FEDERATED AMERICAN LEADERS FUND INC, N-30D/A, 1997-05-28

FEDERATED AMERICAN LEADERS FUND INC
N-30D/A, 1997-05-28

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FEDERATED AMERICAN LEADERS FUND, INC.

28TH ANNUAL REPORT
MARCH 31, 1997

ESTABLISHED 1969

PRESIDENT'S MESSAGE

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Dear Fellow Shareholder:

Federated American Leaders Fund, Inc. was created in 1969, and I am pleased
to present its 28th Annual Report. During the report period, the fund
achieved a milestone by topping $1 billion in assets for the first time in
its 28-year history. Assets currently total $1.3 billion, representing
87,000 shareholders. This robust growth reflects a sizable increase in the
value of fund shares, as well as the continued confidence of present and new
shareholders who purchased shares of this attractive, high-quality common
stock investment.

This report covers the 12-month period from April 1, 1996, through March 31,
1997. It begins with a discussion with the fund's co-portfolio managers,
Peter R. Anderson, Senior Vice President, and Scott B. Schermerhorn, Vice
President, Federated Advisers.

Following this discussion are three additional items of shareholder
interest. First, two graphs show the performance of initial lump sum and
annual investments in the fund -- both with dividends reinvested. Next is a
listing of the high-quality common stocks in the fund, followed by the
fund's financial statements.

The selected high-quality stocks included 78 holdings that represent 12
major industry groups and include leaders like Bristol-Myers Squibb,
Citicorp, Exxon, General Electric, ITT, K-Mart, Merck, Mobil, Rubbermaid and
Wal-Mart. These holdings performed very well in a stock market that was
highly favorable during most of the period, with the exception of a volatile
March.

The fund's shares displayed excellent capital appreciation, plus quarterly
income dividends and some realized capital gains. The performance of the
fund's share classes is listed below based on net asset value.*
<TABLE>
<CAPTION>
TOTAL CAPITAL
RETURN INCOME GAINS ASSET VALUE INCREASE
<S> <C> <C> <C> <C>
Class A Shares 17.40% $0.21 $1.51 $19.78 TO $21.40 = 8.19%
Class B Shares 16.49% $0.05 $1.51 $19.79 TO $21.40 = 8.13%
Class C Shares 16.42% $0.05 $1.51 $19.80 TO $21.40 = 8.08%
Class F Shares 17.39% $0.20 $1.51 $19.78 TO $21.40 = 8.19%
</TABLE>

* Performance quoted reflects past performance and is not indicative of
future returns. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for
Class A, B, C, and F Shares were 10.95%, 10.56%, 15.33% and 15.12%,
respectively.

We trust you are pleased with the positive performance of your investment
in Federated American Leaders Fund, Inc. Remember, reinvesting your
distributions is a convenient way to build the value of your account-and
help your shares increase through the benefit of quarterly compounding.

Sincerely,

[Graphic]

John F. Donahue
President
May 15, 1997

INVESTMENT REVIEW

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Peter R. Anderson
Senior Vice President
Federated Advisers

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Scott B. Schermerhorn
Vice President
Federated Advisers

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THE STOCK MARKET CONTINUED TO CLIMB TO NEW LEVELS, AND VOLATILITY FINALLY
RAISED ITS HEAD AT THE END OF THE FUND'S FISCAL YEAR. WHAT IS YOUR ANALYSIS?

The equity market, as measured by the Standard & Poor's 500 Index* (the "S&P
500 Index"), turned in a strong performance over the 12-month period with a
total return of 19.83%. Major indexes continued to reach new all-time highs
in the fourth quarter as investors reacted positively to election results
and the "Goldilocks" economy continued, i.e., everything -- moderate growth,
stable interest rates, subdued inflation, and rising corporate profits --
was "just about right." However, the end of the period was marked by a
degree of volatility that investors have not seen in over five years. Since
reaching its record of 816.29 in mid-February, the S&P 500 Index fell 7.25%
through March 31, 1997.
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HOW DID FEDERATED AMERICAN LEADERS FUND, INC. PERFORM FOR ITS SHAREHOLDERS
IN THIS CLIMATE?

For the 12-month period, the fund's A, B, C, and F Share classes produced a
strong total return, based on net asset value, of 17.40%, 16.49%, 16.42%,
and 17.39%, respectively.** This includes capital appreciation of the
shares, dividends, and realized capital gain to the fund's net asset value.
As of March 31, 1997, all Federated American Leaders Fund, Inc. share
classes beat the 15.47% average total return of all growth and income funds
tracked by Lipper Analytical Services. For the one-year period ended March
31, 1997, Federated American Leaders Fund, Inc.'s Class A Shares ranked
175th out of the 540 growth and income funds, according to Lipper.*** We did
not match the 19.83% total return of the S&P 500 Index for the period.

* The S&P 500 Index is an unmanaged index of common stocks in industry,
transportation and financial and public utility companies. Investments
cannot be made in an index.

** Performance quoted reflects past performance and is not indicative of
future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Total returns for the period based on offering price
for Class A, B, C, and F Shares were 10.95%, 10.56%, 15.33% and 15.12%,
respectively.

*** For the five-year and ten-year periods ended March 31, 1997, Federated
American Leaders Fund, Inc.'s Class A Shares ranked 46th out of 212 and
49th out of 128 growth and income funds tracked by Lipper Analytical
Services. Lipper Rankings are based on total return and do not take sales
charges into account.

[Graphic]

WHILE THE FUND'S PERFORMANCE -- AS THAT OF STOCKS IN GENERAL --IS BEST
MEASURED OVER THE LONG TERM, HOW DID THE FUND PERFORM IN MARCH DURING THE
MARKET'S DOWNTURN?

In March, which was a very difficult month for stocks, the fund did
relatively well compared to the overall market. All fund share class
returns, (3.01%), (3.05%), (3.05%) and (2.97%) for Class A, B, C, and F
Shares, respectively, based on net asset value, were less negative than the
(4.11%) total return of the overall market as represented by the S&P 500
Index.+

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DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO DURING THE PERIOD, AND
WHY?

The process and style that we use to manage Federated American Leaders Fund,
Inc. typically produces low turnover, so there is rarely any radical change
in the bulk of the portfolio. Our strategy continues to be the pursuit of
large-cap companies that have a leadership position in their respective
industries. We look for companies that appear inexpensive based on the
long-term earnings potential of their underlying businesses and which are
exhibiting positive momentum. We are also interested in asset plays,
restructuring candidates, and companies that will be beneficiaries of
industry consolidation.

During the period, leadership among sectors began to shift, and TECHNOLOGY'S
sustainable growth rate remains in question. We reduced exposure to this
sector in the third quarter of 1996 from one of a market overweight to one
of an underweight. Our valuation methods indicated that there was not much
room for error, and revenue growth in that sector had declined from prior
periods. FINANCE was another sector that we reduced from overweight to
market weight with an emphasis on financial institutions that had unique
items occurring versus those who were simply enjoying the current favorable
credit cycle. We increased our exposures to both RETAIL and TRANSPORTATION
as the fundamental outlook for both groups turned positive for the first
time in a while.

+ Total returns (loss) for the one-month period based on offering price for
Class A, B, C, and F Shares were (8.35%), (8.39%), (9.00%) and (4.87%),
respectively.

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CAN YOU DISCUSS SOME RECENT ADDITIONS TO THE PORTFOLIO, AND WHY THEY WERE
SELECTED?

Our recent purchases include:

AMERADA HESS. This large, integrated oil company has underperformed its
peers due to greater refining and marketing exposure. The company should
benefit from its high oil price sensitivity, and it is attractively valued
based on asset value and cash flow, and a consolidation within the refining
industry.

AMP, INC., the world's leading producer of electronic connectors, has
underperformed over the past two years, but should return to a superior
earnings growth track in 1997. The stock is attractively valued with a 2.6%
dividend yield. AMP has recently initiated a restructuring of their various
business segments to enhance shareholder value.

AMR CORP., the holding company for American Airlines, has strengthened its
competitive position and taken strategic actions including an initial public
offering ("IPO") of Sabre Group (reservation system), and possible
partnership with British Airways. The stock trades below industry multiples.

BEAR STEARNS COS., INC. is a major brokerage and investment banking firm.
Bear Stearns is well-managed and cheap with a price-to-earnings ratio of 8x
and price-to-book value ratio of 1.4x.

COASTAL CORP. is a diversified energy company primarily engaged in the
interstate transmission of natural gas. The stock appears attractively
valued with favorable long-term prospects.

HOUSTON INDUSTRIES is a large, low-cost Texas utility that is merging with
Noram Energy, a pipeline company. The stock appears undervalued relative to
prospects for the combined entity.
NATIONWIDE FINANCIAL SERVICES is a leading provider of long-term savings and
retirement products and a subsidiary of the Nationwide Insurance Enterprise
that recently sold stock in an IPO.

PEPSICO, INC. announced its intent to spin-off its restaurant businesses, so
it will be able to focus on its Frito Lay growth engine and its core
domestic soft drink franchise. Pepsi is at a lifetime low valuation versus
key competitor, Coke, and a 20% discount to our pro-forma sum-of-the-parts
valuation.

REPUBLIC NEW YORK, a leading New York metro consumer bank, also has a strong
international private banking franchise and an outstanding record. The stock
sells at only 11x estimated 1997 earnings.

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THE MARKET'S VALUATION HAS BEEN THE SUBJECT OF MUCH DEBATE. WHAT IS YOUR
VIEW ON THIS SUBJECT, AND ITS IMPACT ON YOUR SECURITY SELECTION PROCESS?

While we confess to some concerns regarding the market being overvalued, a
multiple of 17x estimated 1997 earnings for the S&P 500 Index does not
appear unreasonable given the current interest rate and inflation
environment. We continue to focus on companies that are truly leaders in
their industries and have strong managements. We believe holding stocks with
strong fundamentals supported by valuation is a good strategy in this market
environment, and one that gives the portfolio a defensive orientation.

Currently, our research does not reveal any areas of significant
undervaluation. Conversely, many areas where we saw historic excesses last
year are now more fairly valued. While no one group stands out, we have more
than enough investment candidates on a specific company basis.

Many of these companies are re-focusing on core businesses, while
de-emphasizing historic attempts at diversification that did not enhance
shareholder value. We operate with the mindset that we manage a diversified
mutual fund and, therefore, we have no desire or need for the companies we
own to diversify.

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WHAT DO YOU SEE AHEAD FOR THE STOCK MARKET?

Contrary to many market observers, ourselves included, the U.S. stock market
continued to show strength in the first quarter of 1997, even after the
substantial increases of 1995 and 1996. However, the market has been much
more selective and discriminating with regard to valuation and consistency,
and towards the end of the quarter, gave way to profit-taking. Given our
emphasis on quality and valuation, this "flight to quality" has worked well
for Federated American Leaders Fund, Inc. and its shareholders.

We continue to believe that 1997 will prove to be a challenging year for
investors and that stock selection will be of critical importance in this
environment. Historic valuation and risk control measures, which have been
all but ignored by investors over the past few years, should play an
important role in this market. Our adherence to these disciplines should
reward the fund's shareholders.

TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED AMERICAN LEADERS FUND, INC.

INITIAL INVESTMENT:

IF YOU HAD MADE AN INITIAL INVESTMENT OF $29,000 IN THE CLASS A SHARES OF
FEDERATED AMERICAN LEADERS FUND, INC. ON 2/26/69, REINVESTED DIVIDENDS AND
CAPITAL GAINS, AND DIDN'T REDEEM ANY SHARES, YOUR ACCOUNT WOULD BE WORTH
$486,978 ON 3/31/97. YOU WOULD HAVE EARNED A 10.56%* AVERAGE ANNUAL TOTAL
RETURN FOR THE 28-YEAR INVESTMENT LIFE SPAN.

One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.

As of 3/31/97, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 10.95%, 14.71%, and 11.39%, respectively. Class
B Shares' average annual one-year and since inception (7/26/94) total
returns were 10.56% and 18.95%, respectively. Class C Shares' average annual
one-year and since inception (4/22/93) total returns were 15.33% and 15.40%,
respectively. Class F Shares' average annual one-year and since inception
(7/28/93) total returns were 15.12% and 15.48%, respectively.

[`Graphic representation A1 omitted. See Appendix.'']

* Total return represents the change in the value of an investment in Class
A Shares after reinvesting all income and capital gains, and takes into
account the 5.5% sales charge applicable to an initial investment in Class A
Shares.

Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate so an
investor's shares, when redeemed, may be worth more or less than their
original cost.

FEDERATED AMERICAN LEADERS FUND, INC.

ONE STEP AT A TIME:

$1,000 INVESTED EACH YEAR FOR 28 YEARS (REINVESTING ALL DIVIDENDS AND
CAPITAL GAINS) GREW TO $243,592.
With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class A Shares of
Federated American Leaders Fund, Inc. on 2/26/69, reinvested your dividends
and capital gains and didn't redeem any shares, you have invested only
$29,000, but your account would have reached a total value of $243,592* by
3/31/97. You would have earned an average annual total return of 12.62%.

A practical investment plan helps you pursue long-term performance from
blue-chip stocks. Through systematic investing, you buy shares on a regular
basis and reinvest all earnings. An investment plan works for you when you
invest only $1,000 annually. You can take it one step at a time. Put time,
money, and compounding to work!

[`Graphic representation A2 omitted. See Appendix.'']

* No method of investing can guarantee a profit or protect against loss in
down markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.

Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.

FEDERATED AMERICAN LEADERS FUND, INC.
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR A COLLEGE EDUCATION

David and Joan Rice are a fictional couple who, like many shareholders, are
searching for a way to make their money grow over time.

David and Joan have been planning for the college education of their three
children, which is now just a few years away. On March 31, 1982, they
invested $5,000 in the Class A Shares of Federated American Leaders Fund,
Inc. Since then, David and Joan have made additional investments of $250
every month.

As this chart shows, over 15 years, the original $5,000 investment along
with their additional monthly $250 investments totaling $50,000 has grown to
$187,566. This represents a 14.70% average annual total return. For the
Rices, a dedicated program of monthly investment really paid off.

[`Graphic representation A3 omitted. See Appendix.'']

This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.

FEDERATED AMERICAN LEADERS FUND, INC.
A HISTORY OF SOLID EARNINGS -- NINETEEN 10-YEAR PERIODS

$10,000 INVESTED WITH DISTRIBUTIONS REINVESTED

How a $10,000 investment grew during each 10-year period since fund
inception.

This chart shows what your account would have been worth had you invested
$10,000 in Class A Shares at the beginning of these consecutive decades.

OVER EVERY 10-YEAR PERIOD SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT
IN ITS CLASS A SHARES (WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED) GREW
IN VALUE. At the end of each decade, no investor who stayed invested for the
period would have lost money.

[`Graphic representation A4 omitted. See Appendix.'']
* This 10-Year period is February 26, 1969 through March 31, 1979.

For each time period shown, share price fluctuated.

FEDERATED AMERICAN LEADERS FUND, INC.
PORTFOLIO UPDATE

[`Graphic representation A5 omitted. See Appendix.'']

FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS A SHARES)

GROWTH OF $10,000 INVESTED IN FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS A SHARES)

The graph below illustrates the hypothetical investment of $10,000 in the
Federated American Leaders Fund, Inc. (Class A Shares) (the "Fund") from
March 31, 1987 to March 31, 1997 compared to the Standard & Poor's 500 Index
(S&P 500)+ and the Lipper Growth and Income Funds Average (LGIFA).++

[`Graphic representation A6 omitted. See Appendix.'']

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550) that was in effect prior to October 1, 1994. As of
October 1, 1994, the maximum sales charge was 5.50%. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500 and
the LGIFA have been adjusted to reflect reinvestment of dividends on
securities in the index and average.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
index is unmanaged.

++ The LGIFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective category, and is not adjusted to reflect any sales
charges. However, these total returns are reported net of expenses or other
fees that the SEC requires to be reflected in a fund's performance.

FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS B SHARES)

GROWTH OF $10,000 INVESTED IN FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS B SHARES)

The graph below illustrates the hypothetical investment of $10,000 in the
Federated American Leaders Fund, Inc. (Class B Shares) (the "Fund") from
July 26, 1994 (start of performance) to March 31, 1997 compared to the
Standard & Poor's 500 Index (S&P 500)+ and the Lipper Growth and Income
Funds Average (LGIFA).++

[`Graphic representation A7 omitted. See Appendix.'']

* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 4.00% contingent deferred sales charge on any
redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The S&P 500 and the LGIFA have been
adjusted to reflect reinvestment of dividends on securities in the index and
average.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
index is unmanaged.

FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS C SHARES)

GROWTH OF $10,000 INVESTED IN FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS C SHARES)

The graph below illustrates the hypothetical investment of $10,000 in the
Federated American Leaders Fund, Inc. (Class C Shares) (the "Fund") from
April 22, 1993 (start of performance) to March 31, 1997 compared to the
Standard & Poor's 500 Index (S&P 500)+ and the Lipper Growth and Income
Funds Average (LGIFA).++

[`Graphic representation A8 omitted. See Appendix.'']

* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 1.00% contingent deferred sales charge on any
redemption less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500 and
the LGIFA have been adjusted to reflect reinvestment of dividends on
securities in the index and average.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.

FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS F SHARES)

GROWTH OF $10,000 INVESTED IN FEDERATED AMERICAN LEADERS FUND, INC.
(CLASS F SHARES)

The graph below illustrates the hypothetical investment of $10,000 in the
Federated American Leaders Fund, Inc. (Class F Shares) (the "Fund") from
July 28, 1993 (start of performance) to March 31, 1997 compared to the
Standard & Poor's 500 Index (S&P 500)+ and the Lipper Growth and Income
Funds Average (LGIFA).++

[`Graphic representation A9 omitted. See Appendix.'']

* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 1.00% ($10,000 investment minus $100
sales charge = $9,900). The ending value of the Fund reflects a contingent
deferred sales charge of 1.00% on any redemption less than four years from
the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The S&P 500 and the LGIFA have been adjusted to
reflect reinvestment of dividends on securities in the index and average.

** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.

+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.

FEDERATED AMERICAN LEADERS FUND, INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 97.3%
BASIC INDUSTRY -- 4.9%
200,000 Betz Laboratories, Inc. $ 12,625,000
238,500 Consolidated Papers, Inc. 12,431,812
435,000 Morton International, Inc. 18,378,750
828,000 USX-U.S. Steel Group, Inc. 22,045,500
Total 65,481,062
CONSUMER DURABLES -- 5.4%
535,000 Borg-Warner Automotive, Inc. 22,804,375
296,000 Centex Corp. 10,434,000
232,500 General Motors Corp. 12,874,687
1,051,700 Rubbermaid, Inc. 26,161,038
Total 72,274,100
CONSUMER NON-DURABLES -- 11.5%
272,500 CPC International, Inc. 22,345,000
160,900 Kimberly-Clark Corp. 15,989,438
678,000 PepsiCo, Inc. 22,119,750
92,000 Philip Morris Cos., Inc. 10,499,500
335,000 RJR Nabisco Holdings Corp. 10,803,750
775,300 Russell Corp. 27,716,975
292,200 Tambrands, Inc. 12,528,075
169,300 Unilever N.V., ADR 31,532,125
Total 153,534,613
ENERGY MINERALS -- 10.4%
210,000 Amerada-Hess Corp. 11,130,000
166,500 Chevron Corp. 11,592,562
135,500 Exxon Corp. 14,600,125
135,000 Mobil Corp. 17,634,375
450,000 Occidental Petroleum Corp. 11,081,250
</TABLE>

FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ENERGY MINERALS -- CONTINUED
89,000 Royal Dutch Petroleum Co., ADR $ 15,575,000
120,000 Texaco, Inc. 13,140,000
992,300 USX Corp. 27,660,363
435,000 Unocal Corp. 16,584,375
Total 138,998,050
FINANCE -- 13.5%
226,500 Allstate Corp. 13,448,437
446,250 Bear Stearns Cos., Inc. 11,714,062
200,000 CIGNA Corp. 29,225,000
148,600 Chase Manhattan Corp. 13,912,675
120,000 Citicorp 12,990,000
430,000 Dean Witter, Discover & Co. 14,996,250
330,000 Federal National Mortgage Association 11,921,250
211,000 Marsh & McLennan Cos., Inc. 23,895,750
248,500 National City Corp. 11,586,313
285,000 (a)Nationwide Financial Services, Inc., Class A 7,338,750
206,000 Republic New York Corp. 18,153,750
222,400 Travelers Group, Inc. 10,647,400
Total 179,829,637
HEALTH CARE -- 10.5%
354,000 Abbott Laboratories 19,868,250
233,000 American Home Products Corp. 13,980,000
725,000 Biomet, Inc. 12,234,375
397,000 Bristol-Myers Squibb Co. 23,423,000
411,000 Columbia/HCA Healthcare Corp. 13,819,875
720,400 (a)Healthsource, Inc. 14,768,200
164,000 Merck & Co., Inc. 13,817,000
275,000 United Healthcare Corp. 13,096,875
</TABLE>

FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HEALTH CARE -- CONTINUED
398,000 (a)Vencor, Inc. $ 15,074,250
Total 140,081,825
PRODUCER MANUFACTURING -- 5.2%
142,500 General Electric Co. 14,143,125
820,500 ITT Industries, Inc. 18,358,687
590,500 Ingersoll-Rand Co. 25,760,563
120,000 Loews Corp. 10,665,000
Total 68,927,375
RETAIL TRADE -- 5.8%
658,000 Dayton-Hudson Corp. 27,471,500
1,879,000 (a)KMart Corp. 22,782,875
974,500 Wal-Mart Stores, Inc. 27,164,188
Total 77,418,563
SERVICES -- 4.1%
600,000 Block (H&R), Inc. 17,625,000
800,000 Browning-Ferris Industries, Inc. 23,100,000
165,000 Gannett Co., Inc. 14,169,375
Total 54,894,375
TECHNOLOGY -- 11.1%
505,000 AMP, Inc. 17,359,375
366,200 Electronic Data Systems Corp. 14,785,325
320,000 General Motors Corp., Class H 17,360,000
226,600 Hewlett-Packard Co. 12,066,450
89,000 Intel Corp. 12,382,125
93,500 International Business Machines Corp. 12,844,563
92,364 Lockheed Martin Corp. 7,758,576
389,000 Lucent Technologies, Inc. 20,519,750
209,400 Rockwell International Corp. 13,584,825
</TABLE>

FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TECHNOLOGY -- CONTINUED
503,000 (a)Storage Technology Corp. $ 19,742,750
Total 148,403,739
TRANSPORTATION -- 2.7%
245,000 (a)AMR Corp. 20,212,500
575,000 Consolidated Freightways, Inc. 15,596,875
Total 35,809,375
UTILITIES -- 12.2%
300,000 AT&T Corp. 10,425,000
265,000 Coastal Corp. 12,720,000
243,700 Columbia Gas System, Inc. 14,104,137
431,000 GTE Corp. 20,095,375
617,000 Houston Industries, Inc. 12,879,875
751,500 MCI Communications Corp. 26,772,188
948,000 P G & E Corp. 22,278,000
620,000 Pacific Telesis Group 23,405,000
20,000 SBC Communications, Inc. 1,052,500
1,564,500 (a)Tele-Communications, Inc., Class A 18,774,000
Total 162,506,075
TOTAL COMMON STOCKS (IDENTIFIED COST $1,087,833,869) 1,298,158,789
PREFERRED STOCKS -- 1.6%
TECHNOLOGY -- 1.6%
260,100 Microsoft Corp., Cumulative Conv. Pfd., Series A, $2.20 21,100,612
TOTAL PREFERRED STOCKS (IDENTIFIED COST $20,775,487) 21,100,612
</TABLE>

FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)REPURCHASE AGREEMENT -- 1.6%
$ 21,245,000 BT Securities Corporation, 6.450%, dated 3/31/1997, due 4/1/1997
(AT AMORTIZED COST) $ 21,245,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,129,854,356)(C) $1,340,504,401
</TABLE>

(a) Non-income producing security.

(b) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.

(c) The cost of investments for federal tax purposes amounts to
$1,129,854,356. The net unrealized appreciation of investments on a federal
tax basis amounts to $210,650,045 which is comprised of $238,503,402
appreciation and $27,853,357 depreciation at March 31, 1997.

Note: The categories of investments are shown as a percentage of net assets
($1,334,218,452) at March 31, 1997.

The following acronym is used throughout this portfolio:

ADR -- American Depositary Receipt

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $1,129,854,356) $ 1,340,504,401
Cash 2,092,720
Income receivable 2,378,099
Receivable for shares sold 7,732,991
Total assets 1,352,708,211
LIABILITIES:
Payable for investments purchased $14,660,138
Payable for shares redeemed 2,853,783
Accrued expenses 975,838
Total liabilities 18,489,759
NET ASSETS for 62,359,443 shares outstanding $ 1,334,218,452
NET ASSETS CONSIST OF:
Paid in capital $ 1,044,027,051
Net unrealized appreciation of investments* 210,650,045
Accumulated net realized gain on investments 79,368,284
Undistributed net investment income 173,072
Total Net Assets $ 1,334,218,452
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($638,082,498 / 29,823,124 shares outstanding) $21.40
Offering Price Per Share (100 / 94.50 of $21.40)** $22.65
Redemption Proceeds Per Share*** $21.40
CLASS B SHARES:
Net Asset Value Per Share ($540,995,343 / 25,285,276 shares outstanding) $21.40
Offering Price Per Share** $21.40
Redemption Proceeds Per Share (94.50 /100 of $21.40)*** $20.22
CLASS C SHARES:
Net Asset Value Per Share ($69,989,875 / 3,271,219 shares outstanding) $21.40
Offering Price Per Share** $21.40
Redemption Proceeds Per Share (99.00 /100 of $21.40)*** $21.19
CLASS F SHARES:
Net Asset Value Per Share ($85,150,736 / 3,979,824 shares outstanding) $21.40
Offering Price Per Share (100 / 99.00 of $21.40)**** $21.62
Redemption Proceeds Per Share (99.00 / 100 of $21.40)*** $21.19
</TABLE>

* $15,368,160 of unrealized appreciation was acquired in connection with the
acquisition of The State Bond Diversified Fund on December 13, 1996.

** See "How to Purchase Shares" in the Prospectus.

*** See "Contingent Deferred Sales Charge" in the Prospectus.

**** See "What Shares Cost" in the Prospectus.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 20,396,275
Interest 2,358,917
Total income 22,755,192
EXPENSES:
Investment advisory fee $6,915,061
Administrative personnel and services fee 809,285
Custodian fees 154,559
Transfer and dividend disbursing agent fees and expenses 1,439,228
Directors'/Trustees' fees 26,162
Auditing fees 20,185
Legal fees 27,145
Portfolio accounting fees 169,583
Distribution services fee -- Class B Shares 3,022,927
Distribution services fee -- Class C Shares 437,917
Shareholder services fee -- Class A Shares 1,343,357
Shareholder services fee -- Class B Shares 1,007,642
Shareholder services fee -- Class C Shares 145,972
Shareholder services fee -- Class F Shares 180,791
Share registration costs 197,142
Printing and postage 249,779
Insurance premiums 11,449
Taxes 105,158
Miscellaneous 18,794
Total expenses 16,282,136
Waivers --
Waiver of shareholder services fee -- Class A Shares $(147,218)
Waiver of shareholder services fee -- Class F Shares (5,231)
Total waivers (152,449)
Net expenses 16,129,687
Net investment income 6,625,505
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 141,874,167
Net change in unrealized appreciation of investments 35,256,912
Net realized and unrealized gain on investments 177,131,079
Change in net assets resulting from operations $183,756,584
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 6,625,505 $ 4,745,714
Net realized gain (loss) on investments ($141,874,167
net gain and $29,467,435
net gain, respectively, as computed for federal tax 141,874,167 29,467,435
purposes)
Net change in unrealized appreciation 35,256,912 112,788,561
Change in net assets resulting from operations 183,756,584 147,001,710
NET EQUALIZATION CREDITS (DEBITS) -- 1,030,846 797,978
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (5,317,770) (3,449,876)
Class B Shares (1,076,234) (300,834)
Class C Shares (143,909) (50,556)
Class F Shares (721,875) (370,222)
Distributions from net realized gains
Class A Shares (37,762,270) (12,685,641)
Class B Shares (29,990,344) (4,534,699)
Class C Shares (4,292,692) (1,056,763)
Class F Shares (5,278,763) (1,393,014)
Change in net assets resulting from distributions
to shareholders (84,583,857) (23,841,605)
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED
TO NET INVESTMENT INCOME) --
Proceeds from sale of shares 464,456,064 396,144,022
Proceeds from shares issued in connection with the 48,460,181(a) --
acquisition
Net asset value of shares issued to shareholders in
payment of
distributions declared 77,137,909 19,738,904
Cost of shares redeemed (172,693,035) (86,878,884)
Change in net assets resulting from share transactions 417,361,119 329,004,042
Change in net assets 517,564,692 452,962,125
NET ASSETS:
Beginning of period 816,653,760 363,691,635
End of period (including undistributed net investment
income of $173,072 and $807,355, respectively) $1,334,218,452 $ 816,653,760
</TABLE>

(a) Includes $15,368,160 of unrealized appreciation.

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $19.78 $15.66 $14.58 $14.90 $13.88 $13.18 $12.21 $13.04 $12.55 $14.21
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.23 0.22 0.25 0.23 0.29 0.29 0.37 0.55 0.50 0.45
Net realized and
unrealized gain
(loss)
on investments 3.11 4.70 1.42 0.18 2.05 1.34 1.28 0.36 1.08 (1.21)
Total from
investment
operations 3.34 4.92 1.67 0.41 2.34 1.63 1.65 0.91 1.58 (0.76)
LESS DISTRIBUTIONS
Distributions
from net
investment
income (0.21) (0.17) (0.24) (0.24) (0.28) (0.28) (0.38) (0.56) (0.50) (0.43)
Distributions
from net
realized gain on
investments (1.51) (0.63) (0.35) (0.49) (1.04) (0.65) (0.30) (1.18) (0.59) (0.47)
Total
distributions (1.72) (0.80) (0.59) (0.73) (1.32) (0.93) (0.68) (1.74) (1.09) (0.90)
NET ASSET VALUE,
END OF PERIOD $21.40 $19.78 $15.66 $14.58 $14.90 $13.88 $13.18 $12.21 $13.04 $12.55
TOTAL RETURN(A) 17.40% 32.00% 11.87% 2.76% 18.31% 12.91% 14.17% 7.13% 13.23% (5.32%)
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.17% 1.16% 1.23% 1.18% 1.13% 1.02% 1.02% 1.01% 1.01% 1.00%
Net investment
income 0.95% 1.07% 1.71% 1.48% 2.07% 2.12% 3.06% 4.23% 3.85% 3.35%
Expense waiver/
reimbursement(b) 0.03% 0.07% -- -- 0.06% 0.16% 0.30% 0.35% 0.12% 0.11%
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $638,082 $455,867 $268,470 $226,857 $202,866 $171,210 $149,360 $147,235 $149,049 $158,818
Average
commission rate
paid(c) $.0500 -- -- -- -- -- -- -- -- --
Portfolio 88% 46% 34% 27% 39% 67% 57% 50% 27% 65%
turnover
</TABLE>

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

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

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.79 $15.67 $14.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.10 0.13
Net realized and unrealized gain (loss) on investments 3.12 4.70 0.92
Total from investment operations 3.17 4.80 1.05
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.05) (0.12)
Distributions from net realized gain on investments (1.51) (0.63) (0.23)
Total distributions (1.56) (0.68) (0.35)
NET ASSET VALUE, END OF PERIOD $21.40 $19.79 $15.67
TOTAL RETURN(B) 16.49% 31.10% 7.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.95% 1.93% 1.95%*
Net investment income 0.18% 0.32% 1.09%*
Expense waiver/reimbursement(c) -- 0.05% 0.12%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $540,995 $261,024 $46,671
Average commission rate paid(d) $.0500 -- --
Portfolio turnover 88% 46% 34%
</TABLE>

* Computed on an annualized basis.

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

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

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.80 $15.66 $14.55 $14.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.14 0.12
Net realized and unrealized gain (loss) on investments 3.12 4.75 1.45 0.35
Total from investment operations 3.16 4.80 1.59 0.47
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.13) (0.13)
Distributions from net realized gain on investments (1.51) (0.63) (0.35) (0.49)
Total distributions (1.56) (0.66) (0.48) (0.62)
NET ASSET VALUE, END OF PERIOD $21.40 $19.80 $15.66 $14.55
TOTAL RETURN(B) 16.42% 31.14% 11.23% 3.16%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.95% 1.96% 2.04% 2.11%*
Net investment income 0.18% 0.27% 0.91% 0.71%*
Expense waiver/reimbursement(c) -- 0.02% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $69,990 $44,434 $20,055 $11,895
Average commission rate paid(d) $.0500 -- -- --
Portfolio turnover 88% 46% 34% 27%
</TABLE>

* Computed on an annualized basis.

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

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS -- CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.78 $15.66 $14.58 $14.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.20 0.19 0.25 0.16
Net realized and unrealized gain (loss) on investments 3.13 4.72 1.42 (0.20)
Total from investment operations 3.33 4.91 1.67 (0.04)
LESS DISTRIBUTIONS
Distributions from net investment income (0.20) (0.16) (0.24) (0.16)
Distributions from net realized gain on investments (1.51) (0.63) (0.35) (0.17)
Total distributions (1.71) (0.79) (0.59) (0.33)
NET ASSET VALUE, END OF PERIOD $21.40 $19.78 $15.66 $14.58
TOTAL RETURN(B) 17.39% 31.95% 11.80% (0.30%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.19% 1.21% 1.27% 1.35%*
Net investment income 0.94% 1.02% 1.69% 1.51%*
Expense waiver/reimbursement(c) 0.01% 0.02% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $85,151 $55,329 $28,495 $15,282
Average commission rate paid(d) $.0500 -- -- --
Portfolio turnover 88% 46% 34% 27%
</TABLE>

* Computed on an annualized basis.

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

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

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997

1. ORGANIZATION

Federated American Leaders Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund offers four classes of
shares: Class A Shares, Class B Shares, Class C Shares, and Class F Shares.
The investment objective of the Fund is to seek growth of capital and of
income by concentrating the area of investment decision in the securities of
high quality companies.

On December 13, 1996 the Fund acquired all the net assets of The State Bond
Diversified Fund ("Acquired Fund") pursuant to a plan of reorganization
approved by the Acquired Fund's shareholders. The acquisition was
accomplished by a tax-free exchange of 2,358,160 shares of the Fund (valued
at $48,460,181) for the 4,535,346 shares of the Acquired Fund outstanding on
December 13, 1996. The Acquired Fund's net assets of 48,460,181 which
consisted of $33,092,021 of Paid in Capital and 15,368,160 of unrealized
appreciation, at that date were combined with those of the Fund. The
aggregate net assets of the Fund and the Acquired Fund immediately before
the acquisition were $548,433,731 and $48,460,181, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS -- Listed equity securities are valued at the last
sale price reported on a national securities exchange. Short-term securities
are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost, which
approximates fair market value.

REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral securities.

FEDERATED AMERICAN LEADERS FUND, INC.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.

Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
accumulated equalization and have been reclassified as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT INCOME
<S> <C>
$1,030,846 $(1,030,846)
</TABLE>

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.

EQUALIZATION -- The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.

OTHER -- Investment transactions are accounted for on the trade date.

FEDERATED AMERICAN LEADERS FUND, INC.

3. CAPITAL STOCK

At March 31, 1997, par value shares ($ 0.20 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A 30,000,000
Class B 20,000,000
Class C 25,000,000
Class F 25,000,000
</TABLE>

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 7,706,275 $144,256,344 8,582,300 $153,778,904
Shares issued to
shareholders in
connection with
the Acquisition 2,358,160 48,460,181 -- --
Shares issued to
shareholders in
payment of
distributions
declared 1,877,620 38,245,728 745,456 13,448,166
Shares redeemed (5,165,910) (107,679,833) (3,425,166) (61,354,945)
Net change
resulting from
Class A Share
transactions 6,776,145 $123,282,420 5,902,590 $105,872,125
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 12,996,770 $268,480,862 10,810,661 $198,757,682
Shares issued to
shareholders in
payment of
distributions
declared 1,425,508 29,165,525 236,916 4,339,389
Shares redeemed (2,323,540) (48,574,439) (839,484) (15,534,728)
Net change
resulting from
Class B Share
transactions 12,098,738 $249,071,948 10,208,093 $187,562,343

FEDERATED AMERICAN LEADERS FUND, INC.

<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,226,661 $25,200,316 1,191,221 $21,813,090
Shares issued to
shareholders in
payment of
distributions
declared 201,317 4,118,193 36,162 655,726
Shares redeemed (401,373) (8,350,604) (263,447) (4,771,458)
Net change
resulting from
Class C Share
transactions 1,026,605 $20,967,905 963,936 $17,697,358
<CAPTION>

YEAR ENDED MARCH 31,
1997 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,296,525 $ 26,518,542 1,201,769 $ 21,794,346
Shares issued to
shareholders in
payment of
distributions
declared 274,107 5,608,463 71,470 1,295,623
Shares redeemed (388,020) (8,088,159) (295,842) (5,217,753)
Net change
resulting from
Class F Share
transactions 1,182,612 $ 24,038,846 977,397 $ 17,872,216
Net change
resulting from
share
transactions 21,084,100 $417,361,119 18,052,016 $329,004,042
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to (a) a maximum of 0.55% of the average daily net assets of the Fund,
and (b) 4.50% of the gross income of the Fund, excluding capital gains or
losses.

ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

FEDERATED AMERICAN LEADERS FUND, INC.

DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Corporation's Class B and Class C Shares. The
Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.

SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25% of average daily net assets of the Fund for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS can modify or terminate this voluntary
waiver at any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.

GENERAL -- Certain of the Officers and Directors of the Fund are Officers
and Directors or Trustees of the above companies.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1997, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 1,319,575,844
SALES $ 900,696,189
</TABLE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
FEDERATED AMERICAN LEADERS FUND, INC.:

We have audited the accompanying statement of assets and liabilities of
Federated American Leaders Fund, Inc. (a Maryland corporation), including
the schedule of portfolio of investments, as of March 31, 1997, and the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of March 31, 1997, by correspondence with the custodian
and brokers. As to securities purchased but not received, we requested
confirmation from brokers and, when replies were not received, we carried
out other alternative auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Federated American Leaders Fund, Inc. as of March 31, 1997, and the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania
April 24, 1997

DIRECTORS

John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts

OFFICERS
John F. Donahue
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
S. Elliott Cohan
Assistant Secretary

Mutual funds are not bank deposits or obligations, are not 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. Investment in mutual funds involves risk, including
possible loss of principal.

This report is authorized for distribution to prospective investors only
when preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.

[Graphic]

Federated Investors
Federated Securities Corp., Distributor

Cusip 027128107
Cusip 027128206
Cusip 027128305
Cusip 027128404
8042504 (5/97)

APPENDIX
A1. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation periods
from 2/26/69 to 3/31/97. The `y'' axis is measured in increments of
$100,000 ranging from $0 to $500,000 and indicates that the ending value of
hypothetical initial investment of $29,000 in the Federated American
Leaders Fund, Inc.'s Class A Shares, assuming a 5.5% sales charge and the
reinvestment of all capital gains and dividends, would have grown to
$486,978 on 3/31/97.

A2. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation periods
from 2/26/69 to 3/31/97. The `y'' axis is measured in increments of
$50,000 ranging from $0 to $250,000 and indicates that the ending value of
hypothetical yearly investments of $1,000 in the fund's Class A Shares,
assuming the reinvestment of all capital gains and dividends, would have
grown to $243,592 on 3/31/97.

A3. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color-coded mountain chart is a visual representation
of the narrative text beneath it. The `x'' axis reflects computation
periods from 3/31/82 to 3/31/97. The `y'' axis is measured in increments
of $50,000 ranging from $0 to $200,000 and indicates that the ending value
of a hypothetical initial investment of $5,000 and subsequent monthly
investments of $250 over 15 years in the fund's Class A Shares would have
grown to $187,566 on 3/31/97.

A4. The Graphic presentation here displayed consists of a five column chart
showing a History of Investment Growth. The columns are as follows: April
1-March 31; Initial Number of Shares; Dividends and Capital Gains
Reinvested; Total Shares; Ending Value. The information is as follows:
1969-1979*, 919, $5,501, 1,552, $12,386; 1970-1980, 962, $5,918, 1,729,
$13,347; 1971-1981, 919, $7,312, 1,699, $15,935; 1972-1982, 920, $7,334,
1,784, $15,146; 1973-1983, 957, $10,781, 1,941, $21,275; 1974-1984, 1,151,
$14,597, 2,473, $27,305; 1975-1985, 1,272, $21,238, 3,104, $35,978; 1976-
1986, 1,047, $23,339, 2,758, $37,613; 1977-1987, 1,081, $28,331, 3,075,
$43,696; 1978-1988, 1,287, $26,800, 3,423, $42,958; 1979-1989, 1,184,
$27,487, 3,292, $42,929; 1980-1990, 1,224, $28,863, 3,588, $43,809; 1981-
1991, 1,007, $24,931, 2,899, $38,209; 1982-1992, 1,113, $28,557, 3,170,
$44,006; 1983-1993, 862, $24,159, 2,484, $37,005; 1984-1994, 856, $20,729,
2,278, $33,209; 1985-1995, 815, $16,837, 1,891, $29,606, 1986-1996, 693,
$15,946, 1,499, $29,658 and 1987-1997, 664, 15,170, 1,373, 29,399.

A5. The graphic presentation here displayed consists of a four column chart
outlining the fund's Top Ten Holdings as if March 31, 1997. The columns are
as follows: Top Ten Holdings, Market Value in milions, % of Assets, and
Current Yield. The information is as follows: Unilever N.V., $31.5, 2.36%,
2.52%; CIGNA Corp., $29.2, 2.19%, 2.27%; Russell Corp., $27.7, 2.08%,
1.45%;USX Corp. $27.7, 2.07%, 2.73%; Dayton-Hudson Corp., $27.5, 2.06%,
1.53%; Wal-Mart Stores, Inc., $27.2, 2.04%, 0.97%; MCI Communications
Corp., $26.8, 2.01%, 0.14%; Rubbermaid, Inc., $26.2, 1.96%, 2.41%;
Ingersoll-Rand Co., $25.7, 1.93%, 1.88%; and Marsh & McLennan Cos., Inc.,
$23.9, 1.79%, 3.18%.

A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class A Shares of the fund. based on a 4.5% sales charge are represented by
a solid line. The Standard & Poor's 500 Index (the `S&P 500'') is
represented by a dotted line and the Lipper Growth and Income Funds Average
(the `LGIFA'') is represented by a broken line.The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the fund and the S&P 500 and the LGIFA.
The `x'' axis reflects computation periods from 3/31/87 to 3/31/97. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class A
Shares based on a 4.5% sales charge, as compared to the S&P 500 and the
LGIFA; the ending values were $29,717, $34,995, and $29,186, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
fund's Class A Shares Average Annual Total Returns for the one-year, five-
year, 10-year and Start of Performance periods ended 3/31/97, which were
10.95%, 14.71%, 11.39% and 10.56%, respectively.

A7. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class
B Shares of the fund are represented by a solid line. The S&P 500 is
represented by a dotted line and the LGIFA is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class B Shares of the
fund and the S&P 500 and the LGIFA. The `x'' axis reflects computation
periods from 7/26/94 to 3/31/97. The `y'' axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the fund's Class B Shares, as compared to the S&P 500 and
the LGIFA; the ending values were $15,924, $17,815, and $15,901,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the fund's Class B Shares Average Annual Total Returns for the
one-year and Start of Performance periods ended 3/31/97, which were 10.56%
and 18.95%, respectively.

A8. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class
C Shares of the fund are represented by a solid line. The S&P 500 is
represented by a dotted line and the LGIFA is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class C Shares of the
fund and the S&P 500 and the LGIFA. The `x'' axis reflects computation
periods from 4/22/93 to 3/31/97. The `y'' axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the fund's Class C Shares, as compared to the S&P 500 and
the LGIFA; the ending values were $17,590, $18,571, and $16,655,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the fund's Class C Shares Average Annual Total Returns for the
one-year and Start of Performance periods ended 3/31/97, which were 15.33%
and 15.40%, respectively.

A9. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class
F Shares of the Fund are represented by a solid line. The S&P 500 is
represented by a dotted line and the LGIFA is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class F Shares of the
fund and the S&P 500 and the LGIFA. The `x'' axis reflects computation
periods from 7/28/93 to 3/31/97. The `y'' axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the fund's Class F Shares, as compared to the S&P 500 and
the LGIFA; the ending values were $16,970, $18,571, and $16,655,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the fund's Class F Shares Average Annual Total Returns for the
one-year and Start of Performance periods ended 3/31/97, which were 15.12%
and 15.48%, respectively.