXAMPLE

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

The Example assumes that you invest $10,000 in the Fund's Class A, Class B and Class C 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 and Class C Shares operating expenses are before waiver as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

Share Class	1 Year	3 Years	5 Years	10 Years
Class A:
Expenses assuming redemption	$700	$1,016	$1,353	$2,304
Expenses assuming no redemption	$700	$1,016	$1,353	$2,304
Class B:
Expenses assuming redemption	$759	$1,046	$1,308	$2,262
Expenses assuming no redemption	$209	$ 646	$1,108	$2,262
Class C:
Expenses assuming redemption	$309	$ 646	$1,108	$2,390
Expenses assuming no redemption	$209	$ 646	$1,108	$2,390

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What are the Fund's Investment Strategies?

The Adviser has devised a proprietary model for assistance in identifying equity securities that have a superior risk/return tradeoff when compared to other equity securities. In selecting securities for the Fund's portfolio, the Adviser emphasizes the following: undervalued and overlooked companies that have the potential for positive changes; companies' financial strength, particularly the generation of "free" cash flow that exceeds capital spending and dividend requirements; companies' management skill and shareholder orientation; improving earnings; and equity securities of companies that demonstrate an ability to maintain their value when the broad equity market is weak.

Companies with similar characteristics may be grouped together in broad categories called sectors. The Adviser may select securities of issuers in any sector and having any market capitalization range (i.e. number of shares multiplied by the share price). The Adviser allocates the Fund's assets among the various economic sectors based on Standard & Poor's classifications. The Adviser's allocations are based on a combination of bottom-up security selection and top-down sector emphasis. Primarily using the bottom-up approach, the Adviser searches for outstanding performance of individual stocks. The Adviser identifies such companies from research reports, stock screens or personal knowledge of the products and services. As a secondary matter, using top-down analysis, the Adviser considers current economic, financial market, and industry factors and societal trends that may affect the issuing company, in order to assist in determining sector allocations for the Fund.

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In addition, sector allocations are based on the Adviser's opinion as to which sectors are, as a whole, priced at a low market valuation ("undervalued") when compared with the other sectors. The Adviser also considers such factors as the dividend-paying potential and earnings growth potential of the companies in each sector.

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The Adviser uses the "value" style of investing, selecting securities of companies that, in the Adviser's opinion, are trading at a lower valuation in relation to their historic and current market prices, to industry peers, and to their expected future price based on projected earnings, and that therefore offer the potential for capital appreciation. Because the Adviser uses a "value" style of investing, the securities held by the Fund may not, under certain market conditions, increase as rapidly in price as stocks selected primarily for their growth attributes. However, such securities generally have lower share price volatility, and a higher yield, when compared with other equity securities.

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To determine the timing of purchases of portfolio securities, the Adviser compares the current stock price of an issuer with the Adviser's judgment as to that stock's intrinsic value. The Adviser prefers to purchase a stock when it is relatively depressed, rather than after a substantial rise in price. The Adviser uses technical analysis as an aid in timing purchases and sales. The Adviser sells a portfolio security if it determines that the issuer's prospects have deteriorated, or if it finds an attractive security which the Adviser deems has superior risk and return characteristics to a security held by the Fund.

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The Adviser generally purchases convertible securities and Real Estate Investment Trusts (REITs) to provide total return and/or to enhance the Fund's income. In addition, the Adviser may invest a portion of the Fund's assets in securities of companies based outside the United States, to diversify the Fund's holdings and to gain exposure to the foreign market. Foreign holdings primarily take the form of American Depositary Receipts, which represent interests in underlying securities issued by a foreign company, but which are traded in the United States.

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Additionally, when the Adviser cannot find sufficient stocks that it deems to be undervalued, the Adviser may invest a portion of the Fund's assets in high yield or emerging market fixed income securities in order to increase the current income of the Fund.

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PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its investment objective. Active trading will cause the Fund to have an increased portfolio turnover rate, which is likely to generate shorter-term gains (losses) for its shareholders, which are taxed at a higher rate than longer-term gains (losses). Actively trading portfolio securities increases the Fund's trading costs and may have an adverse impact on the Fund's performance.

TEMPORARY DEFENSIVE INVESTMENTS

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

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

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

Common Stocks

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

Real Estate Investment Trusts (REITs)

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REITs are real estate investment trusts that own, 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.

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American Depository Receipts

ADRs represent interests in underlying securities issued by a foreign company. Depositary receipts are not traded in the same market as the underlying security. ADRs provide a way to buy shares of foreign-based companies in the U.S. rather than in overseas markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign exchange transactions.

Convertible Securities

Convertible securities are fixed income securities that the Fund has the option to exchange for equity securities at a specified conversion price, or which are automatically exchanged for equity securities after a specified conversion period. 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.

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Convertible securities generally 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.

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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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Short Sales

The Fund may make short sales of securities listed on one or more national exchanges or on the NASDAQ stock market. A short sale means selling a security the Fund does not own to take advantage of an anticipated decline in the stock's price. Once the Fund sells the security short, it has an obligation to replace the borrowed security. If it can buy the security back at a lower price, a profit results. In no event will the Fund engage in short sales transactions if it would cause the market value of all of the Fund's securities sold short to exceed 25% of its net assets. The value of the securities of any one issuer that may be shorted by the Fund is limited to the lesser of 2% of the value of the Fund's net assets or 2% of the securities of any class of the issuer. The Fund may also "sell short against the box," i.e., the Fund owns securities identical to those sold short. Short sales against the box are not subject to the 25% limitation. A capital gain is recognized immediately upon entering into a short sale against the box with respect to an appreciated security. Short sales are speculative in nature, and may reduce returns or increase volatility.

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FIXED INCOME SECURITIES

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Foreign Government Securities

Foreign government securities generally consist of fixed income securities supported by national, state or provincial governments or similar political subdivisions. Foreign government securities also include debt obligations of supranational entities, such as international organizations designed or supported by governmental entities to promote economic reconstruction or development, international banking institutions and related government agencies. Examples of these include, but are not limited to, the International Bank for Reconstruction and Development (the World Bank), the Asian Development Bank, the European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of quasi-governmental agencies that are either issued by entities owned by a national, state or equivalent government or are obligations of a political unit that are not backed by the national government's full faith and credit. Further, foreign government securities include mortgage-related securities issued or guaranteed by national, state or provincial governmental instrumentalities, including quasi-governmental agencies.

Foreign Corporate Debt Securities

The Fund may also invest in high-yield debt securities of foreign corporations. 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. The credit risk of an issuer's debt security may also 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.

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Investing in Securities of Other Investment Companies

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

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The Fund may invest in high yield securities and emerging market fixed income securities primarily by investing in other investment companies (which are not available for general investment by the public) that owns those securities and that is advised by an affiliate of the Adviser. These other investment companies are managed independently of the Fund and may incur additional administrative expenses. Therefore, any such investment by the Fund may be subject to duplicate expenses. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the potential additional expenses. The Fund may also invest in such securities directly.

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Investment Ratings for Investment Grade Securities

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

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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 Funds may also purchase interests in bank loans to companies. The credit risks of corporate debt securities vary widely among issuers.

Lower-rated fixed income securities are securities rated below investment grade (i.e., BB or lower) by a nationally recognized rating service. There is no minimal acceptable rating for a security to be purchased or held by the Fund and the Fund may purchase or hold unrated securities and securities whose issuers are in default.

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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.

RISKS RELATED TO INVESTING FOR VALUE

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

RISKS OF INVESTING IN ADRS

Because the Fund may invest in ADRs 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 would otherwise be the case. 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 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 United States 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 ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, 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.

EMERGING MARKET RISKS

Securities issued or traded in emerging markets generally entail greater risks than securities issued or traded in developed markets. For example, their creditworthiness and consequently their prices can be significantly more volatile than prices in developed countries. Emerging market economies may also experience more actual or perceived severe downturns (with corresponding currency devaluation) than developed economies.
Emerging market countries may have relatively unstable governments and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies.

LEVERAGE RISKS

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

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What Do Shares Cost?

You can purchase, redeem or exchange Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form (as described in 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 at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

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

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

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.

Shares Offered	Minimum Initial/Subsequent Investment Amounts¹	Maximum Sales Charge
Shares Offered	Minimum Initial/Subsequent Investment Amounts¹	Front-End Sales Charge²	Contingent Deferred Sales Charge³
Class A Shares	$1,500/$100	5.50%	0.00%
Class B Shares	$1,500/$100	None	5.50%
Class C Shares	$1,500/$100	None	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 (SIP) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund. Orders for $250,000 or more will be invested in Class A Shares instead of Class B 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."

SALES CHARGE WHEN YOU PURCHASE

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%

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

If your investment qualifies for a reduction or elimination of the sales charge as described below, you or your investment professional should notify the Fund's Distributor at the time of purchase. If the Distributor is not notified, you will receive the reduced sales charge only on additional purchases, and not retroactively on previous purchases.

The sales charge at purchase may be reduced or eliminated by:

purchasing Shares in greater quantities to reduce the applicable sales charge;
combining concurrent purchases of Shares:
by you, your spouse, and your children under age 21; or
of the same share class of two or more Federated Funds (other than money market funds);
accumulating purchases (in calculating the sales charge on an additional purchase, include the current value of previous Share purchases still invested in the Fund); or
signing a letter of intent to purchase a specific dollar amount of Shares within 13 months (call your investment professional or the Fund for more information).

The sales charge will be eliminated when you purchase Shares:

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

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by exchanging shares from the same share class of another Federated Fund (other than a money market fund);
through wrap accounts or other investment programs where you pay the investment professional directly for services;
through investment professionals that receive no portion of the sales charge;
as a Federated Life Member (Class A Shares only) and their immediate family members; or
as a Trustee or employee of the Fund, the Adviser, the Distributor and their affiliates, and the immediate family members of these individuals.

SALES CHARGE WHEN YOU REDEEM

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

Class A Shares(Purchase amount of $1 million or greater) :
A CDSC of 0.75% of the redemption amount applies to Class A Shares redeemed up to 24 months after purchase under certain investment programs where an investment professional received an advance payment on the transaction.
Class B Shares:
Shares Held Up To:		CDSC
1 Year		5.50%
2 Years		4.75%
3 Years		4.00%
4 Years		3.00%
5 Years		2.00%
6 Years		1.00%
7 Years or More		0.00%
Class C Shares:
You will pay a 1% CDSC if you redeem Shares within one year of the purchase date.

If your investment qualifies for a reduction or elimination of the CDSC as described below, you or your investment professional should notify the Distributor at the time of redemption. If the Distributor is not notified, the CDSC will apply.

You will not be charged a CDSC when redeeming Shares:

purchased with reinvested dividends or capital gains;
purchased within 120 days of redeeming Shares of an equal or lesser amount;
that you exchanged into the same share class of another Federated Fund if the shares were held for the applicable CDSC holding period (other than a money market fund);
purchased through investment professionals who did not receive advanced sales payments;
if, after you purchase Shares, you become disabled as defined by the IRS;
if the Fund redeems your Shares and closes your account for not meeting the minimum balance requirement;
if your redemption is a required retirement plan distribution; or
upon the death of the last surviving shareholder of the account. The beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder of the account.

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

Shares that are not subject to a CDSC; and
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).

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

How is the Fund Sold?

The Fund offers three share classes: Class A Shares, Class B Shares and Class C Shares, each representing interests in a single portfolio of securities.

The Fund's Distributor, Federated Securities Corp., markets the Shares described in this prospectus to institutions or to individuals, directly or through investment professionals.

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

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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 and customer servicing of the Fund's 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.

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.

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.

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.

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 Federated Shareholder Services Company, the Fund's transfer agent.

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 mail it to:

Federated Shareholder Services Company
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, mail it to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

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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.

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BY AUTOMATIC INVESTMENTS

You may establish an account with your financial institution to automatically purchase Shares on predetermined dates or when your bank account reaches a certain level. Under this program, participating financial institutions are responsible for prompt transmission of orders and may charge you for this service. You should read this prospectus along with your financial institution's agreement or materials describing this service.

BY INVEST-BY-PHONE

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Once you establish an account, you may use the Fund's Invest-By-Phone privilege for future Share purchases if you have an account with a bank that is an Automated Clearing House member. To apply, call the Fund for an authorization form. You may use Invest-By-Phone to purchase Shares approximately two weeks from the date you file the form with Federated Shareholder Services Company.

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BY DIRECT DEPOSIT

You may complete an application with Federated Shareholder Services Company to have your Social Security, Railroad Retirement, VA Compensation or Pension, Civil Service Retirement and certain other retirement payments invested directly into the Fund. The application must be filed with Federated Shareholder Services Company before direct deposit may begin. Allow 60 to 90 days for the application to be processed.

THROUGH AN EXCHANGE

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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

Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the Systematic Investment Program 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.

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 mailing 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:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

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

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days;
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.

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

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.

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The Fund may modify or terminate the exchange privilege at any time. The Fund's management or investment adviser may determine from the amount, frequency and pattern of exchanges that a shareholder is engaged in excessive trading that is detrimental to the Fund and other shareholders. If this occurs, the Fund may terminate the availability of exchanges to that shareholder and may bar that shareholder from purchasing other Federated funds.

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SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

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 subject to a sales charge while redeeming Shares using this program.

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 does not issue share certificates.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

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

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

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, 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

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

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

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the Adviser, Federated Investment Management Company. The Adviser manages the Fund's assets, including buying and selling portfolio securities. The Adviser's address is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Adviser and other subsidiaries of Federated advise approximately 139 mutual funds and a variety of separate accounts, which totaled approximately $180 billion in assets as of December 31, 2001. Federated was established in 1955 and is one of the largest mutual fund investment managers in the United States with approximately 1,800 employees. More than 4,000 investment professionals make Federated funds available to their customers.

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THE FUND'S PORTFOLIO MANAGERS ARE:

Steven J. Lehman

Steven J. Lehman has been the Fund's Portfolio Manager since inception. He is Vice President of the Trust. Mr. Lehman joined the Fund's Adviser in May 1997 as a Portfolio Manager and Vice President. He has been a Senior Portfolio Manager since 1998. From 1986 to May 1997, Mr. Lehman served as a Portfolio Manager, then Vice President/Senior Portfolio Manager, at First Chicago NBD. Mr. Lehman is a Chartered Financial Analyst; he received his M.A. from the University of Chicago.

John L. Nichol

John L. Nichol has been the Fund's Portfolio Manager since November 2001. Mr. Nichol joined Federated in September 2000 as an Assistant Vice President/Senior Investment Analyst. He has been a Portfolio Manager since December 2000 and was named a Vice President of the Fund's Adviser in July 2001. Mr. Nichol served as a portfolio manager and analyst for the Public Employees Retirement System of Ohio from 1992 through August 2000. Mr. Nichol is a Chartered Financial Analyst. He received has M.B.A. with an emphasis in finance and management and information science from the Ohio State University.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.75% of the Fund's average daily net assets. The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

Financial Information

FINANCIAL HIGHLIGHTS

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

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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 A Shares

(For a Share Outstanding Throughout Each Period)

	Year Ended 10/31/2002		Period Ended 10/31/2001	¹
Net Asset Value, Beginning of Period	$11.14		$10.00
Income From Investment Operations:
Net investment income	0.39	²	0.42
Net realized and unrealized gain (loss) on investments and foreign currency	(0.30	)²	1.13

Total from investment operations	0.09		1.55

Less Distributions:
Distributions from net investment income	(0.42	)	(0.41	)
Distributions from net realized gain on investments and foreign currency transactions	(0.04	)	--

Total distributions	(0.46	)	(0.41	)

Net Asset Value, End of Period	$10.77		$11.14

Total Return³	0.56	%	15.67	%

Ratios to Average Net Assets:

Expenses	1.31	%⁴	1.28	%⁵

Net investment income	3.90	%²	4.63	%⁵

Expense waiver/reimbursement⁶	0.00	%⁷	0.99	%⁵

Supplemental Data:

Net assets, end of period (000 omitted)	$189,611		$36,774

Portfolio turnover	105	%	60	%

1 Reflects operations for the period from December 5, 2000 (date of initial public investment) to October 31, 2001.

2 Effective November 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gain/loss per share by $0.01, and increase the ratio of net investment income to average net assets from 3.75% to 3.90%. Per share, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

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

4 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements.

5 Computed on an annualized basis.

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

7 Less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated October 31, 2002, which can be obtained free of charge.

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Financial Highlights -- Class B Shares

(For a Share Outstanding Throughout Each Period)

	Year Ended 10/31/2002		Period Ended 10/31/2001	¹
Net Asset Value, Beginning of Period	$11.12		$10.00
Income From Investment Operations:
Net investment income	0.35	²	0.38
Net realized and unrealized gain (loss) on investments and foreign currency	(0.35	)²	1.10

Total from investment operations	0.00		1.48

Less Distributions:
Distributions from net investment income	(0.34	)	(0.36	)
Distributions from net realized gain on investments and foreign currency transactions	(0.04	)	--

Total distributions	(0.38	)	(0.36	)

Net Asset Value, End of Period	$10.74		$11.12

Total Return³	(0.19	)%	15.00	%

Ratios to Average Net Assets:

Expenses	2.06	%⁴	2.03	%5

Net investment income	3.30	%²	3.81	%⁵

Expense waiver/reimbursement⁶	0.00	%⁷	0.99	%⁵

Supplemental Data:

Net assets, end of period (000 omitted)	$115,531		$33,481

Portfolio turnover	105	%	60	%

1 Reflects operations for the period from December 5, 2000 (date of initial public investment) to October 31, 2001.

2 Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gain/loss per share by $0.01, and increase the ratio of net investment income to average net assets from 3.16% to 3.30%. Per share, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

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

4 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements.

5 Computed on an annualized basis.

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

7 Less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated October 31, 2002, which can be obtained free of charge.

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Financial Highlights -- Class C Shares

(For a Share Outstanding Throughout Each Period)

	Year Ended 10/31/2002		Period Ended 10/31/2001	¹
Net Asset Value, Beginning of Period	$11.11		$10.00
Income From Investment Operations:
Net investment income	0.36	²	0.37
Net realized and unrealized gain (loss) on investments and foreign currency	(0.36	)²	1.10

Total from investment operations	0.00		1.47

Less Distributions:
Distributions from net investment income	(0.34	)	(0.36	)
Distributions from net realized gain on investments and foreign currency transactions	(0.04	)	--

Total distributions	(0.38	)	(0.36	)

Net Asset Value, End of Period	$10.73		$11.11

Total Return³	(0.20	)%	14.90	%

Ratios to Average Net Assets:

Expenses	2.06	%⁴	2.03	%5

Net investment income	3.29	%²	3.80	%⁵

Expense waiver/reimbursement⁶	0.00	%⁷	0.99	%⁵

Supplemental Data:

Net assets, end of period (000 omitted)	$56,586		$17,845

Portfolio turnover	105	%	60	%

1 Reflects operations for the period from December 5, 2000 (date of initial public investment) to October 31, 2001.

2 Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gain/loss per share by $0.01, and increase the ratio of net investment income to average net assets from 3.15% to 3.29%. Per share, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

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

4 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements.

5 Computed on an annualized basis.

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

7 Less than 0.01%.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated October 31, 2002, which can be obtained free of charge.

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A Statement of Additional Information (SAI) dated December 31, 2002, 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 discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. 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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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 Internet site at http://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.

[Logo of Federated]

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Federated Market Opportunity Fund
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Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-4017

Federated is a registered mark of Federated Investors, Inc.
2001 © Federated Investors, Inc.

Cusip 314172743
Cusip 314172735
Cusip 314172727

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25839 (12/02)

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FEDERATED MARKET OPPORTUNITY FUND
A Portfolio of Federated Equity Funds

Statement of additional Information

February 28, 2003

class a shares
class b shares
class c shares

This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectus for the Federated Market Opportunity Fund (Fund), dated
February 28, 2003. This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-341-7400.

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
Massachusetts Partnership Law
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.?
Investment Ratings
Addresses
25840 (2/03)

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Equity Funds (Trust). The Trust is an
open-end, management investment company that was established under the laws of the
Commonwealth of Massachusetts on April 17, 1984. The Trust may offer separate series of
shares representing interests in separate portfolios of securities.

The Board of Trustees (the Board) has established three classes of shares of the Fund,
known as Class A Shares, Class B Shares and Class C Shares (Shares). This SAI relates to
all classes of Shares. The Fund's investment adviser is Federated Investment Management
Company (Adviser).

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 their value increases directly with the value of
the issuer's business. The following describes the types of equity securities in which the
Fund invests:

Common Stocks
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.

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

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

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.

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

A security's yield measures the annual income earned on a security as a percentage of its
price. A security's yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may redeem the
security before its scheduled maturity, the price and yield on a discount or premium
security may change based upon the probability of an early redemption. Securities with
higher risks generally have higher yields.
The following describes the types of fixed income securities in which the Fund invests:
Treasury Securities
Treasury securities are direct obligations of the federal government of the United States.
Treasury securities are generally regarded as having the lowest credit risks.

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

The Fund treats mortgage backed securities guaranteed by GSEs as agency securities.
Although a GSE guarantee protects against credit risks, it does not reduce the market and
prepayment risks of these mortgage backed securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses. 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.

Convertible Securities
Convertible securities are fixed income securities that the Fund has the option to exchange
for equity securities at a specified conversion price, or which are automatically exchanged
for equity securities after a specified conversion period. 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 generally 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 equity securities for purposes of its
investment policies and limitations, because of their unique characteristics.

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

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

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

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

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.

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 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.

Foreign Exchange Contracts
In order to convert U.S. dollars into the currency needed to buy a foreign security, or to
convert foreign currency received from the sale of a foreign security into U.S. dollars,
the Fund may enter into spot currency trades. In a spot trade, the Fund agrees to exchange
one currency for another at the current exchange rate. The Fund may also enter into
derivative contracts in which a foreign currency is an underlying asset. The exchange rate
for currency derivative contracts may be higher or lower than the spot exchange rate. Use
of these derivative contracts may increase or decrease the Fund's exposure to currency
risks.

Derivative Contracts
Derivative contracts are financial instruments that require payments based upon changes in
the values of designated (or underlying) securities, currencies, commodities, financial
indices or other assets. Some derivative contracts (such as futures, forwards and options)
require payments relating to a future trade involving the underlying asset. Other
derivative contracts (such as swaps) require payments relating to the income or returns
from the underlying asset. The other party to a derivative contract is referred to as a
counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price. Investors make
payments due under their contracts through the exchange. Most exchanges require investors
to maintain margin accounts through their brokers to cover their potential obligations to
the exchange. Parties to the contract make (or collect) daily payments to the margin
accounts to reflect losses (or gains) in the value of their contracts. This protects
investors against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a future date
by entering into an offsetting contract to sell the same asset on the same date. If the
offsetting sale price is more than the original purchase price, the Fund realizes a gain;
if it is less, the Fund realizes a loss. Exchanges may limit the amount of open contracts
permitted at any one time. Such limits may prevent the Fund from closing out a position. If
this happens, the Fund will be required to keep the contract open (even if it is losing
money on the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm the Fund by preventing it from disposing of or trading any assets
it has been using to secure its obligations under the contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty. OTC contracts do not necessarily
have standard terms, so they cannot be directly offset with other OTC contracts. In
addition, OTC contracts with more specialized terms may be more difficult to price than
exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships between the
market value of a derivative contract and the underlying asset, derivative contracts may
increase or decrease the Fund's exposure to market and currency risks, and may also expose
the Fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit
risks in the event that a counterparty defaults on the contract.

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

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

The Fund may buy or sell financial futures contracts (including futures on stock indices).

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

The Fund may:

o Buy call options on portfolio securities, futures, futures on indices and financial
futures contracts in anticipation of an increase in the value of the underlying asset;

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

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

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

The Fund may also write put options on portfolio securities, futures, futures on indices
and financial futures contracts 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.
When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

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.
CURRENCY SWAPS
Currency swaps are contracts which provide for interest payments in different currencies.
The parties might agree to exchange the notional principal amount as well.

Special Transactions

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

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

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

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

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

The Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for the use of
cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The Fund will
not have the right to vote on securities while they are on loan, but it will terminate a
loan in anticipation of any important vote. The Fund may pay administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the interest earned on
the cash collateral to a securities lending agent or broker.
Securities lending activities are subject to interest rate risks and credit risks.

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 funds, and an inter-fund loan is only made if it benefits each
participating 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 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 fund than market-competitive rates on overnight repurchase
agreements (the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings (the "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.

Short Sales
The Fund may make short sales of securities listed on one or more national exchanges or on
the NASDAQ stock market. A short sale means selling a security the Fund does not own to
take advantage of an anticipated decline in the stock's price. Once the Fund sells the
security short, it has an obligation to replace the borrowed security. If it can buy the
security back at a lower price, a profit results. In no event will the Fund engage in short
sales transactions if it would cause the market value of all of the Fund's securities sold
short to exceed 25% of its net assets. The value of the securities of any one issuer that
may be shorted by the Fund is limited to the lesser of 2% of the value of the Fund's net
assets or 2% of the securities of any class of the issuer. The Fund may also "sell short
against the box," i.e., the Fund owns securities identical to those sold short. Short sales
against the box are not subject to the 25% limitation. A capital gain is recognized
immediately upon entering into a short sale against the box with respect to an appreciated
security. Short sales are speculative in nature, and may reduce returns or increase
volatility.
Asset Coverage
In order to secure its obligations in connection with derivatives contracts or 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 without entering into an offsetting
derivative contract or terminating a special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on derivative contracts or special
transactions.

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

Investment Ratings

Investment Ratings for Investment Grade Securities

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

If a security is downgraded below the minimum quality grade discussed above, the Adviser
will reevaluate the security, but will not be required to sell it.

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.

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.

Risks of Investing in ADRs
o Because the Fund may invest in ADRs 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 would otherwise be the case.
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 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.

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 Company Size
o 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.

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

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.

Currency Risks
o 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.

o The Adviser attempts to manage currency risk by limiting the amount the Fund invests
in securities denominated in a particular currency. However, diversification will not
protect the Fund against a general increase in the value of the U.S. dollar relative to
other currencies.

Euro Risks
o The Fund may make significant investments in securities denominated in the Euro, the
new single currency of the European Monetary Union (EMU). Therefore, the exchange rate
between the Euro and the U.S. dollar will have a significant impact on the value of the
Fund's investments.

o With the advent of the Euro, the participating countries in the EMU can no longer
follow independent monetary policies. This may limit these countries' ability to respond
to economic downturns or political upheavals, and consequently reduce the value of their
foreign government securities.

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.

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.

Risks Associated with Noninvestment Grade Securities
o Securities rated below investment grade, also known as junk bonds, 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.

FIXED INCOME Securities Investment Risks

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

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.

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.

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.

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.

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.

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.

Fundamental INVESTMENT Objective
The Fund's investment objective is to provide moderate capital appreciation and high
current income. The investment objective may not be changed by the Fund's Trustee without
shareholder approval.

INVESTMENT LIMITATIONS

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

Concentration

The Fund will not make investments that will result in the concentration of its investments
in the securities of issuers primarily engaged in the same industry. For purposes of this
restriction, the term concentration has the meaning set forth in the Investment Company Act
of 1940 (1940 Act), as amended, any rule or order thereunder, or any SEC staff
interpretation thereof. Government securities and municipal securities will not be deemed
to constitute an industry.

Underwriting
The Fund may not underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its portfolio
securities, under circumstances where it may be considered to be an underwriter under the
Securities Act of 1933.

Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund may purchase
securities of companies that deal in commodities. For purposes of this restriction,
investments in transactions involving futures contracts and options, forward currency
contracts, swap transactions and other financial contracts that settle by payment of cash
are not deemed to be investments in commodities.

Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction does not
prevent the Fund from investing in issuers which invest, deal, or otherwise engage in
transactions in real estate or interests therein, or investing in securities that are
secured by real estate or interests therein. The Fund may exercise its rights under
agreements relating to such securities, including the right to enforce security interests
and to hold real estate acquired by reason of such enforcement until that real estate can
be liquidated in an orderly manner.

Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities to the
maximum extent permitted under the 1940 Act, any rule or order thereunder, or any SEC staff
interpretation thereof.

Lending
The Fund may not make loans, provided that this restriction does not prevent the Fund from
purchasing debt obligations, entering into repurchase agreements, lending its assets to
broker/dealers or institutional investors and investing in loans, including assignments and
participation interests.

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.

Concentration
In applying the concentration restriction, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute investment in
an industry. In addition, (a) utility companies will be divided according to their
services, for example, gas, gas transmission, electric and telephone will each be
considered a separate industry; (b) financial service companies will be classified
according to the end users of their services, for example, automobile finance, bank finance
and diversified finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such securities.

Illiquid Securities
The Fund will not purchase securities for which there is no readily available market, or
enter into repurchase agreements or purchase time deposits maturing in more than seven
days, if immediately after and as a result, the value of such securities would exceed, in
the aggregate, 15% of the Fund's net assets.

Investing in Other Investment Companies
The Fund may invest its assets in securities of other investment companies as an efficient
means of carrying out its investment policies. It should be noted that investment companies
incur certain expenses, such as management fees, and, therefore, any investment by the Fund
in shares of other investment companies may be subject to such duplicate expenses. At the
present time, the Fund expects that its investments in other investment companies may
include shares of money market funds, including funds affiliated with the Fund's investment
adviser.

The Fund may invest in the securities of affiliated money market funds as an efficient
means of managing the Fund's uninvested cash.

Purchases on Margin
The Fund will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities, and
further provided that the Fund may make margin deposits in connection with its use of
financial options and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.

Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided that this
shall not apply to the transfer of securities in connection with any permissible borrowing
or to collateral arrangements in connection with permissible activities.

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

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

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

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.

REDUCING OR eliminating THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:

Quantity Discounts
Larger purchases of the same Share class reduce or eliminate the sales charge you pay. You
can combine purchases of Shares made on the same day by you, your spouse and your children
under age 21. In addition, purchases made at one time by a trustee or fiduciary for a
single trust estate or a single fiduciary account can be combined.

Accumulated Purchases
If you make an additional purchase of Shares, you can count previous Share purchases still
invested in the Fund in calculating the applicable sales charge on the additional purchase.

Concurrent Purchases
You can combine concurrent purchases of the same share class of two or more Federated Funds
in calculating the applicable sales charge.

Letter of Intent Class A Shares
You can sign a Letter of Intent committing to purchase a certain amount of the same class
of Shares within a 13-month period to combine such purchases in calculating the sales
charge. 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.

Reinvestment Privilege
You may reinvest, within 120 days, your Share redemption proceeds at the next determined
NAV without any sales charge.

Purchases by Affiliates of the Fund
The following individuals and their immediate family members may buy Shares at NAV without
any sales charge because there are nominal sales efforts associated with their purchases:

o the Trustees, employees and sales representatives of the Fund, the Adviser, the
Distributor and their affiliates;

o any associated person of an investment dealer who has a sales agreement with the
Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

Federated Life Members
Shareholders of the Fund known as "Federated Life Members" are exempt from paying any
front-end sales charge. These shareholders joined the Fund originally:

o through the "Liberty Account," an account for Liberty Family of Funds shareholders on
February 28, 1987 (the Liberty Account and Liberty Family of Funds are no longer
marketed); or

o as Liberty Account shareholders by investing through an affinity group prior to
August 1, 1987.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have been
advanced to the investment professional selling Shares; the shareholder has already paid a
Contingent Deferred Sales Charge (CDSC); or nominal sales efforts are associated with the
original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will be imposed
on redemptions:

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

o representing minimum required distributions from an Individual Retirement Account or
other retirement plan to a shareholder who has attained the age of 7012;

o of Shares that represent a reinvestment within 120 days of a previous redemption;

o of Shares held by the Trustees, employees, and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates; employees of any investment professional
that sells Shares according to a sales agreement with the Distributor; and the immediate
family members of the above persons;

o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has entered
into certain arrangements with the Distributor or its affiliates, or any other
investment professional, to the extent that no payments were advanced for purchases made
through these entities;

o which are involuntary redemptions processed by the Fund because the accounts do not
meet the minimum balance requirements; and

Class B Shares Only

o which are qualifying redemptions of Class B Shares under a Systematic Withdrawal
Program.

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
generally pays up to 90% (and as much as 100%) of this charge to investment professionals
for sales and/or administrative services. Any payments to investment professionals in
excess of 90% of the front-end sales charge are considered supplemental payments. The
Distributor retains any portion not paid to an investment professional.

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

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

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 advanced commissions to
investment professionals.

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

SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker/dealers or banks) may be paid fees, in significant
amounts, out of the assets of the Distributor and/or Federated Shareholder Services
Company. (These fees do not come out of Fund assets.) The Distributor and/or Federated
Shareholder Services Company may be reimbursed by the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related and/or
shareholder services, such as advertising, providing incentives to their sales personnel,
sponsoring other activities intended to promote sales, and maintaining shareholder
accounts. These payments may be based upon such factors as the number or value of Shares
the investment professional sells or may sell; the value of client assets invested; and/or
the type and nature of sales or marketing support furnished by the investment professional.
When an investment professional's customer purchases shares, the investment professional
may receive:

o an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C Shares.

In addition, the Distributor may pay investment professionals 0.25% of the purchase price
of $1 million or more of Class A Shares that its customer has not redeemed over the first
year.

Class A Shares
Investment professionals purchasing Class A Shares for their customers are eligible to
receive an advance payment from the Distributor based on the following breakpoints:

Advance Payments
as a Percentage of
Public Offering
Amount Price
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%
For accounts with assets over $1 million, the dealers advance payments reset 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 payments will be paid only on those purchases that
were not previously subject to a front-end sales charge and dealer advance payments.
Certain retirement accounts may not be eligible for this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to Class A
Shares redeemed up to 24 months after purchase. The CDSC does not apply under certain
investment programs where the investment professional does not receive an advance payment
on the transaction including, but not limited to, trust accounts and wrap programs where
the investor pays an account level fee for investment management.

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.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as partners under
Massachusetts law for obligations of the Trust. To protect its shareholders, the Trust has
filed legal documents with Massachusetts that expressly disclaim the liability of its
shareholders for acts or obligations of the Trust.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its property to
protect or compensate the shareholder. On request, the Trust will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Trust. Therefore,
financial loss resulting from liability as a shareholder will occur only if the Trust
itself cannot meet its obligations to indemnify shareholders and pay judgments against them.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

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

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

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

As of December 2, 2002, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class A Shares: Edward Jones & Co., Maryland Hts., MO, owned
approximately 7,992,008 Shares (42.61%).

As of December 2, 2002, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class B Shares: Edward Jones & Co., Maryland Hts., MO, owned
approximately 1,888,529 Shares (16.72%); and MLPF&S, Jacksonville, FL, owned
approximately 749,762 Shares (6.64%).

As of December 2, 2002, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class C Shares: MLPF&S, Jacksonville, FL, owned approximately
850,246 Shares (15.37%).

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.

TAX INFORMATION

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

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

FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be subject to foreign
withholding or other taxes that could reduce the return on these securities. Tax treaties
between the United States and foreign countries, however, may reduce or eliminate the
amount of foreign taxes to which the Fund would be subject. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within various
countries is uncertain. However, the Fund intends to operate so as to qualify for
treaty-reduced tax rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year. Book
income generally consists solely of the income generated by the securities in the
portfolio, whereas tax-basis income includes, in addition, gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed-income
securities denominated in foreign currencies, it is difficult to project currency effects
on an interim basis. Therefore, to the extent that currency fluctuations cannot be
anticipated, a portion of distributions to shareholders could later be designated as a
return of capital, rather than income, for income tax purposes, which may be of particular
concern to simple trusts.

If the Fund invests in the stock of certain foreign corporations, they may constitute
Passive Foreign Investment Companies (PFIC), and the Fund may be subject to Federal income
taxes upon disposition of PFIC investments.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund will qualify for
certain Code provisions that allow its shareholders to claim a foreign tax credit or
deduction on their U.S. income tax returns. The Code may limit a shareholder's ability to
claim a foreign tax credit. Shareholders who elect to deduct their portion of the Fund's
foreign taxes rather than take the foreign tax credit must itemize deductions on their
income tax returns.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. 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. The Trust comprises six portfolios and the Federated
Fund Complex consists of 44 investment companies (comprising 138 portfolios). Unless
otherwise noted, each Board member oversees all portfolios in the Federated Fund Complex;
serves for an indefinite term; and also serves as a Board member of the following
investment company complexes: Banknorth Funds-five portfolios; CCMI Funds-two portfolios;
Regions Funds-eight portfolios; Riggs Funds-nine portfolios; and WesMark Funds-five
portfolios.

As of December 2, 2002, the Fund's Board and Officers as a group owned less than 1% of the
Fund's outstanding Class A, B and C Shares.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

Name rincipal Occupation(s) for Past Aggregate Total
Birth Date ive Years, Other Directorships Compensation Compensation
Address eld and Previous Positions From Trust From Trust and
Positions Held with P (past Fund Complex
Trust F fiscal (past calendar
Date Service Began H year) year)
Principal Occupations: Chief $0
John F. Donahue* Executive Officer and Director $0
Birth Date: July or Trustee of the Federated Fund
28, 1924 Complex; Chairman and Director,
CHAIRMAN AND Federated Investors, Inc.;
TRUSTEE Chairman, Federated Investment
Began serving: Management Company, Federated
April 1984 Global Investment Management
Corp. and Passport Research, Ltd.

Previous Positions: Trustee,
Federated Investment Management
Company and Chairman and
Director, Federated Investment
Counseling.

Principal Occupations: President $0
J. Christopher or Executive Vice President of $0
Donahue* 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
TRUSTEE Executive Officer and Director,
Began serving: Federated Investors, Inc.;
August 2000 President, Chief Executive
Officer and Trustee, Federated
Investment Management Company;
Trustee, Federated Investment
Counseling; President, Chief
Executive Officer and Director,
Federated Global Investment
Management Corp.; President and
Chief Executive Officer,
Passport Research, Ltd.;
Trustee, Federated Shareholder
Services Company; Director,
Federated Services Company.

Previous Position: President,
Federated Investment Counseling.

Principal Occupations: Director $197.57
Lawrence D. Ellis, or Trustee of the Federated Fund $148,500.00
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,
TRUSTEE 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 TRUSTEES BACKGROUND AND COMPENSATION

Name rincipal Occupation(s) for Past Aggregate Total
Birth Date ive Years, Other Directorships Compensation Compensation
Address eld and Previous Positions From From Trust and
Positions Held with P Trust Fund Complex
Trust Date Service F (past (past calendar
Began H fiscal year) year)
Principal Occupation: Director $217.34 $163,350.00
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
TRUSTEE Committee, Children's Hospital
Began serving: of Pittsburgh; Director,
October 1995 University of Pittsburgh.

Previous Position: Senior
Partner, Ernst & Young LLP.

Principal Occupations: Director $217.34
John T. Conroy, Jr. or Trustee of the Federated Fund $163,350.00
Birth Date: June Complex; Chairman of the Board,
23, 1937 Investment Properties
Grubb & Corporation; Partner or Trustee
Ellis/Investment in private real estate ventures
Properties in Southwest Florida.
Corporation
3838 Tamiami Trail Previous Positions: President,
N. Investment Properties
Naples, FL Corporation; Senior Vice
TRUSTEE President, John R. Wood and
Began serving: Associates, Inc., Realtors;
November 1991 President, Naples Property
Management, Inc. and Northgate
Village Development Corporation.

Principal Occupation: Director $217.34
Nicholas P. or Trustee of the Federated Fund $163,350.00
Constantakis Complex.
Birth Date: ---------------------------------
September 3, 1939
175 Woodshire Drive Other Directorships Held:
Pittsburgh, PA Director, Michael Baker
TRUSTEE Corporation (engineering and
Began serving: energy services worldwide).
February 1998
Previous Positions: Partner,
Andersen Worldwide SC.

Principal Occupation: Director $197.57 $148,500.00
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
TRUSTEE Executive Officer, Cunningham
Began serving: & Co., Inc. (strategic
January 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 $197.57 $148,500.00
Peter E. Madden or Trustee of the Federated Fund
Birth Date: March Complex; Management Consultant.
16, 1942 ---------------------------------
One Royal Palm Way
100 Royal Palm Way Other Directorships Held: Board
Palm Beach, FL of Overseers, Babson College.
TRUSTEE
Began serving: Previous Positions:
November 1991 Representative, Commonwealth of
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 $217.34 $163,350.00
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
TRUSTEE Previous Positions: Chief
Began serving: Executive Officer, PBTC
January 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.

John E. Murray, Principal Occupations: Director $234.3 $178,200.00
Jr., J.D., S.J.D. or Trustee of the Federated Fund
Birth Date: Complex; Chancellor and Law
December 20, 1932 Professor, Duquesne University;
Chancellor, Consulting Partner, Mollica
Duquesne University & Murray.
Pittsburgh, PA
TRUSTEE Other Directorships Held:
Began serving: Director, Michael Baker Corp.
February 1995 (engineering, construction,
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 $197.57
Marjorie P. Smuts or Trustee of the Federated Fund $148,500.00
Birth Date: June Complex; Public
21, 1935 Relations/Marketing
4905 Bayard Street Consultant/Conference
Pittsburgh, PA Coordinator.
TRUSTEE
Began serving: Previous Positions: National
April 1984 Spokesperson, Aluminum Company
of America; television producer;
President, Marj Palmer Assoc.;
Owner, Scandia Bord.

Principal Occupations: Director $197.57
John S. Walsh or Trustee of the Federated Fund $148,500.00
Birth Date: Complex; President and Director,
November 28, 1957 Heat Wagon, Inc. (manufacturer
2604 William Drive of construction temporary
Valparaiso, IN heaters); President and
TRUSTEE Director, Manufacturers
Began serving: Products, Inc. (distributor of
January 1999 portable construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products, Inc.

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

OFFICERS**
--------------------------------------------------------------------------------------------

Name rincipal Occupation(s) and Previous Positions
Birth Date
Address
Positions Held with Trust P
Principal Occupations: President, Executive Vice
Edward C. Gonzales President and Treasurer of some of the Funds in the
Birth Date: October 22, 1930 Federated Fund Complex; Vice Chairman, Federated
EXECUTIVE VICE PRESIDENT Investors, Inc.; Trustee, Federated Administrative
Services.

Previous Positions: Trustee or Director of some of the
Funds in the Federated Fund Complex; CEO and Chairman,
Federated Administrative Services; Vice President,
Federated Investment Management Company, Federated
Investment Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.; Director
and Executive Vice President, Federated Securities
Corp.; Director, Federated Services Company; Trustee,
Federated Shareholder Services Company.

Principal Occupations: Executive Vice President and
John W. McGonigle Secretary of the Federated Fund Complex; Executive Vice
Birth Date: October 26, 1938 President, Secretary and Director, Federated Investors,
EXECECUTIVE VICE PRESIDENT Inc.
AND SECRETARY
Previous Positions: Trustee, Federated Investment
Management Company and Federated Investment Counseling;
Director, Federated Global Investment Management Corp.,
Federated Services Company and Federated Securities
Corp.

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

Principal Occupations: President or Vice President of
Richard B. Fisher some of the Funds in the Federated Fund Complex; Vice
Birth Date: May 17, 1923 Chairman, Federated Investors, Inc.; Chairman,
VICE PRESIDENT Federated Securities Corp.

Previous Positions: 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.

James E. Grefenstette is Vice President of the Fund.
James E. Grefenstette Mr. Grefenstette joined Federated in 1992 and has been
Birth Date: November 7, 1962 a Portfolio Manager since 1994. Mr. Grefenstette became
VICE PRESIDENT a Senior Vice President of the Fund's Adviser in
January 2000. He served as a Vice President of the
Fund's Adviser from 1996 through 1999 and was an
Assistant Vice President of the Fund's Adviser from
1994 until 1996. Mr. Grefenstette is a Chartered
Financial Analyst; he received his M.S. in Industrial
Administration from Carnegie Mellon University.

Lawrence Auriana is Vice President of the Trust. Mr.
Lawrence Auriana Auriana joined Federated in April 2001 as Co-Head of
Birth Date: January 8, 1944 Investments/Federated Kaufmann. From August 1984 to
VICE PRESIDENT April 2001, Mr. Auriana was President and Treasurer of
Edgemont Asset Management Corp., and Chairman of the
Board and Portfolio Manager to The Kaufmann Fund, Inc.
(predecessor to the Federated Kaufmann Fund). Mr.
Auriana earned a B.S. in economics from Fordham
University and has been engaged in the securities
business since 1965.
--------------------------------------------------------

Hans P. Utsch is Vice President of the Trust. Mr. Utsch
Hans P. Utsch joined Federated in April 2001 as Co-Head of
Birth Date: July 3, 1936 Investments/Federated Kaufmann. From August 1984 to
VICE PRESIDENT April 2001, Mr. Auriana was Chairman of the Board and
Secretary of Edgemont Asset Management Corp., and
President and Portfolio Manager to The Kaufmann Fund,
Inc. (predecessor to the Federated Kaufmann Fund).
Mr. Utsch graduated from Amherst College and holds an
M.B.A. from Columbia University. He has been engaged in
the securities business since 1962.

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

Thomas R. Donahue, Chief Financial Officer, Vice President, Treasurer and Assistant
Secretary of Federated and an officer of its various advisory and underwriting
subsidiaries, has served as a Term Member on the Board of Directors of Duquesne University,
Pittsburgh, Pennsylvania, since May 12, 2000. Mr. John E. Murray, Jr., an Independent
Trustee of the Fund, served as President of Duquesne from 1988 until his retirement from
that position in 2001, and became Chancellor of Duquesne on August 15, 2001. It should be
noted that Mr. Donahue abstains on any matter that comes before Duquesne's Board that
affects Mr. Murray personally.

COMMITTEES of the board
ommittee Functions Meetings
Held
During
Last
Board Committee Fiscal
Committee Members C Year
Executive John F. Donahue In between meetings of the full Board, Two
John E. Murray, the Executive Committee generally may
Jr., J.D., S.J.D. exercise all the powers of the full Board
in the management and direction of the
business and conduct of the affairs of
the Trust in such manner as the
Executive Committee shall deem to be in
the best interests of the Trust.
However, the Executive Committee cannot
elect or remove Board members, increase
or decrease the number of Trustees, elect
or remove any Officer, declare dividends,
issue shares or recommend to shareholders
any action requiring shareholder approval.

Audit Thomas G. Bigley The Audit Committee reviews and Four
John T. Conroy, recommends to the full Board the
Jr. independent auditors to be selected to
Nicholas P. audit the Fund`s financial statements;
Constantakis meets with the independent auditors
Charles F. periodically to review the results of the
Mansfield, Jr. audits and reports the results to the
full Board; evaluates the independence of
the auditors, reviews legal and
regulatory matters that may have a
material effect on the financial
statements, related compliance policies
and programs, and the related reports
received from regulators; reviews the
Fund`s internal audit function; reviews
compliance with the Fund's code of
conduct/ethics; reviews valuation issues;
monitors inter-fund lending transactions;
reviews custody services and issues and
investigates any matters brought to the
Committee's attention that are within the
scope of its duties.

Board ownership of shares in the fund and in the Federated family of Investment companies
AS OF dECEMBER 31, 2002
--------------------------------------------------------------------------------------------
ollar Aggregate
Range of ollar Range of
hares hares Owned in
Owned Federated
D in Fund Family of
Interested D Investment
Board Member Name S S Companies
John F. Donahue None Over $100,000
J. Christopher Over Over $100,000
Donahue $100,000
Lawrence D. Ellis, None Over $100,000
M.D.

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. None Over $100,000
Constantakis
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. None $50,001 -
Mansfield, Jr. $100,000
John E. Murray, None Over $100,000
Jr., J.D., S.J.D.
Marjorie P. Smuts $1-$10,000 Over $100,000
John S. Walsh $10,001-$50,00Over $100,000

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

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 Trust or any Fund shareholder for any losses that
may be sustained in the purchase, holding, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its contract with the
Trust.

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 other funds in the Federated
fund 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 and
transfer agent). 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 offered by Federated.

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

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
Trustees, and certain other employees. Although they do permit these people to trade in
securities, including those that the Fund could buy, 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.

BROKERAGE TRANSACTIONS

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

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

For the fiscal year ended, October 31, 2002, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. The total amount of
these transactions was $370,377,579 for which the Fund paid $820,446 in brokerage
commissions.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative personnel
and services (including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company 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 $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
on assets in excess of
0.075 of 1% $750 million
The administrative fee received during any fiscal year shall be at least $125,000 per
portfolio and $30,000 for each additional class of shares. Federated Services Company may
voluntarily waive a portion of its fee and may reimburse the Fund for expenses.
--------------------------------------------------------------------------------------------

Federated Services Company 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. Foreign instruments purchased by the Fund are held by foreign banks
participating in a network coordinated by State Street Bank.

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

INDEPENDENT Auditors

The independent auditor for the Fund, Deloitte & Touche LLP, conducts its audits in
accordance with auditing standards generally accepted in the United States of America,
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.

FEES PAID BY THE FUND FOR SERVICES
For the Period Ended October 31 2002 20011
Advisory Fee Earned $1,627,2$234,838
Advisory Fee Reduction
0 234,838
Advisory Fee Reimbursement
7,981 723
Brokerage Commissions 166,430
1,083,686
Administrative Fee
185,000 167,767
12b-1 Fee:
Class B Shares
562,602 --

280,720 --
Shareholder Services Fee:
Class A Shares
261,317 --
Class B Shares
187,534 --
Class C Shares
93,574 --
1 Reflects operations for the period from December 4, 2002 (start of performance) to
October 31, 2001.
--------------------------------------------------------------------------------------------

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.

Average Annual Total Returns and Yield
Total returns are given for the one-year and Start of Performance periods ended October
31, 2002.

Yield is given for the 30-day period ended October 31, 2002.

0-Day Year Start of
3eriod Performance on
P 1 12/5/2000
Class A:
Total Return
Before Taxes NA (4.98)%5.10%
After Taxes on A 6.42)%
Distributions N ( 3.46%
After Taxes on A 3.02)%
Distributions
and Sale of Shares N ( 3.29%
Yield 4.13% NA NA
Class B:
Total Return
Before Taxes NA (5.51)%5.14%
After Taxes on A 6.76)%
Distributions N ( 3.66%
After Taxes on A 3.34)%
Distributions
and Sale of Shares N ( 3.41%
Yield 3.65% NA NA
Class C
Total Return
Before Taxes NA (1.17)%7.44%
After Taxes on A 2.43)%
Distributions N ( 5.99%
After Taxes on A 0.68)
Distributions
and Sale of Shares N ( 5.28%
Yield 3.65% NA NA

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

The average annual total return for Shares is the average compounded rate of return for a
given period that would equate a $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:

Russell Midcap Value Index measures the performance of those Russell Midcap companies
with lower price-to-book ratios and lower forecasted growth values. The stocks are also
members of the Russell 1000 Value index.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured, straightforward and
consistent investment decisions. Federated investment products have a history of
competitive performance and have gained the confidence of thousands of financial
institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound methodologies
backed by fundamental and technical research. At Federated, success in investment
management does not depend solely on the skill of a single portfolio manager. It is a
fusion of individual talents and state-of-the-art industry tools and resources. Federated's
investment process involves teams of portfolio managers and analysts, and investment
decisions are executed by traders who are dedicated to specific market sectors and who
handle trillions of dollars in annual trading volume.

Federated Funds overview

Municipal Funds

In the municipal sector, as of December 31, 2002, Federated managed 14 bond funds with
approximately $3.2 billion in assets and 22 money market funds with approximately $20.6
billion in total assets. In 1976, Federated introduced one of the first municipal bond
mutual funds in the industry and is now one of the largest institutional buyers of
municipal securities. The Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of Americans.

Equity Funds
In the equity sector, Federated has more than 31 years' experience. As of December 31,
2002, Federated managed 37 equity funds totaling approximately $16.2 billion in assets
across growth, value, equity income, international, index and sector (i.e. utility)
styles. Federated's value-oriented management style combines quantitative and qualitative
analysis and features a structured, computer-assisted composite modeling system that was
developed in the 1970s.

Corporate Bond Funds
In the corporate bond sector, as of December 31, 2002, Federated managed 10 money market
funds and 9 bond funds with assets approximating $59.4 billion and $6.0 billion,
respectively. Federated's corporate bond decision making--based on intensive, diligent
credit analysis--is backed by over 29 years of experience in the corporate bond sector. In
1972, Federated introduced one of the first high-yield bond funds in the industry. In 1983,
Federated was one of the first fund managers to participate in the asset backed securities
market, a market totaling more than $209 billion.

Government Funds
In the government sector, as of December 31, 2002, Federated managed 7 mortgage backed, 3
multi-sector government funds, 4 government/agency and 19 government money market mutual
funds, with assets approximating $4.9 billion, $0.9 billion, $2.9 billion and $56.2
billion, respectively. Federated trades approximately $90.4 billion in U.S. government and
mortgage backed securities daily and places approximately $35 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to invest in U.S.
government bond securities in 1969. Federated has been a major force in the short- and
intermediate-term government markets since 1982 and currently manages approximately $50
billion in government funds within these maturity ranges.

Money Market Funds
In the money market sector, Federated gained prominence in the mutual fund industry in 1974
with the creation of the first institutional money market fund. Simultaneously, the company
pioneered the use of the amortized cost method of accounting for valuing shares of money
market funds, a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money market fund. As of
December 31, 2002, Federated managed $136.2 billion in assets across 52 money market funds,
including 19 government, 10 prime, 22 municipal and 1 euro-denominated with assets
approximating $56.2 billion, $59.4 billion, $20.6 billion and $173.9 million, respectively.

The Chief Investment Officers responsible for oversight of the various investment sectors
within Federated are: Global Equity - Stephen F. Auth is responsible for overseeing the
management of Federated's domestic and international equity products; Global Fixed Income -
William D. Dawson III is responsible for overseeing the management of Federated's domestic
and international fixed income and high yield products.

Mutual Fund Market
Forty-nine percent of American households are pursuing their financial goals through mutual
funds. These investors, as well as businesses and institutions, have entrusted over $6.8
trillion to the more than 8,157 funds available, according to the Investment Company
Institute.

Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of investment
purposes. Specific markets include:

Institutional Clients
Federated meets the needs of approximately 3,035 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of purposes,
including defined benefit and defined contribution programs, cash management, and
asset/liability management. Institutional clients include corporations, pension funds, tax
exempt entities, foundations/endowments, insurance companies, and investment and financial
advisers. The marketing effort to these institutional clients is headed by John B. Fisher,
President, Institutional Sales Division, Federated Securities Corp.

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

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms nationwide--we
have over 2,000 broker/dealer and bank broker/dealer relationships across the
country--supported by more wholesalers than any other mutual fund distributor. Federated's
service to financial professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry benchmark for
service quality measurement. The marketing effort to these firms is headed by James F.
Getz, President, Broker/Dealer Sales Division, Federated Securities Corp.

INVESTMENT RATINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Moody's Investors Service Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics:

o Leading market positions in well-established industries;

o High rates of return on funds employed;

o Conservative capitalization structure with moderate reliance on debt and ample asset
protection;

o Broad margins in earning coverage of fixed financial charges and high internal cash
generation; and

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

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

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

A-2--Capacity for timely payment on issues with this designation is satisfactory. However,
the relative degree of safety is not as high as for issues designated A-1.

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

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

DC-415179 v1 0102460-0529
Addresses

federated market opportunity fund
Class A Shares
Class B Shares
Class C 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 Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

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

Independent Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116



PART C.    OTHER INFORMATION.

Item 23.    Exhibits
            (a)            (i) ...............Conformed copy of Amended and Restated Declaration
                           of          .......            Trust of the Registrant; (12)
                           (ii) ..............Conformed copy of Amendment No. 8 of the Amended
                           and Restated Declaration of Trust of the Registrant; (19)
                  (iii)    Conformed copy of Amendment No. 9 of the Amended and Restated
                           Declaration of Trust of the Registrant; (21)
                   (iv)    Conformed copy of Amendment No. 10 of the Amended and Restated
                           Declaration of Trust of the Registrant; (21)
                   (v)     Conformed copy of Amendment No. 11 of the Amended and Restated
                           Declaration of Trust of the Registrant; (21)
                  (vi)     Conformed copy of Amendment No. 12 of the Amended and Restated
                           Declaration of Trust of the Registrant; (23)
                  (vii)    Conformed copy of Amendment No. 13 of the Amended and Restated
                           Declaration of Trust of the Registrant; (23)
(viii)      Conformed copy of Amendment No. 14 of the Amended and Restated Declaration of
                           Trust of the Resgistrant; (24)
(ix)        Conformed copy of Amendment No. 15 of the Amened and Restated Declaration of
                           Trust of the Registrant; (24)
(x)   Conformed copy of Amendment No. 16 of the Amended and Restated Declaration of Trust
                           of the Registrant (24)
(xi)  Conformed copy of Amendment No. 17 of the Amended and Restated Declaration of the
                           Trust of the Registrant (24)
            (b)   (i)      Copy of Amended and Restated By-Laws of the Registrant; (12)
                  (ii)     Copy of Amendment No. 5 to By-Laws of the Registrant; (18)
                  (iii)    Copy of Amendment No. 6 to By-Laws of the Registrant; (18)
(iv)  Copy of Amendment No. 7 to By-Laws of the Registrant; (18)
(v)   Copy of Amendment No. 8 to By-Laws of the Registrant; (24)
            (c)    (i)     Copy of Specimen Certificate for Shares of Beneficial Interest of the
                           Registrant (Federated Small Cap Strategies Fund); (7)
                   (ii)    Copy of Specimen Certificate for Shares of Beneficial Interest of the
                           Registrant (Federated Growth Strategies Fund); (8)
                  (iii)    Copy of Specimen Certificate for Shares of Beneficial Interest of the
                           Registrant (Federated Capital Appreciation Fund); (9)
                  (iv)     Copy of Specimen Certificate for Shares of Beneficial
                           Interest of the Registrant (Federated Aggressive Growth
                           ..................Fund); (13)
______________________________________________________________
+     All exhibits have been filed electronically

7.    Response is incorporated by reference to Registrant's Post-Effective
            Amendment No. 21 on Form N-1A filed June 30, 1995.  (File Nos. 2-91090
      and 811-4017)
8.    Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 22 on Form N-1A filed July 17, 1995.  (File Nos. 2-91090
      and 811-4017)
9.    Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 25 on Form N-1A filed August 31, 1995.  (File Nos. 2-91090
      and 811-4017)
12.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 31 on Form N-1A filed June 11, 1996.  (File Nos. 2-91090
      and 811-4017)
13.         Response is incorporated by reference to Registrant's Post-Effective
            Amendment No. 34 on Form N-1A filed December 30, 1996.  (File Nos. 2-91090
      and 811-4017)
18.         Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 41 on Form N-1A filed November 2, 1998. (File Nos. 2-91090
      and 811-4017)
19.         Response is incorporated by reference to Registrant's Post-Effective
            Amendment No. 44 on Form N-1A filed December 28, 1999. (File Nos. 2-91090
      and 811-4017)
21.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 50 on Form N-1A filed December 29, 2000.  (File Nos. 2-91090
      and 811-4017)
23.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 51 on Form N-1A filed December 27, 2001.  (File Nos. 2-91090
      and 811-4017
24.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 57 on Form N-1A filed December 26, 2002.  (File Nos. 2-91090
      and 811-4017


             (d)     (i)   Conformed copy of Investment Advisory Contract of the Registrant
                           (Federated Growth Strategies Fund); (5)
                  (ii)     Conformed copy of Investment Advisory Contract on behalf
                           of the Registrant, which includes Exhibits A and B for
                            Federated Small Cap Strategies Fund and Federated Capital
                            Appreciation Fund, respectively; (10)
                    (iii)  Conformed copy of Exhibit C to the Investment Advisory
                           Contract of the Registrant (Federated Aggressive Growth
                           Fund); (14)
                   (iv)    Conformed copies of Exhibits D & E for Federated Large Cap
                           Growth Fund and Federated Communications Technology Fund,
                           respectively; (19)
                  (v)      Conformed copy of Exhibit F to the Investment Advisory
                           Contract for Federated New Economy Fund;(20)
(vi)  Conformed copy of Exhibit G to the Investment Advisory
                           Contract for Federated Kaufmann Fund; (23)
                  (vii)    Conformed copy of Exhibit H to the Investment Advisory
                           Contract for Federated Large Cap Tech Fund; (23)
                   (viii)  Conformed copy of Exhibit I to the Investment Advisory
                           Contract for Federated Market Opportunities Fund; (23)
                   (ix)    Conformed copy of Limited Power of Attorney of the
                           Investment Advisory Contract of the Registrant; (21)
                    (x)    Conformed copy of Schedule 1 of the Investment Advisory
                           Contract of the Registrant; (21)
                   (xi)    Conformed copy of Amendment #1 to Schedule 1 of the
                           Investment Advisory Contract of the Registrant; (21)
                  (xii)    Conformed copy of Amendment #2 to Schedule 1 of the
                           Investment Advisory Contract of the Registrant; (21)
                  (xiii)   Conformed copy of Amendment #3 to Schedule 1 of the
                           Investment Advisory Contract of the Registrant; (21)
                   (xiv)   Conformed copy of Exhibit I to Registrant's Investment Advisory
                           Contract for Federated Market Opportunity Fund; (22)
                  (xv)        Conformed copy of Amendment to Investment Advisory Contract
                           of the Registrant; (23)
(xvi)    Conformed copy of Sub-Advisory Agreement between Federated Investment Management
                           Company and Federated Global Investment Management Corp., with
                           Exhibit A attached thereto, dated September 1, 2001; (23)
(xvii)          Conformed copy of Sub-Advisory Agreement between Federated Investment
                           Management Company and Federated Global Investment Management Corp.
                           for Federated Kaufmann Small Cap Fund, with Exhibit A attached
                           thereto, dated December 1, 2002; (24)
(xviii)     Conformed copy of Exhibit J to the Investment Advisory Contract (Federated
                           Kaufmann Small Cap Fund) (24)

______________________________________________________________
+     All exhibits have been filed electronically

5     Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 21 on Form N-1A filed June 30, 1995. (File Nos. 2-91090 and
      811-4017)
10.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 26 on Form N-1A filed September 12, 1995.  (File Nos. 2-
      91090 and 811-4017)
14.   Response is incorporated by reference to Registrant's Post Effective
      Amendment No. 29 on Form N-1A filed May 29, 1997.  (File Nos. 2-
      910090 and 811-4017)
19.   Response is incorporated by reference to Registrant's Post-Effective Amendment No. 44 on
      Form
      N-1A filed December 28, 1999. (File Nos. 2-91090 and 811-4017)
20.   Response is incorporated by reference to Registrant's Post-Effective Amendment No. 46 on
      Form
      N-1A filed September 15, 2000. (File Nos. 2-91090 and 811-4017)
21.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 50 on Form N-1A filed December 29, 2000.  (File Nos. 2-91090
      and 811-4017)
22.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 52 on Form N-1A filed March 20, 2001.  (File Nos. 2-91090
      and 811-4017)
23.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 51 on Form N-1A filed December 27, 2001.  (File Nos. 2-91090
      and 811-4017
24.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 57 on Form N-1A filed December 26, 2002.  (File Nos. 2-91090
      and 811-4017
(e)
             (i)  Conformed copy of Distributor's Contract of the
                             Registrant; (10)
                  (ii)     Conformed copies of Exhibits A and C to the Distributor's Contract
                           for Federated Small Cap Strategies Fund, (Class A and C Shares); (10)
                  (iii)    ..................Conformed copies of Exhibits D and F to the
                           Distributor's Contract for Federated Growth Strategies Fund, (Class A
                           and C Shares); (10)
                  (iv)     Conformed copies of Exhibits G and I to the Distributor's Contract
                           for Federated Capital Appreciation Fund, (Class A and C Shares); (10)
                  (v)      Conformed copies of Exhibits J and L to the Distributor's Contract
                           for Federated Aggressive Growth Fund, (Class A and C Shares); (14)
                  (vi)     Conformed copy of Distributor's Contract (Class B Shares); (16)
                  (vii)    ...................Conformed copies of Exhibits M and N to the
                           Distributor's Contract for Federated Large Cap Growth Fund, (Class A
                           and C Shares); (19)
                  (viii)   Conformed copies of Exhibits O and P to the Distributor's
                           Contract for Federated Communications Technology Fund,
                           (Class A and C Shares); (19)
                  (ix)     Conformed copies of Exhibits Q and R to the Distributor's
                           Contract for Federated New Economy Fund, (Class A and C
                           Shares); (20)
(x)      Conformed copy of Exhibits S & T to Registrant's Distributor
                           Contract for Class A & C Shares of Federated Market Opportunity
                           Fund; (22)
                  (xi)     Conformed copy of Exhibit U to Registrant's Distributor
                           Contract for Class K Shares of Federated Kaufmann Fund; (23)
                  (xii)    Conformed copy of Exhibits V & W to Registrant's Distributor
                           Contract for Class A & C Shares of Federated Kaufmann Fund &
                           Federated Large Cap Tech Fund; (22)
                  (xiii)   Conformed copy of Amendment to Distributor's Contract of the
                           Registrant; (23)
(xiv) Conformed copy of Exhibit X to the Distributor's Contract (Federated Kaufmann Small
                           Cap Fund Class A Shares) (24)
(xv)  Conformed copy of Exhibit Y to the Distributor's Contract (Federated Kaufmann Small
                           Cap Fund Class C Shares) (24)
                  (xvi)    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 No. 33-38550 and 811-6269)
            (f)   Not applicable;

______________________________________________________________
+     All exhibits have been filed electronically

10.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 26 on Form N-1A filed September 12, 1995.  (File Nos. 2-91090 and 811-4017)
14.    Response is incorporated by reference to Registrant's Post Effective Amendment
       No. 29 on Form N-1A filed May 29, 1997.  (File Nos. 2-910090 and 811-4017)
16.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 35 on Form N-1A filed December 30, 1997. (File Nos. 2-91090 and 811-4017)
19.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 44 on Form N-1A filed December 28, 1999. (File Nos. 2-91090 and 811-4017)
20.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 46 on Form N-1A filed September 15, 2000. (File Nos. 2-91090 and 811-4017)
22.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 52 on Form N-1A filed March 20, 2001.  (File Nos. 2-91090
      and 811-4017)
23.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 51 on Form N-1A filed December 27, 2001.  (File Nos. 2-91090
      and 811-4017
24.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 57 on Form N-1A filed December 26, 2002.  (File Nos. 2-91090
      and 811-4017

             (g)     (i)   Conformed Copy of the Custodian Agreement of the
                            Registrant; (6)
                  (ii)                        Conformed copy of Custodian Fee Schedule; (15)
             (h)   (i)     Conformed copy of Amended and Restated Shareholder Services
                           Agreement; (15)
                   (ii)     Conformed copy of Amended and Restated Agreement for Fund Accounting
                           Services, Administrative Services, Shareholder Transfer Agency
                           Services and Custody Services Procurement; (17)
                  (iii)    Conformed copy of Amendment to Agreement for Fund Accounting
                           Services, Administrative Services, Shareholder Transfer Agency
                           Services and Custody Services Procurement; (23)
                   (iv)    Conformed copy of Principal Shareholder Service's Agreement
                           (Class B Shares); (16)
                    (v)    ..................Conformed copy of Exhibit 1 to the Principal
                           Shareholder
                           Service's Agreement (Class B Shares); (23)
                   (vi)    ..................Conformed copy of Shareholder Services Agreement
                           (Class B Shares); (16)
                  (vii)    Conformed copy of Exhibit 1 to the Shareholder Services
                           Agreement (Class B Shares); (23)
                 (viii)    The Registrant hereby incorporates by reference the conformed copy of
                           the Shareholder Services Sub-Contract between Fidelity and Federated
                           Shareholder Services from Item 24(b)(9)(iii) of the Federated GNMA
                           Trust Registration Statement on Form N-1A, filed with the Commission
                           on March 25, 1996 (File Nos. 2-75670 and 811-3375).
            (i)            Conformed copy of the Opinion and Consent of Counsel regarding
                           legality of shares being registered; (6)
            (j)            Conformed copy of Consent of Independent Auditors; (24)
            (k)             Not Applicable;
            (l)            Conformed copy of Initial Capital understanding; (2)


______________________________________________________________
+     All exhibits have been filed electronically

2.    Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 1 on Form N-1A filed February 28, 1985.  (File Nos. 2-91090 and 811-4017)
6.    Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 20 on Form N-1A filed December 29, 1994.  (File Nos. 2-91090 and 811-4017)
10.   Response is incorporated by reference to Registrant's Post-Effective Amendment
       No. 26 on Form N-1A filed September 12, 1995.  (File Nos. 2-91090 and 811-4017)
15.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 31 on Form N-1A filed October 30, 1997.  (File Nos. 2-91090 and 811-4017)
16.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 35 on Form N-1A filed December 30, 1997. (File Nos. 2-91090 and 811-4017)
17.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 40 on Form N-1A filed October 9, 1998. (File Nos. 2-91090 and 811-4017)
23.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 51 on Form N-1A filed December 27, 2001.  (File Nos. 2-91090
      and 811-4017
24.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 57 on Form N-1A filed December 26, 2002.  (File Nos. 2-91090
      and 811-4017


            (m)     (i)    Conformed Copy of Distribution Plan of the Registrant; (10)
                   (ii)    Conformed copies of Exhibits A and C to the Distribution Plan for
                           Federated Small Cap Strategies Fund, (Class A and C Shares); (10)
                           (iii) Conformed copy of Exhibit E to the Distribution Plan for
                           Federated Growth Strategies Fund, (Class C Shares); (10)
                   (iv)     Conformed copies of Exhibit F and H to the Distribution Plan for
                           Federated Capital Appreciation Fund, (Class A and C Shares); (10)
                     (v)      Conformed copies of Exhibits I and K to the Distribution Plan for
                           Federated Aggressive Growth Fund (Class A and C Shares); (14)
                           The responses described in Item 23(e)(xiv) are hereby
                           incorporated by reference;
                           (vii) ............Conformed copy of Amendment to the Distribution
                           Contract (Class B Shares); (23)
                 (viii)    Conformed copies of Exhibits L, M, N & O to the
                           Distribution Plan; (19)
                   (ix)    Conformed copies of Exhibits P and Q to the Distribution Plan for
                           Federated New Economy Fund, (Class A and C Shares); (20)
                    (x)    Conformed copy of Exhibit B to Registrant's Distribution Plan for
                           Class B Shares of Federated Small Cap Strategies Fund;(22)
                   (xi)    Conformed copy of Exhibit D to Registrant's Distribution Plan for
                           Class B Shares of Federated Growth Strategies Fund; (22)
                  (xii)    Conformed copy of Exhibit G to Registrant's Distribution Plan for
                           Class B Shares of Federated Capital Appreciation Fund; (22)
                 (xiii)    Conformed copy of Exhibit J to Registrant's Distribution Plan for
                           Class B Shares of Federated Aggressive Growth Fund; (22)
                  (xiv)    Conformed copy of Exhibits R & S to Registrant's Distribution
                           Plan for Class A & C Shares of Federated Market Opportunity Fund;
                           (22)
                   (xv)    Conformed copy of Exhibit T to Registrant's Distribution Plan for
                           Class K Shares of Federated Kaufmann Fund; (22)
                  (xvi)    Conformed copy of Exhibits U & V to Registrant's Distribution
                           Plan for Class A & C Shares of Federated Kaufmann Fund and
                           Federated Large Cap Tech Fund; (22)
(xvi) Copy of Schedule A to the Distribution Plan; (19)
(xvii)      Conformed copy of Exhibit W to the Distribution Plan (Federated Kaufmann Small
                           Cap Fund Class A Shares) (24)
(xviii)     Conform copy of Exhibit X to the Distribution Plan (Federated Kaufmann Small
                           Cap Fund Class C Shares) (24)
            (n)     (i)      The Registrant hereby incorporates the conformed copy of the
                           specimen Multiple Class Plan from Item (n) of the Federated Total
                           Return Government Bond Fund Registration Statement on Form N-1A,
                           filed with the Commission on April 24, 200. (File Nos. 33-60411 and
                           811-07309);
                   (ii)    Multiple Class Plan (18f-3) Exhibits; (19)
            (o)     (i)    Conformed copy of Power of Attorney of the Registrant;(19)
                  (ii)     Conformed copy of Power of Attorney of Chief
                           Investment Officer of the Registrant; (24)
______________________________________________________________
+     All exhibits have been filed electronically

10.   Response is incorporated by reference to Registrant's Post-Effective Amendment
       No. 26 on Form N-1A filed September 12, 1995.  (File Nos. 2-91090 and 811-4017)
14.    Response is incorporated by reference to Registrant's Post Effective Amendment
       No. 29 on Form N-1A filed May 29, 1997.  (File Nos. 2-910090 and 811-4017)
19.    Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 44 on Form N-1A filed December 28, 1999. (File Nos. 2-91090 and 811-4017)
20.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 46 on Form N-1A filed September 15, 2000. (File Nos. 2-91090 and 811-4017)
22.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 52 on Form N-1A filed March 20, 2001.  (File Nos. 2-91090
      and 811-4017)
23.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 51 on Form N-1A filed December 27, 2001.  (File Nos. 2-91090
      and 811-4017
24.   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 57 on Form N-1A filed December 26, 2002.  (File Nos. 2-91090
      and 811-4017


(iii)    Conformed copy of Power of Attorney of Trustee of the
                           Registrant; (19)
                   (iv)    Conformed copy of Limited Power of Attorney; (19)
            (p)            The Registrant hereby incorporates the conformed copy of the Code of
                           Ethics for Access Persons from Item 23(p) of the Federated Managed
                           Allocation Portfolios Registration Statement on Form N-1A filed with
                           the Commission on January 25, 2001. (File Nos. 33-51247 and 811-7129).

Item 24.    Persons Controlled by or Under Common Control with the Funds

            None.

Item 25.    Indemnification:  (1)

_______________________________________________________________________________________
1.    Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 41 on Form N-1A filed November 2, 1998. (File Nos. 2-91090
      and 811-4017)
19.   Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 44 on Form N-1A filed December 28, 1999. (File Nos. 2-91090 and 811-4017)

Item 26. Business and Other Connections of Investment Adviser:


   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 four
   of the Trustees and one 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.


         The remaining Officers of the investment adviser are:

         Vice Chairman:                      J. Thomas Madden

         President/ Chief Executive
         Officer:                                  Keith M. Schappert

         Executive Vice Presidents:          William D. Dawson, III
                                             Stephen F. Auth

         Senior Vice Presidents:             Joseph M. Balestrino
                                             David A. Briggs
                                             Jonathan C. Conley
                                             Christopher F. Corapi
                                             Deborah A. Cunningham
                                             Michael P. Donnelly
                                             Linda A. Duessel
                                             Mark E. Durbiano
                                             James E. Grefenstette
                                             Robert M. Kowit
                                             Jeffrey A. Kozemchak
                                             Richard J. Lazarchic
                                             Susan M. Nason
                                             Mary Jo Ochson
                                             Robert J. Ostrowski
                                             Frank Semack
                                             Richard Tito
                                             Peter Vutz

         Vice Presidents:                    Todd A. Abraham
                                             J. Scott Albrecht
                                             Randall S. Bauer
                                             Nancy J.Belz
                                             G. Andrew Bonnewell
                                             David Burns
                                             Robert E. Cauley
                                             Regina Chi
                                             Ross M. Cohen
                                             Fred B. Crutchfield
                                             Lee R. Cunningham, II
                                             Alexandre de Bethmann
B.    Anthony Delserone, Jr.
                                             Donald T. Ellenberger
                                             Eamonn G. Folan
                                             Kathleen M. Foody-Malus
                                             Thomas M. Franks
                                             John T. Gentry
                                             David P. Gilmore
                                             Marc Halperin
                                             John W. Harris
                                             Patricia L. Heagy
                                             Susan R. Hill
                                             Nikola A. Ivanov
                                             William R. Jamison
                                             Constantine J. Kartsonas
                                             Nathan H. Kehm
                                             John C. Kerber
                                             Steven Lehman
                                             Marian R. Marinack
                                             Natalie F. Metz
                                             Thomas J. Mitchell
                                             Joseph M. Natoli
                                             John L. Nichol
                                             Mary Kay Pavuk
                                             Jeffrey A. Petro
                                             John P. Quartarolo
                                             Ihab L. Salib
                                             Roberto Sanchez-Dahl, Sr.
                                             Aash M. Shah
                                             John Sidawi
                                             Michael W. Sirianni, Jr.
                                             Christopher Smith
                                             Timothy G. Trebilcock
                                             Leonardo A. Vila
                                             Paige M. Wilhelm
                                             Richard M. Winkowski, Jr.
                                             Lori A. Wolff
                                             George B. Wright

         Assistant Vice Presidents:          Catherine A. Arendas
                                             Angela A. Auchey
                                             Nicholas P. Besh
                                             Hanan Callas
                                             David W. Cook
                                             James R. Crea, Jr.
                                             Karol M. Crummie
                                             David Dao
                                             Richard J. Gallo
                                             James Grant
                                             Anthony Han
                                             Kathryn P. Heagy
                                             Carol B. Kayworth
                                             J. Andrew Kirschler
                                             Robert P. Kozlowski
                                             Ted T. Lietz, Sr.
                                             Monica Lugani
                                             Tracey L. Lusk
                                             Theresa K. Miller
                                             Bob Nolte
                                             Rae Ann Rice
                                             Jennifer G. Setzenfand
                                             Kyle D. Stewart
                                             Mary Ellen Tesla
                                             Michael R. Tucker
                                             Steven J. Wagner
                                             Mark Weiss

         Secretary:                          G. Andrew Bonnewell

         Treasurer:                          Thomas R. Donahue

         Assistant Secretaries:              Jay S. Neuman
                                             Leslie K. Ross

         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 II; Cash Trust Series, Inc.; CCMI Funds; Edward Jones Money Market Fund;
Edward Jones Tax-Free Money Market Fund; Federated American Leaders Fund, Inc.; Federated
Adjustable Rate Securities Fund; 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 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 Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Securities Income Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5
Years; Federated Total Return Government Bond Fund; Federated Utility Fund, Inc.; Federated
World Investment Series, Inc.; FirstMerit Funds; Hibernia Funds; Intermediate Municipal
Trust; Marshall Funds, Inc.; Money Market Obligations Trust; Regions Morgan Keegan Select
Funds; RIGGS Funds; SouthTrust Funds; and Vision Group of Funds.


         (b)

        (1)                          (2)                       (3)
Positions and Offices                                 Positions and Offices
  With Distributor                   Name                With Registrant
_____________________          _________________      ______________________

Chairman:                     Richard B. Fisher          Vice President

Director:                     Arthur L. Cherry

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

Senior Vice Presidents:
                              Mark W. Bloss
                              Richard W. Boyd
                              Laura M. Deger
                              Peter W. Eisenbrandt
                              Theodore Fadool, Jr.
                              Christopher T. Fives
                              James S. Hamilton
                              James M. Heaton
                              Amy Michaliszyn
                              Keith Nixon
                              Solon A. Person, IV
                              Ronald M. Petnuch
                              Timothy C. Pillion
                              Thomas E. Territ
                              Robert F. Tousignant

Vice Presidents:              John B. Bohnet
                              Jane E. Broeren-Lambesis
                              David J. Callahan
                              Mark Carroll
                              Scott Charlton
                              Steven R. Cohen
                              Mary J. Combs
                              R. Edmond Connell, Jr.
                              Kevin J. Crenny
                              Daniel T. Culbertson
                              G. Michael Cullen
                              Marc C. Danile
                              Robert J. Deuberry
                              Ron Dorman
                              William C. Doyle
                              Donald C. Edwards
                              Timothy Franklin
                              Peter J. Germain
                              Joseph D. Gibbons
                              G. Tad Gullickson
                              Scott Gundersen
                              Dayna C. Haferkamp
                              Raymond J. Hanley
                              Vincent L. Harper, Jr.
                              Bruce E. Hastings
                              Charlene H. Jennings
                              Teresa M. Johnson
                              Christopher L. Johnston
                              H. Joseph Kennedy
                              Stephen Kittel
                              Michael W. Koenig
                              Ed Koontz
                              Christopher A. Layton
                              Michael H. Liss
                              Michael R. Manning
                              Martin J. McCaffrey
                              Maurice W. McKinney
                              Mark J. Miehl
                              Richard C. Mihm
                              Vincent T. Morrow
                              Alec H. Neilly
                              Thomas A. Peter III
                              Raleigh Peters
                              Robert F. Phillips
                              Richard A. Recker
                              Christopher Renwick
                              John Rogers
                              Brian S. Ronayne
                              Thomas S. Schinabeck
                              Edward J. Segura
                              Edward L. Smith
                              David W. Spears
                              John A. Staley
                              Colin B. Starks
                              Jeffrey A. Stewart
                              Kevin Stutz
                              Timothy A. Rosewicz
                              Greg Spralding
                              William C. Tustin
                              Paul A. Uhlman
                              Richard B. Watts
                              G. Walter Whalen
                              Patrick M. Wiethorn
                              Edward J. Wojnarowski
                              Michael P. Wolff


Assistant Vice Presidents:    Lisa Arcuri
                              Robert W. Bauman
                              Edward R. Bozek
                              Charles L. Davis, Jr.
                              Beth C. Dell
                              Jennifer Fetteroff
                              Renee L. Gebben
                              John T. Glickson
                              William Rose
                              Lynn Sherwood-Long

Treasurer:                    Denis McAuley, III

Secretary:                    Stephen A. Keen

Assistant Secretaries:        Thomas R. Donahue
                              Peter J. Germain

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

         (c)     Not applicable





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 and Asset Management
                                          Group (IAMG)
                                          Federated Investors Tower
                                          12th Floor
                                          1001 Liberty Avenue
                                          Pittsburgh, PA  15222-3779
                                          (Notices should be sent to the Agent for
                                           Service at above address)

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

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

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

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

Federated Global Investment Management Corp.    c/o Federated Investors Tower
("Sub-Adviser to Federated Kaufmann       1001 Liberty Avenue
Small Cap Fund")                          Pittsburgh, PA  15222-3779

State Street Bank and Trust Company       P.O. Box 8600
("Custodian")                             Boston, MA 02266-8600


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 Trustees 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 EQUITY FUNDS, 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 22nd day of January, 2003.

                                   FEDERATED EQUITY FUNDS

                  BY: /s/ Todd P. Zerega
                  Todd P. Zerega, Assistant Secretary
                  Attorney in Fact for John F. Donahue
                  January 22, 2003

    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/ Todd P. Zerega            Attorney In Fact          January 22, 2003
    Todd P. Zerega                For the Persons
    ASSISTANT SECRETARY           Listed Below

John F. Donahue*                  Chairman and Trustee

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

Richard J. Thomas*                Treasurer
                                  (Principal FinancialOfficer)

Stephen F. Auth*                  Chief Investment Officer

Thomas G. Bigley*                   Trustee

John T. Conroy, Jr.*                Trustee

Nicholas P. Constantakis*           Trustee

John F. Cunningham*                 Trustee

Lawrence D. Ellis, M.D.*            Trustee

Peter E. Madden*                    Trustee

Charles F. Mansfield, Jr.*          Trustee

John E. Murray, Jr., J.D., S.J.D.*  Trustee

Marjorie P. Smuts*                  Trustee

John S. Walsh*                      Trustee

*By Power of Attorney

Federated Market Opportunity Fund

PROSPECTUS

CLASS A SHARESCLASS B SHARESCLASS C SHARES

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

CONTENTS

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, 2001)

What are the Fund's Fees and Expenses?

FEDERATED MARKET OPPORTUNITY FUND

FEES AND EXPENSES

EXAMPLE

What are the Fund's Investment Strategies?

PORTFOLIO TURNOVER

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

Real Estate Investment Trusts (REITs)

American Depository Receipts

Convertible Securities

Short Sales

FIXED INCOME SECURITIES

Foreign Government Securities

Foreign Corporate Debt Securities

Investing in Securities of Other Investment Companies

Investment Ratings for Investment Grade Securities

Corporate Debt Securities

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO INVESTING FOR VALUE

RISKS OF INVESTING IN ADRS

RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES

EMERGING MARKET RISKS

LEVERAGE RISKS

What Do Shares Cost?

SALES CHARGE WHEN YOU PURCHASE

SALES CHARGE WHEN YOU REDEEM

How is the Fund Sold?

RULE 12B-1 PLAN

How to Purchase Shares

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Wire

By Check

BY AUTOMATIC INVESTMENTS

BY INVEST-BY-PHONE

BY DIRECT DEPOSIT

THROUGH AN EXCHANGE

BY SYSTEMATIC INVESTMENT PROGRAM

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

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

Steven J. Lehman

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES