FEDERATED AMERICAN LEADERS FUND INC, N-30D, 1998-05-26

FEDERATED AMERICAN LEADERS FUND INC
N-30D, 1998-05-26

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Federated American Leaders Fund, Inc.

29th Annual Report
March 31, 1998

ESTABLISHED 1969

[Graphic]

Dear Fellow Shareholder:

Federated American Leaders Fund, Inc. was created in 1969, and I am pleased to
present its 29th Annual Report. This fund invests in America's blue-chip
corporations -- 93 well-known, large capitalized corporations whose shares are
held by individuals and institutions alike.

Over the 12-month reporting period, assets have more than doubled, reaching $2.9
billion. This robust growth reflected a sizable increase in the value of fund
shares, as well as the continued confidence of more than 87,000 investors who
purchased shares of this attractive, high-quality, blue-chip stock fund.

This report covers the 12-month period from April 1, 1997 through March 31,
1998. It begins with a discussion with Scott B. Schermerhorn, Vice President,
Federated Advisers, who co-manages the fund with Michael P. Donnelly, Vice
President, Federated Advisers. Following their discussion are three additional
items of shareholder interest. First is a series of graphs showing long-term
investment performance. Second is a complete listing of the fund's high-quality
blue-chip stocks. Third is the publication of the fund's financial statements.

The fund's high-quality stocks include 90 holdings from all 12 major industry
groups -- leaders like Anheuser Busch, Bristol-Myers Squibb, Chevron, General
Motors, IBM, ITT, Merck, Sherwin-Williams, and Wal-Mart. These holdings
performed very well in a stock market that reflected continued economic growth,
low inflation, low interest rates, and a strong desire on the part of investors
to own large-cap companies whose shares can provide liquidity.

The fund's shares displayed excellent capital appreciation, plus quarterly
income dividends and realized capital gains. In fact, the total performance of
all share classes exceeded the performance of the average growth and income
fund. Individual share class total return performance, including capital
appreciation, income dividends, and realized gains, follows.*

<TABLE>
<CAPTION>
TOTAL CAPITAL NET ASSET
RETURN INCOME GAINS VALUE INCREASE
<S> <C> <C> <C> <C>
Class A Shares 43.95% $0.21 $3.23 $21.40 to $26.64 = 24%
Class B Shares 42.78% $0.03 $3.23 $21.40 to $26.61 = 24%
Class C Shares 42.78% $0.03 $3.23 $21.40 to $26.61 = 24%
Class F Shares 43.80% $0.21 $3.23 $21.40 to $26.61 = 24%
</TABLE>

We trust you were pleased with the positive performance of your investment in
Federated American Leaders Fund, Inc. Remember, reinvesting your earnings 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, 1998

* Performance quoted is based on net asset value, 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 reporting period based on
offering price for Class A, B, C, and F Shares were 36.01%, 36.45%, 41.65% and
41.22%, respectively.

INVESTMENT REVIEW

[Graphic]
Scott B. Schermerhorn
Vice President
Federated Advisers

[Graphic]
Michael P. Donnelly
Vice President
Federated Advisers

[Graphic]

THE FUND'S FISCAL YEAR WAS AN EXTRAORDINARY PERIOD FOR STOCKS AS THE BULL
MARKET SQUARED ITS SHOULDERS AND CHARGED ON, DESPITE SOME SIGNIFICANT DAILY
STUMBLES. WHAT ARE YOUR COMMENTS?

The U.S. stock market, as represented by the Standard & Poor's ("S&P") 500
Index,* registered a total return of 48.00% for the 12-month reporting period
ended March 31, 1998. While investors have been handsomely rewarded, the price
fluctuations on a daily basis have increased as investors have shown concern
about the direction of the economy, interest rates, and the Asian economic
crisis.

In this environment, our focus on quality stocks and strict valuation
disciplines offered our shareholders a prudent equity strategy. The dangers of
"market timing," entering and exiting the market in anticipation of its ups and
downs (a strategy we studiously avoid), was apparent early in the reporting
period. The conventional wisdom in early April was that the economy was too
strong, which would force the Federal Reserve Board to increase interest rates
in an effort to thwart inflation. Many investors, trying to "time" the market,
began to reduce their exposure to U.S. equities. What followed was an apparent
slowdown in the economy, which convinced investors that there would be no need
to change current interest rates. This renewed optimism led to a market increase
(as reported by the S&P 500 Index) from the low single-digits to a 20.00% total
return by June 30, 1997.

The fourth quarter of 1997 was marked by investor uncertainty over the Asian
economies, the price of oil, interest rates, and Middle East tensions. Our
emphasis on large, high-quality companies with reasonable valuations fared well
in this environment as investors embarked on a "flight to quality."

The first quarter of 1998, the final quarter of the fund's fiscal year, was
marked by optimism as stock market investors received an average year's return
(13.39% as reported by the S&P 500 Index) in one quarter. Some of this
enthusiasm was due to the belief that Asia will not have as dramatic an impact
on our economy as previously expected. While we do not know the full magnitude
of the Asian crisis, we do not believe its impact would come and go in three
months' time. Therefore, while we remain positive on the stock market, we
believe it is currently discounting positive factors while ignoring negative
ones.

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

[Graphic]

HOW DID FEDERATED AMERICAN LEADERS FUND, INC. PERFORM FOR ITS SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998?

For the 12-month reporting period ended March 31, 1998, the fund's Class A, B,
C, and F Shares produced extremely strong total returns of 43.95%, 42.78%,
42.78%, and 43.80%, respectively, based on net asset value.* The returns of all
share classes exceeded the 40.15% average total return of the 646 growth and
income funds tracked by Lipper Analytical Services, Inc.+

[Graphic]

WHAT WAS THE FUND'S SECTOR EXPOSURE AS OF MARCH 31, 1998?

At the end of the reporting period, the fund's sector weightings were as
follows:

<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Utilities 11.9% 10.6%
Finance 11.5% 16.9%
Technology 10.8% 14.7%
Services 10.4% 5.4%
Health Care 9.8% 11.8%
Energy/Minerals 9.6% 7.7%
Basic Industry 7.7% 4.8%
Consumer
Non-Durables 7.6% 10.8%
Retail Trade 6.6% 5.2%
Producer
Manufacturing 6.2% 7.7%
Transportation 3.5% 1.2%
Consumer Durables 3.2% 3.4%
Other 1.3% 0.0%
</TABLE>

+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category indicated. Lipper returns do not take sales charges into account.

[Graphic]

PLEASE COMMENT ON RECENT PORTFOLIO ADDITIONS.

While many issues are not without a concern or question, the overall
attractiveness of the companies we own outweigh any temptation to react to these
events. In fact, the reactive nature of some investors created opportunities for
the fund to acquire high-quality companies at attractive valuations. Our more
recent additions include the following:

ANHEUSER-BUSCH COMPANIES, INC. (0.93% of portfolio) -- Tough pricing in the beer
category, led by number two player Miller, afforded us an opportunity to acquire
shares in the world's leading brewer at a significant multiple discount to its
history.

SEAGRAM CO., LTD. (0.93% of portfolio) -- Difficulty in the mature spirits
business has made Seagram a value purchase, despite the entertainment business
(Universal Studios) continuing to grow the company in the high-teens range.
Troubles in Asia have depressed Seagram's stock price, but once this short-term
hurdle is cleared, growth should return, or we anticipate the company will use
its strong balance sheet to otherwise create shareholder value.

GENERAL SIGNAL CORP. (0.73% of portfolio) -- This maker of equipment and
instruments is trading at attractive valuation with relatively low downside
risk. The opportunity for restructuring of the business portfolio and margin
improvement may provide this stock with the catalysts needed for good upside
earnings improvement.

DILLARDS, INC., CLASS A (0.98% of portfolio) -- Dillards is the third largest
traditional department store chain in America, with a primary focus on the
Southeast and Southwest. The company disappointed investors last quarter due to
a shortfall in its Midwest operations. A change of management for Midwest
merchandising gives us a degree of comfort that the problems have a good chance
of being fixed over the course of the next few quarters. At less than 15 times
January 1999 estimates, the risk/reward factor appears to be quite favorable.

TOYS "R" US, INC. (1.55% of portfolio) -- This stock has come under pressure as
a result of high shrinkage and lower gross margins from higher promotional
activity and increased distribution costs. The company has instituted a $1
billion buyback of their stock, and management appears to understand what is
required to return the business to its trendline growth. The risk/reward factor
appears to be skewed positively, as the stock trades at a lifetime-low of 70%
relative earnings multiple.

[Graphic]

WHAT HAVE YOU SOLD RECENTLY, AND WHY?

RUSSELL CORP. -- We escaped relatively unscathed before Russell imploded on
yet another earnings disappointment. We exited prior to Russell's stock
falling 20% over the course of a month.

DAYTON-HUDSON CORP. -- After benefiting from a two-year cost reduction program
and strong results at Target discount stores, sponsorship for this stock rotated
from value investors to momentum players. Strong price appreciation pushed this
company's valuation well beyond fair value.

GENERAL MOTORS CORP., CLASS H -- After strong runup, the stock hit our price
objectives. The attractiveness of the business is intact, but the valuation, in
our opinion, has gotten ahead of itself, and we have since found better uses for
the funds.

TELE-COMMUNICATIONS, INC., CLASS A -- This leading cable company was purchased
after a long period of underperformance and in anticipation of a company
restructuring. The company delivered on its restructuring, and the price
appreciated well beyond its fair market value.

[Graphic]

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF MARCH 31, 1998?

The top holdings were as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NET ASSETS
<S> <C>
First Data Corp. 2.2%
Wal-Mart Stores, Inc. 2.0%
Bristol-Myers Squibb Co. 1.9%
Pharmacia & Upjohn, Inc. 1.9%
News Corp., Ltd., ADR 1.8%
CIGNA Corp. 1.8%
Waste Management, Inc. 1.8%
ABB AB, ADR 1.7%
U.S. Surgical Corp. 1.6%
Toys "R" Us, Inc. 1.6%
TOTAL 18.3%
</TABLE>

[Graphic]

IT HAS BEEN QUITE A YEAR FOR STOCK INVESTORS IN GENERAL AND FEDERATED
AMERICAN LEADERS FUND, INC. SHAREHOLDERS IN PARTICULAR. AS THE FUND BEGINS A
NEW FISCAL YEAR IN SUCH A HIGHLY VALUED MARKET, WHAT IS YOUR STRATEGY?

As we discussed in the fund's last report, which covered the first six months of
the fiscal year, some industries and numerous stocks are overvalued, and the
dramatic runup in equity prices has made it more difficult to find undervalued
companies. In this environment, investors must rely on security selection versus
overall market appreciation. We continue to believe that, as with 1997, 1998
will be a "stock pickers" year, with attractive fundamentals and reasonable
valuation leading the way.

We also believe our valuation disciplines, which force us to exit overpriced
securities and focus on undervalued situations, are in our shareholders' best
interests. Given current valuations, our recent emphasis has been on
high-quality, well-run companies that, for various reasons, have not
participated fully in the unprecedented bull market of the past 2 1/2 years.

TECHNOLOGY continues as our most significant underweighting, though, we have
added to certain positions as valuation became overly depressed. The ENERGY and
TRANSPORTATION sectors continue as our largest overweights, with the RETAIL
sector declining. Our exposure to the UTILITIES sector has been increasing, as
concerns over deregulation are outweighed by depressed valuations and some
yields that are greater than long-term Treasury notes.

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 $30,000 IN THE CLASS A SHARES OF
FEDERATED AMERICAN LEADERS FUND, INC. ON 2/26/69, REINVESTED DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$725,049 ON 3/31/98. YOU WOULD HAVE EARNED A 11.57%* AVERAGE ANNUAL TOTAL RETURN
FOR THE 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 3/31/98, the Class A Shares' average annual 1-year, 5-year, and 10-year
total returns were 36.01%, 19.36%, and 16.16%, respectively. Class B Shares'
average annual 1-year and since inception (7/26/94) total returns were 36.45%
and 25.38%, respectively. Class C Shares' average annual 1-year and since
inception (4/22/93) total returns were 41.65% and 20.48%, respectively. Class F
Shares' average annual 1-year and since inception (7/28/93) total returns were
41.22% and 21.21%, respectively.**

[Graphic representation omitted. Please see Appendix #1.]

* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50% 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 that an investor's
shares, when redeemed, may be worth more or less than their original cost.

** The total returns stated take into account the 5.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares, the 1.00%
contingent deferred sales charge for Class C Shares, and the 1.00% sales charge
and 1.00% contingent deferred sales charge for Class F Shares.

FEDERATED AMERICAN LEADERS FUND, INC.
ONE STEP AT A TIME:

$1,000 INVESTED EACH YEAR FOR 30 YEARS (REINVESTING ALL DIVIDENDS AND
CAPITAL GAINS) GREW TO $349,002.

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 did not redeem any shares, you would have invested only $30,000, but
your account would have reached a total value of $349,002* by 3/31/98. You would
have earned an average annual total return of 13.83%.

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 omitted. Please see Appendix #2.]

* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. 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. 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. On March 31, 1983, 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
$218,881. This represents a 16.32% average annual total return. For the Rices, a
dedicated program of monthly investments really paid off.

[Graphic representation omitted. Please see Appendix #3.]

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 -- TWENTY 10-YEAR PERIODS

$10,000 INVESTED WITH DISTRIBUTIONS REINVESTED

How a $10,000 investment grew during each 10-year period since the fund's
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 omitted. See Appendix #4]

* 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.
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 Federated
American Leaders Fund, Inc. (Class A Shares) (the "Fund") from March 31, 1988 to
March 31, 1998 compared to the Standard & Poor's 500 Index (S&P 500) and the
Lipper Growth and Income Funds Average (LGIFA).+

[Graphic representation omitted. Please see Appendix #5.]

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 the 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 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 Federated
American Leaders Fund, Inc. (Class B Shares) (the "Fund") from July 26, 1994
(start of performance) to March 31, 1998 compared to the Standard & Poor's 500
Index (S&P 500) and the Lipper Growth and Income Funds
Average (LGIFA).+

[Graphic representation omitted. Please see Appendix #6.]

* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 3.00% contingent deferred sales charge on any redemption
less than four 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 the 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. 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 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 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 Federated
American Leaders Fund, Inc. (Class C Shares) (the "Fund") from April 22, 1993
(start of performance) to March 31, 1998 compared to the Standard & Poor's 500
Index (S&P 500) and the Lipper Growth and Income Funds
Average (LGIFA).+

[Graphic representation omitted. Please see Appendix #7.]

* 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 the average.

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

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 Federated
American Leaders Fund, Inc. (Class F Shares) (the "Fund") from July 28, 1993
(start of performance) to March 31, 1998 compared to the Standard & Poor's 500
Index (S&P 500) and the Lipper Growth and Income Funds
Average (LGIFA).+

[Graphic representation omitted. Please see Appendix #8.]

* 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 the average.

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

FEDERATED AMERICAN LEADERS FUND, INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 98.8%
BASIC INDUSTRY -- 7.7%
1,695,959 Archer-Daniels-Midland Co. $ 37,205,101
1,611,900 Barrick Gold Corp. 34,857,338
416,200 Consolidated Papers, Inc. 26,636,800
1,149,175 (a)Corn Products International, Inc. 41,226,654
272,900 Dow Chemical Co. 26,539,525
516,600 Nucor Corporation 28,122,413
866,000 Sherwin-Williams Co. 30,743,000
Total 225,330,831
CONSUMER DURABLES -- 3.2%
412,500 Borg-Warner Automotive, Inc. 26,451,563
539,000 Centex Corp. 20,549,375
430,000 Eastman Kodak Co. 27,896,250
286,300 General Motors Corp. 19,307,357
Total 94,204,545
CONSUMER NON-DURABLES -- 7.6%
589,500 Anheuser-Busch Cos., Inc. 27,301,219
300,700 BestFoods 35,144,313
363,000 Philip Morris Cos., Inc. 15,132,563
494,900 RJR Nabisco Holdings Corp. 15,496,556
477,800 Sara Lee Corp. 29,444,425
711,500 Seagram Co. Ltd. 27,170,406
1,086,500 UST, Inc. 35,039,625
530,000 Unilever N.V., ADR 36,371,250
Total 221,100,357
ENERGY MINERALS -- 9.6%
444,500 Amerada-Hess Corp. 25,919,907
271,100 Chevron Corp. 21,772,719
</TABLE>
FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ENERGY MINERALS -- CONTINUED
419,300 Exxon Corp. $ 28,355,163
360,000 Mobil Corp. 27,585,000
1,228,900 Occidental Petroleum Corp. 36,022,131
388,000 Royal Dutch Petroleum Co., ADR 22,043,250
1,108,800 Sun Co., Inc. 45,322,200
365,800 Texaco, Inc. 22,039,450
786,900 USX Corp. 29,607,113
675,000 YPF Sociedad Anonima, ADR 22,950,000
Total 281,616,933
FINANCE -- 11.5%
248,500 Allstate Corp. 22,846,469
500,055 Bear Stearns Cos., Inc. 25,690,326
652,100 Boston Properties, Inc. 22,945,769
257,500 CIGNA Corp. 52,787,500
132,000 General RE Corp. 29,122,500
1,373,900 Green Tree Financial Corp. 39,070,282
360,000 MBIA Insurance Corporation 27,900,000
470,500 Marsh & McLennan Cos., Inc. 41,080,531
381,700 Morgan Stanley, Dean Witter & Co. 27,816,388
226,000 Republic New York Corp. 30,142,750
591,000 (a)Security Capital Group, Inc. 18,173,250
Total 337,575,765
HEALTH CARE -- 9.8%
395,000 Abbott Laboratories 29,748,438
734,200 Biomet, Inc. 22,026,000
543,500 Bristol-Myers Squibb Co. 56,693,844
251,800 Merck & Co., Inc. 32,324,825
1,214,500 (a)Perrigo Co. 14,877,625
</TABLE>
FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HEALTH CARE -- CONTINUED
1,249,000 Pharmacia & Upjohn, Inc. $ 54,643,750
1,380,500 U.S. Surgical Corp. 45,556,500
474,000 United Healthcare Corp. 30,691,500
Total 286,562,482
PRODUCER MANUFACTURING -- 6.2%
497,000 Cincinnati Milacron, Inc. 15,841,875
460,300 General Signal Corp. 21,519,025
791,300 ITT Industries, Inc. 30,118,856
580,500 Ingersoll-Rand Co. 27,827,719
517,500 Johnson Controls, Inc. 31,405,781
759,600 (a)Lexmark Intl. Group, Class A 34,276,950
183,500 Loews Corp. 19,129,875
Total 180,120,081
RETAIL TRADE -- 6.6%
1,158,700 American Stores Co. 30,126,200
781,700 Dillards, Inc., Class A 28,874,044
1,726,500 (a)KMart Corp. 28,810,969
1,511,400 (a)Toys 'R' Us, Inc. 45,436,463
1,157,000 Wal-Mart Stores, Inc. 58,790,063
Total 192,037,739
SERVICES -- 10.4%
348,000 ABB AB, ADR 48,459,000
652,478 Browning-Ferris Industries, Inc. 21,287,095
170,000 News Corp., Ltd., ADR 4,579,375
2,326,000 News Corp., Ltd., ADR 53,498,000
1,154,500 Readers Digest Association, Inc., Class A 31,532,281
1,423,700 (a)Tricon Global Restaurants, Inc. 42,799,981
567,500 (a)Viacom, Inc., Class A 30,148,438
</TABLE>
FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SERVICES -- CONTINUED
361,000 (a)Viacom, Inc., Class B $ 19,403,750
1,687,500 Waste Management, Inc. 51,996,094
Total 303,704,014
TECHNOLOGY -- 10.8%
882,500 AMP, Inc. 38,664,532
1,946,000 First Data Corp., Class 63,245,000
209,500 International Business Machines Corp. 21,761,813
194,000 Matsushita Electric Industrial Co., ADR 31,027,875
3,038,500 (a)Novell, Inc. 32,568,922
453,500 Raytheon Co., Class A 25,792,842
1,282,000 (a)Seagate Technology, Inc. 32,370,500
1,518,500 (a)Sequent Computer System, Inc. 27,712,625
567,000 (a)Storage Technology Corp. 43,127,438
Total 316,271,547
TRANSPORTATION -- 3.5%
135,500 (a)AMR Corp. 19,401,907
785,800 CNF Transportation, Inc. 28,239,688
436,200 Canadian National Railway 27,916,800
698,000 Ryder Systems, Inc. 26,524,000
Total 102,082,395
UTILITIES -- 11.9%
372,900 Coastal Corp. 24,285,113
247,000 Columbia Gas System, Inc. 19,204,250
484,700 Consolidated Natural Gas Co. 27,961,132
1,300,000 Entergy Corp. 38,675,000
465,000 GTE Corp. 27,841,875
1,030,700 Houston Industries, Inc. 29,632,625
1,205,000 PG & E Corp. 39,765,000
</TABLE>
FEDERATED AMERICAN LEADERS FUND, INC.
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UTILITIES -- CONTINUED
1,991,700 Peco Energy Co. $ 44,066,363
823,000 Public Service Enterprises Group, Inc. 31,171,125
790,400 SBC Communications, Inc. 34,481,200
582,500 U.S. West, Inc. 31,891,875
Total 348,975,558
TOTAL COMMON STOCKS (IDENTIFIED COST
$2,194,911,858) 2,889,582,247
(B)REPURCHASE AGREEMENT -- 1.3%
$ 37,050,000 BT Securities Corp., 5.97%, dated 3/31/1998,
due 4/1/1998 (AT AMORTIZED COST) 37,050,000
TOTAL INVESTMENTS (IDENTIFIED COST
$2,231,961,858)(C) $ 2,926,632,247
</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 $2,231,970,446.
The net unrealized appreciation of investments on a federal tax basis amounts to
$694,661,801 which is comprised of $717,688,013 appreciation and $23,026,212
depreciation at March 31, 1998.

Note: The categories of investments are shown as a percentage of net assets
($2,923,559,198) at March 31, 1998.

The following acronym is used throughout this portfolio:

ADR -- American Depository Receipt

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

FEDERATED AMERICAN LEADERS FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES

MARCH 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $ 2,926,632,247
$2,231,961,858 and tax cost $2,231,970,446)
Income receivable 3,873,510
Receivable for shares sold 18,219,468
Total assets 2,948,725,225
LIABILITIES:
Payable for investments purchased $ 20,768,665
Payable for shares redeemed 2,101,744
Payable to Bank 158,675
Payable for taxes withheld 49,931
Accrued expenses 2,087,012
Total liabilities 25,166,027
NET ASSETS for 109,811,982 shares outstanding $ 2,923,559,198
NET ASSETS CONSIST OF:
Paid in capital $ 2,063,927,255
Net unrealized appreciation of investments* 694,670,363
Accumulated net realized gain on investments 164,850,734
Undistributed net investment income 110,846
Total Net Assets $ 2,923,559,198
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($1,457,925,474 / 54,728,481 shares $26.64
outstanding)
Offering Price Per Share (100/94.50 of $26.64)*** $28.19
Redemption Proceeds Per Share $26.64
CLASS B SHARES:
Net Asset Value Per Share ($1,201,402,431 / 45,153,000 shares $26.61
outstanding)
Offering Price Per Share $26.61
Redemption Proceeds Per Share (94.50/100 of $26.61)*** $25.15
CLASS C SHARES:
Net Asset Value Per Share ($134,773,081 / 5,064,628 shares $26.61
outstanding)
Offering Price Per Share $26.61
Redemption Proceeds Per Share (99.00/100 of $26.61)*** $26.34
CLASS F SHARES:
Net Asset Value Per Share ($129,458,212 / 4,865,873 shares $26.61
outstanding)
Offering Price Per Share (100/99.00 of $26.61)** $26.88
Redemption Proceeds Per Share (99.00/100 of $26.61)*** $26.34
</TABLE>

* $80,795,828 of unrealized appreciation was acquired in connection with the
acquisition of the Penn Square Mutual Fund on June 2, 1997.

** See "Investing in the Fund" in the Prospectus.

*** See "Redeeming and Exchanging Shares" 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, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 38,813,387
Interest 4,079,083
Total income 42,892,470
EXPENSES:
Investment advisory fee $ 13,813,557
Administrative personnel and services fee 1,630,734
Custodian fees 105,425
Transfer and dividend disbursing agent fees and expenses 2,274,642
Directors'/Trustees' fees 25,080
Auditing fees 21,870
Legal fees 10,487
Portfolio accounting fees 224,735
Distribution services fee -- Class B Shares 6,202,102
Distribution services fee -- Class C Shares 741,736
Shareholder services fee -- Class A Shares 2,821,001
Shareholder services fee -- Class B Shares 2,067,367
Shareholder services fee -- Class C Shares 247,246
Shareholder services fee -- Class F Shares 266,953
Share registration costs 580,154
Printing and postage 263,867
Insurance premiums 17,196
Taxes 106,004
Miscellaneous 17,264
Total expenses 31,437,420
Net investment income 11,455,050
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 354,458,500
Net change in unrealized appreciation of investments 484,020,318
Net realized and unrealized gain on investments 838,478,818
Change in net assets resulting from operations $ 849,933,868
</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,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 11,455,050 $ 6,625,505
Net realized gain (loss) on investments ($354,467,088 net
gain and
$141,874,167 net gain, respectively, as computed for federal 354,458,500 141,874,167
tax purposes)
Net change in unrealized appreciation 484,020,318 35,256,912
Change in net assets resulting from operations 849,933,868 183,756,584
NET EQUALIZATION CREDITS (DEBITS) -- 2,869,258 1,030,846
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (9,470,939) (5,317,770)
Class B Shares (1,019,987) (1,076,234)
Class C Shares (115,071) (143,909)
Class F Shares (911,279) (721,875)
Distributions from net realized gains
Class A Shares (136,036,451) (37,762,270)
Class B Shares (106,307,915) (29,990,344)
Class C Shares (12,719,363) (4,292,692)
Class F Shares (13,912,321) (5,278,763)
Change in net assets resulting from distributions to (280,493,326) (84,583,857)
shareholders
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED
TO NET INVESTMENT INCOME) --
Proceeds from sale of shares 799,421,022 464,456,064
Net asset value of shares issued to shareholders in payment
of distributions declared 336,495,867(a) 48,460,181(b)
Net asset value of shares issued to shareholders in payment
of distributions declared 251,515,083 77,137,909
Cost of shares redeemed (370,401,026) (172,693,035)
Change in net assets resulting from share transactions 1,017,030,946 417,361,119
Change in net assets 1,589,340,746 517,564,692
NET ASSETS:
Beginning of period 1,334,218,452 816,653,760
End of period (including undistributed net investment income
of $110,846 and $173,072, respectively) $ 2,923,559,198 $ 1,334,218,452
</TABLE>

(a) Includes $80,295,577 and $500,251 of unrealized appreciation on Class A
Shares and Class C Shares, respectively.

(b) 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,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.78 $15.66 $14.58 $14.90
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.29 0.23 0.22 0.25 0.23
Net realized and unrealized gain
(loss) on investments 8.39 3.11 4.70 1.42 0.18
Total from investment operations 8.68 3.34 4.92 1.67 0.41
LESS DISTRIBUTIONS
Distributions from net
investment income (0.21) (0.21) (0.17) (0.24) (0.24)
Distributions from net realized gain
on investments (3.23) (1.51) (0.63) (0.35) (0.49)
Total distributions (3.44) (1.72) (0.80) (0.59) (0.73)
NET ASSET VALUE, END OF PERIOD $26.64 $21.40 $19.78 $15.66 $14.58
TOTAL RETURN(A) 43.95% 17.40% 32.00% 11.87% 2.76%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.14% 1.17% 1.16% 1.23% 1.18%
Net investment income 0.84% 0.95% 1.07% 1.71% 1.48%
Expense waiver/reimbursement(b) -- 0.03% 0.07% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,457,925 $638,082 $455,867 $268,470 $226,857
Average commission rate paid(c) $0.0488 $0.0500 -- -- --
Portfolio turnover 63% 88% 46% 34% 27%
</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,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.79 $15.67 $14.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.05 0.10 0.13
Net realized and unrealized gain (loss) on 8.41 3.12 4.70 0.92
investments
Total from investment operations 8.47 3.17 4.80 1.05
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.12)
Distributions from net realized gain on (3.23) (1.51) (0.63) (0.23)
investments
Total distributions (3.26) (1.56) (0.68) (0.35)
NET ASSET VALUE, END OF PERIOD $26.61 $21.40 $19.79 $15.67
TOTAL RETURN(B) 42.78% 16.49% 31.10% 7.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.89% 1.95% 1.93% 1.95%*
Net investment income 0.11% 0.18% 0.32% 1.09%*
Expense waiver/reimbursement(c) -- -- 0.05% 0.12%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,201,402 $540,995 $261,024 $46,671
Average commission rate paid(d) $0.0488 $0.0500 -- --
Portfolio turnover 63% 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,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.80 $15.66 $14.55 $14.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.14 0.12
Net realized and unrealized gain (loss)
on investments 8.42 3.12 4.75 1.45 0.35
Total from investment operations 8.47 3.16 4.80 1.59 0.47
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.03) (0.13) (0.13)
Distributions from net realized gain on
investments (3.23) (1.51) (0.63) (0.35) (0.49)
Total distributions (3.26) (1.56) (0.66) (0.48) (0.62)
NET ASSET VALUE, END OF PERIOD $26.61 $21.40 $19.80 $15.66 $14.55
TOTAL RETURN(B) 42.78% 16.42% 31.14% 11.23% 3.16%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.89% 1.95% 1.96% 2.04% 2.11%*
Net investment income 0.11% 0.18% 0.27% 0.91% 0.71%*
Expense waiver/reimbursement(c) -- -- 0.02% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $134,773 $69,990 $44,434 $20,055 $11,895
Average commission rate paid(d) $0.0488 $0.0500 -- -- --
Portfolio turnover 63% 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,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $19.78 $15.66 $14.58 $14.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.20 0.19 0.25 0.16
Net realized and unrealized gain (loss)
on investments 8.43 3.13 4.72 1.42 (0.20)
Total from investment operations 8.65 3.33 4.91 1.67 (0.04)
LESS DISTRIBUTIONS
Distributions from net investment income (0.21) (0.20) (0.16) (0.24) (0.16)
Distributions from net realized gain
on investments (3.23) (1.51) (0.63) (0.35) (0.17)
Total distributions (3.44) (1.71) (0.79) (0.59) (0.33)
NET ASSET VALUE, END OF PERIOD $26.61 $21.40 $19.78 $15.66 $14.58
TOTAL RETURN(B) 43.80% 17.39% 31.95% 11.80% (0.30%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.14% 1.19% 1.21% 1.27% 1.35%*
Net investment income 0.86% 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) $129,458 $85,151 $55,329 $28,495 $15,282
Average commission rate paid(d) $0.0488 $0.0500 -- -- --
Portfolio turnover 63% 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.

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

FEDERATED AMERICAN LEADERS FUND, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

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 June 2, 1997, the Fund's Class A Shares and Class C Shares acquired all the
net assets of Penn Square Mutual Fund's Class A Shares and Class C Shares (the
"Acquired Class A Shares and Acquired Class C Shares") pursuant to a plan of
reorganization approved by the Acquired Class A Shares' and Acquired Class C
Shares' shareholders. The acquisition was accomplished by a tax-free exchange of
14,929,279 and 92,816 shares, respectively, of the Fund's Class A Shares and
Class C Shares (valued at $334,415,853 and $2,080,014, respectively) for
27,592,067 and 171,902 shares, respectively, of the Acquired Class A Shares and
Acquired Class C Shares outstanding on June 1, 1997. The Acquired Class A
Shares' and Acquired Class C Shares' net assets of $334,415,853 and $2,080,014,
respectively, which consisted of $80,295,577 and $500,251, respectively, of
unrealized appreciation, were combined at that date with those of the Fund's
Class A Shares and Class C Shares. The aggregate net assets of the Fund's Class
A Shares and Class C Shares and the Acquired Class A Shares and Acquired Class C
Shares immediately before the acquisition were $716,179,581 and $79,736,654,
respectively, and $334,415,853 and $2,080,014, respectively.

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, were combined at that
date 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.

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:

INCREASE (DECREASE)
ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT INCOME
$2,869,258 $(2,869,258)

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.

3. CAPITAL STOCK

At March 31, 1998, par value shares ($0.20 per share) authorized were as
follows:

NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 30,000,000
Class B Shares 20,000,000
Class C Shares 25,000,000
Class F Shares 25,000,000

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 14,199,455 $ 257,444,031 7,706,275 $ 144,256,344
Shares issued to shareholders
in connection
with the Acquisition 14,929,279 334,415,853 2,358,160 48,460,181
Shares issued to shareholders
in payment
of distributions declared 5,489,537 124,963,822 1,877,620 38,245,728
Shares redeemed (9,712,914) (234,846,738) (5,165,910) (107,679,833)
Net change resulting from
Class A Share
transactions 24,905,357 $ 481,976,968 6,776,145 $ 123,282,420
<CAPTION>

YEAR ENDED MARCH 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 19,476,886 $ 468,919,793 12,996,770 $ 268,480,862
Shares issued to shareholders
in payment of
distributions declared 4,423,479 100,689,615 1,425,508 29,165,525
Shares redeemed (4,032,641) (97,137,007) (2,323,540) (48,574,439)
Net change resulting from Class
B Share
transactions 19,867,724 $ 472,472,401 12,098,738 $ 249,071,948
<CAPTION>

YEAR ENDED MARCH 31,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2,272,169 $ 54,279,888 1,226,661 $ 25,200,316
Shares issued to shareholders
in connection
with the Acquisition 92,816 2,080,014 -- --
Shares issued to shareholders
in payment
of distributions declared 524,098 11,922,133 201,317 4,118,193
Shares redeemed (1,095,674) (26,166,756) (401,373) (8,350,604)
Net change resulting from
Class C Share
transactions 1,793,409 $ 42,115,279 1,026,605 $ 20,967,905

YEAR ENDED MARCH 31,
1998 1997
<S> <C> <C> <C> <C>

CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 787,209 $ 18,777,310 1,296,525 $ 26,518,542
Shares issued to shareholders in
payment
of distributions declared 612,048 13,939,513 274,107 5,608,463
Shares redeemed (513,208) (12,250,525) (388,020) (8,088,159)
Net change resulting from
Class F Share
transactions 886,049 $ 20,466,298 1,182,612 $ 24,038,846
Net change resulting from
share transactions 47,452,539 $ 1,017,030,946 21,084,100 $ 417,361,119
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment 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.

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., the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund'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 Federated Securities Corp.

<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, the Fund will pay Federated Shareholder
Services ("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. YEAR 2000 ISSUE

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the fund.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1998, were as follows:

PURCHASES $2,000,194,900
SALES $1,315,184,209

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, 1998, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights 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, 1998, by correspondence with the custodian and brokers. 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, 1998, 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
May 15, 1998

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
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
Nicholas J. Seitanakis
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
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

[Graphic]

Cusip 313914103
Cusip 313914202
Cusip 313914301
Cusip 313914400
8042504 (5/98)

FEDERATED AMERICAN LEADERS FUND, INC.

1. 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 3/31/98. The "y" axis is measured in increments of $100,000 ranging from $0
to $800,000 and indicates that the ending value of hypothetical initial
investment of $30,000, assuming the 5.50% sales charge, in Federated American
Leaders Fund, Inc.'s Class A Shares, assuming the reinvestment of capital gains
and dividends, would have grown to $725,049 on 3/31/98.

2. 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 3/31/98. The "y" axis is measured in increments of $100,000 ranging from $0
to $400,000 and indicates that the ending value of hypothetical yearly
investments of $1,000 in Federated American Leaders Fund, Inc.'s Class A Shares,
assuming the reinvestment of capital gains and dividends, would have grown to
$349,002 on 3/31/98.

3. 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 3/31/83
to 3/31/98. The "y" axis is measured in increments of $50,000 ranging from $0 to
$250,000 and indicates that the ending value of hypothetical investment of
$5,000 in Federated American Leaders Fund, Inc.'s Class A Shares, assuming the
reinvestment of capital gains and dividends, and investments of $250 every month
for 10 years, would have grown to $218,881 on 3/31/98.

4. The graphic presentation here displayed consists of a five column chart
showing a History of Investment. The columns are as follows: April 1-March 31;
Initial Number of Shares; Dividends and Capital Gains Reinvested; Total Shares;
Ending Value of Shares. 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, 1987-1997, 664, 15,170, 1,373, 29,399, and
1988-1998, 752, $24,649, 1,678, $44,709.

5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. Federated American Leaders Fund, Inc. (Class A Shares) is
represented by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is
represented by a dotted line, and the Lipper Growth and Income Funds Average
(LPIFA) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated American Leaders Fund, Inc. (Class A Shares) for the
period from March 31, 1988 to March 31, 1998. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Federated American Leaders Fund, Inc.
(Class A Shares), based on a 4.50% sales charge that was in effect prior to
October 1, 1994, as compared to the S&P 500, and the LPIFA. The ending values
were $31,387 for the fund, and $43,556 and $56,506, for the S&P 500 and the
LPIFA, respectively. Beneath the list of components that correspond to the line
graph are the following average annual total returns for Federated American
Leaders Fund, Inc. (Class A Shares), based on all applicable sales charges and
contingent deferred sales charge, for the one-year period, five-year period,
ten-year period and start of performance (2/26/69) to March 31, 1998. The total
returns were 36.01%, 19.36%, 16.16%, and 11.57%, respectively. The performance
disclaimer and footnotes are listed directly under the graphic presentation.

6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. Federated American Leaders Fund, Inc. (Class B Shares) is
represented by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is
represented by a dotted line, and the Lipper Growth and Income Funds Average
(LPIFA) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated American Leaders Fund, Inc. (Class B Shares) for the
period from July 26, 1994 to March 31, 1998. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Federated American Leaders Fund, Inc.
(Class B Shares), based on a 3.00% contingent deferred sales charge, as compared
to the S&P 500, and the LPIFA. The ending values were $23,035 for the fund, and
$26,366, and $23,127 for the S&P 500 and LPIFA, respectively. Beneath the list
of components that correspond to the line graph are the following average annual
total returns for Federated American Leaders Fund, Inc. (Class B Shares), based
on all applicable sales charges and contingent deferred sales charge, for the
one-year period and start of performance (7/26/94) to March 31, 1998. The total
returns were 36.45%, and 25.38%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.

7. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation Federated American Leaders Fund, Inc. (Class C Shares) is
represented by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is
represented by a dotted line, and the Lipper Growth and Income Funds Average
(LPIFA) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated American Leaders Fund, Inc. (Class C Shares) for the
period from April 22, 1993 to March 31, 1998. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Federated American Leaders Fund, Inc.
(Class C Shares), based on a 1.00% contingent deferred sales charge, as compared
to the S&P 500, and the LPIFA. The ending values were $23,342 for the fund, and
$27,485 and $23,342, for the S&P 500 and the LPIFA, respectively. Beneath the
list of components that correspond to the line graph are the following average
annual total returns for Federated American Leaders Fund, Inc. (Class C Shares),
based on all applicable sales charges and contingent deferred sales charges for
the one-year period and start of performance (4/22/93) to March 31, 1998. The
total returns were 41.65%, and 20.48%, respectively. The performance disclaimer
and footnotes are listed directly under the graphic presentation.

8. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation Federated American Leaders Fund, Inc. (Class F Shares) is
represented by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is
represented by a dotted line, and the Lipper Growth and Income Funds Average
(LPIFA) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated American Leaders Fund, Inc. (Class F Shares) for the
period from July 28, 1993 to March 31, 1998. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Federated American Leaders Fund, Inc.
(Class F Shares), based on a 1.00% sales charge, as compared to the S&P 500, and
LPIFA. The ending values were $24,579 for the fund and $27,485 and $23,342, for
the S&P 500 and the LPIFA, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total returns for
Federated American Leaders Fund, Inc. (Class F Shares), reflecting all
applicable sales charges and contingent deferred sales charge, for the one-year
period and start of performance (7/28/93) to March 31, 1998. The total returns
were 41.22%, and 21.21%, respectively. The performance disclaimer and footnotes
are listed directly under the graphic presentation.