FEDERATED EQUITY FUNDS, N-30D, 1998-07-02

FEDERATED EQUITY FUNDS
N-30D, 1998-07-02

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[Graphic]

Federated Growth Strategies Fund

14TH SEMI-ANNUAL REPORT
APRIL 30, 1998

ESTABLISHED 1984

PRESIDENT'S MESSAGE

[Graphic]

Dear Shareholder:

Federated Growth Strategies Fund was created in 1984, and I am pleased to
present its 14th Semi-Annual Report. This report covers the first half of the
fund's fiscal year which is the six-month period from November 1, 1997 through
April 30, 1998. It begins with a discussion with the fund's portfolio manager
Jim E. Grefenstette, Vice President of Federated Management. Following his
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 stock holdings. Third is the publications of the fund's financial
statements.

Federated Growth Strategies Fund is managed to pursue long-term growth through a
highly diversified portfolio of mid- and large- capitalization stocks selected
for their strong price and earnings momentum. The fund's portfolio includes
common stocks representing the 12 industry sectors with many familiar names that
you will recognize immediately: General Electric, Travelers Group, and Merck, to
name a few.

The fund weathered a difficult fourth quarter of 1997 when the market reacted
negatively to Asian market difficulties. The fund subsequently participated in
the market rally during the first quarter of 1998 and outpaced the average
growth fund from the beginning of the year through April 30, 1998. The fund's
returns were primarily the result of price appreciation of the securities in the
fund's portfolio. 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 CHANGE
<S> <C> <C> <C> <C>
Class A Shares 13.19% $0.00 $6.39 $31.54 to $28.38 = (10%)
Class B Shares 12.86% $0.00 $6.39 $31.02 to $27.70 = (10%)
Class C Shares 12.87% $0.00 $6.39 $31.16 to $27.86 = (10%)
</TABLE>

* 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 period based on offering
price for Class A, B, and C Shares were 6.95%, 6.67%, and 11.73%, respectively.

Over time, you can easily increase your opportunity to participate in the growth
of American companies by reinvesting your dividends and capital gains
automatically in additional fund shares. You can also add to your account on a
regular basis through a systematic investment program. This program withdraws a
specific amount from your checking account on a regular basis to purchase more
fund shares. Buying shares regularly, (i.e. monthly additions of the same dollar
amount) automatically accumulates more shares in your account at lower prices.+
You can contact your investment representative or Federated Securities Corp. for
more information.

Thank you for selecting Federated Growth Strategies Fund to pursue your
long-term financial goals. We welcome your comments and suggestions.

Sincerely,

[Graphic]

Glen R. Johnson
President
June 15, 1998

+ Systematic investing does not ensure a profit or protect against loss in
declining markets.

INVESTMENT REVIEW

[Graphic]
Jim E. Grefenstette, CFA
Vice President
Federated Management

[Graphic]

WHAT IS YOUR APPRAISAL OF THE FIRST HALF OF THE FUND'S FISCAL YEAR, WHICH WAS
BOTH REWARDING AND VOLATILE?

The tone for late 1997 was set during the last two weeks of October, when the
markets suddenly realized that near-term economic growth in the southeast Asian
countries was more problematic than certain. This led to a dramatic downward
revaluation of the affected countries' currencies and capital markets. The
impact on the U.S. stock market, aside from a terrific one-day thumping, was
that there was material uncertainty with regard to how fast U.S. companies could
grow earnings over the next year or two. This doubt was caused by fears that
U.S. exports to Asia would likely slow (thanks to moderating local demands and a
stronger dollar), and that cheaper Asian imports to the U.S. would threaten
domestically produced goods.

The result of the Asian transformation from hero to goat was that investors
began to pay premiums for securities that offered stability and to demand
discounts for those that entailed higher risk. The Standard & Poor's ("S&P") 500
Index (large cap stocks) returned 2.9% for the quarter, while the S&P 600 Small
Cap Index (small cap stocks) lost 3.1% and the NASDAQ Composite (a range of caps
dominated by large technology stocks) lost 6.8%.*

Federated Growth Strategies Fund felt the effects of the changes in market
sentiment. We left the third quarter of 1997 with the wind in our sails,
benefiting from the trend of moderating domestic economic growth favoring
smaller growth stocks. The Asian turmoil, however, as mentioned above, caused
investors to rapidly migrate toward the stability of larger stocks.

* The S&P 500 Index is a capitalization weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries. The S&P
600 Small Cap Index is a capitalization weighted index that measures the
performance of selected U.S. stocks with a small market capitalization. NASDAQ
Composite is a computerized system that provides brokers and dealers with price
quotations for securities traded over the counter as well as for many New York
Stock Exchange listed securities. These indices are unmanaged, and investments
cannot be made in an index.

After that fretful fourth quarter, we returned to business as usual in the first
quarter of 1998. The rally was broad as the S&P 500 Index returned 13.9%, the
S&P 600 Small Cap Index was up 11.1%, and the NASDAQ Composite gained 17.3%.
Federated Growth Strategies Fund performed in line with the market in 1998, as
Class A, B, and C Shares recorded total returns of 14.49%, 14.27%, and 14.27%,
respectively, for the period from January 1, 1998 to April 30, 1998.** These
year-to-date returns were comparable to the 14.27% return of the average growth
fund tracked by the Lipper Growth Funds Average.+

[Graphic]

WHAT IS YOUR OUTLOOK ON ASIA'S POTENTIAL IMPACT ON THE MARKET?

Concerns of a meltdown in Asia resulting in a decline in global Gross Domestic
Product ("GDP"), global excess capacity, reduced U.S. exports, and intense
pricing pressures have been eased considerably. Asia, including Japan,
represents 30% of U.S. exports, but only 3% of domestic GDP. Because the region
is a large source of imports, lower import prices should benefit the economy by
further reducing inflation and our multi-national companies with lower sourced
material costs. While we think it is appropriate for the market to recognize
this, it should also be noted that U.S. exports, along with business fixed
investment, have been the greatest contributors to GDP growth in the U.S.

[Graphic]

HOW DID FEDERATED GROWTH STRATEGIES FUND PERFORM OVER THE SIX-MONTH
REPORTING PERIOD ENDED APRIL 30, 1998 COMPARED TO THE LIPPER GROWTH FUNDS
AVERAGE?

The fund's six-month total returns for Class A, B, and C Shares were 13.19%,
12.86%, and 12.87%, respectively, based on net asset value.** These returns
lagged the 17.31% return of the fund's peer group, the Lipper Growth Funds
Average.

** 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 period from January 1,
1998 to April 30, 1998, based on offering price for Class A, B, and C Shares
were 8.20%, 8.79%, and 13.29%, respectively. Total returns for the six-month
reporting period ended April 30, 1998, based on offering price for Class A, B,
and C Shares were 6.95%, 6.67%, and 11.73%, respectively.

+ 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 respective categories indicated. These figures do not reflect sales charges.

[Graphic]

WHAT ARE SOME OF THE FUND'S RECENT PORTFOLIO ADDITIONS?

Our recent purchases include the following:

ADVANCED FIBRE COMMUNICATIONS (1.36% of portfolio): Advanced Fibre designs and
sells one of the most flexible and saleable next generation digital loop carrier
systems on the market. The company is well positioned to benefit from the
prevailing trends in the carrier equipment industry.

CHANCELLOR MEDIA (0.58% of portfolio): This is the largest pure-play public
radio company and the second largest overall with 99 stations in the 21 largest
U.S. markets. Its stations are well positioned for growth due to steady ratings
gains and a rising national advertising presence.

EMC CORP. (0.92% of portfolio): A leading manufacturer of enterprise-scale data
storage devices, EMC is enjoying growth as networks increase in number and grow
in size. The company should continue to benefit from the shift from mainframes
to servers, a trend that should last for years to come.

FAIRFIELD COMMUNITIES (0.71% of portfolio): Fairfield is a leading vacation
ownership sales company with innovative product development and marketing.
Vacation ownership should grow as Baby Boomers mature and experience improved
disposable income. Fairfield has the potential to grow earnings 25%-30% per year
by consolidating a fragmented industry of small operators.

[Graphic]

HOW HAS THE MARKET INFLUENCED THE FUND'S SECTOR WEIGHTINGS?

We still think it will take at least several quarters to work through the Asian
situation, and that it will put pressure on industrial commodity companies. So,
despite the respectable performance of basic industry and producer manufacturing
stocks, we continue to underweight these groups, as well as the energy sector.

Our domestic economy remained healthy, as strong employment trends and wage
growth invigorated American consumers to spend more money on automobiles,
housing, and retail goods. This has led to strong performance by the consumer
durable manufacturers and retail sector. We brought our durables sector position
up closer to market weight to take advantage of the healthy consumer trend, but
remain selective. We have reduced our retail exposure closer to market weight
with the strong performance of this group. We expect this environment to also
benefit the services sector, to which we have been aggressively increasing our
exposure.

[Graphic]

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF APRIL 30, 1998, AND WHAT WERE THE
INDUSTRY WEIGHTINGS?

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Advanced Fibre Communications 1.3%
Lucent Technologies, Inc. 1.2%
Tellabs, Inc. 1.2%
Pfizer, Inc. 1.1%
MBNA Corp. 1.1%
Equitable Companies, Inc. 1.1%
Dollar Tree Stores Inc. 1.1%
Schering Plough Corp. 1.1%
Warner-Lambert Co. 1.1%
Conseco, Inc. 1.0%
TOTAL 11.3%
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Technology 20.8% 15.2%
Finance 16.0% 16.0%
Health Care 12.8% 11.4%
Consumer Non-Durables 10.9% 11.0%
Energy/Minerals 7.3% 9.1%
Services 5.3% 5.1%
Utilities 5.6% 9.5%
Retail Trade 5.2% 4.8%
Producer Manufacturing 4.1% 7.7%
Consumer Durables 3.6% 3.4%
Basic Industry 2.5% 5.4%
Transportation 1.2% 1.4%
Other 3.3% 0.0%
</TABLE>

[Graphic]

AS WE APPROACH MID-YEAR, WHAT IS YOUR OVERALL OUTLOOK FOR THE MARKET?

The market is not cheap, but based on interest rates, it is not overly
expensive. If inflation stays around 2%, it is fairly valued, and the market is
discounting a decline in interest rates. We think a decline in rates is
reasonable based on decelerating growth of consumer credit, slower industrial
capacity growth, and the federal government's budget moving from deficit to
surplus, combined with problems abroad and lower international interest rates.
With top-down strategists' earnings expectations still well below bottom-up
analysts estimates, we think earnings are a bigger risk than valuations. Such an
environment should continue to put a premium on the reliability of earnings
growth and result in a strong bid for growth stocks.

TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED GROWTH STRATEGIES FUND

INITIAL INVESTMENT:

IF YOU HAD MADE AN INITIAL INVESTMENT OF $14,000 IN THE CLASS A SHARES OF
FEDERATED GROWTH STRATEGIES FUND ON 8/23/84, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$120,717 ON 4/30/98. YOU WOULD HAVE EARNED A 17.05%* 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, Class A Shares' average annual 1-year, 5-year, and 10-year total
returns were 38.45%, 17.16%, and 15.43%, respectively. Class B Shares' 1-year
and since inception (8/16/95) total returns were 38.41% and 25.78%,
respectively. Class C Shares' 1-year and since inception (8/16/95) total returns
were 44.45% and 27.83%, respectively.**

"Graphic representation "B1" omitted. See Appendix."

* 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, and the
1.00% contingent deferred sales charge for Class C Shares.

FEDERATED GROWTH STRATEGIES FUND

ONE STEP AT A TIME:

$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 13
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $48,975.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class A Shares of Federated
Growth Strategies Fund on 8/23/84, reinvested your dividends and capital gains
and did not redeem any shares, you would have invested only $14,000, but your
account would have reached a total value of $48,975* by 4/30/98. You would have
earned an average annual total return of 16.19%.

A practical investment plan helps you pursue long-term performance from growth
oriented 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 "B2" omitted. See Appendix."

* 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 GROWTH STRATEGIES FUND
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR A COLLEGE EDUCATION

David and Joan Rice are a fictitious 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 child. On
April 30, 1988, they invested $5,000 in the Class A Shares of Federated Growth
Strategies Fund. Since then, David and Joan have made additional investments of
$250 every month.

As this chart shows, over 10 years, the original $5,000 investment along with
their additional monthly $250 investments totaling $35,000 has grown to $92,936.
This represents a 16.42% average annual total return. For the Rices, a dedicated
program of monthly investments really paid off.

"Graphic representation "B3" omitted. See Appendix."

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

FEDERATED GROWTH STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 95.3%
BASIC INDUSTRY -- 2.5%
23,000 Goodrich (B.F.) Co. $ 1,237,688
62,100 Monsanto Co. 3,283,538
165,200 (a) Royal Group Technologies Ltd. 5,131,525
59,000 Southdown, Inc. 4,174,250
52,500 Texas Industries, Inc. 3,382,969
Total 17,209,970
CONSUMER DURABLES -- 3.6%
130,000 Centex Corp. 4,517,500
208,600 (a)Fairfield Communities, Inc. 4,876,025
225,500 (a)Furniture Brands International, Inc. 6,624,063
153,600 (a)Gentex Corp. 5,184,000
117,400 Oakwood Homes Corp. 3,309,213
Total 24,510,801
CONSUMER NON-DURABLES -- 10.9%
92,200 American International Pasta Co. 2,766,000
38,200 Clorox Co. 3,204,025
67,800 Coca-Cola Co. 5,144,325
53,000 Colgate-Palmolive Co. 4,753,438
44,000 Gillette Co. 5,079,250
115,100 (a)Jones Apparel Group, Inc. 6,884,419
106,900 (a)Keebler Foods Co. 3,046,650
87,600 Procter & Gamble Co. 7,199,625
75,300 Quaker Oats Co. 3,915,600
116,200 RJR Nabisco Holdings Corp. 3,231,813
182,600 (a)Smithfield Foods, Inc. 5,546,475
87,800 St. John Knits, Inc. 3,918,075
95,900 (a)Tommy Hilfiger Corp. 5,849,900
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
CONSUMER NON-DURABLES -- CONTINUED
112,000 Universal Corp. $ 4,193,000
126,900 Wolverine World Wide, Inc. 3,664,238
62,300 Wrigley (Wm.), Jr. Co. 5,544,700
Total 73,941,533
ENERGY/MINERALS -- 7.3%
192,400 (a)BJ Services Co. 7,215,000
38,800 Baker Hughes, Inc. 1,571,400
90,800 (a)Cooper Cameron Corp. 6,032,525
93,800 Diamond Offshore Drilling, Inc. 4,748,625
109,600 ENSCO International, Inc. 3,096,200
171,100 (a)Friede Goldman International, Inc. 6,886,775
247,800 (a)Global Industries Ltd. 5,621,963
210,700 (a)Global Marine, Inc. 4,964,619
87,900 Tosco Corp. 3,131,438
199,800 (a)Varco International, Inc. 6,143,850
Total 49,412,395
FINANCE -- 16.0%
77,500 Ahmanson (H.F.) & Co. 5,909,375
61,800 Allstate Corp. 5,948,250
39,400 American International Group, Inc. 5,183,563
52,800 Bank of New York Co., Inc. 3,118,500
62,600 BankAmerica Corp. 5,321,000
223,500 (a)Catellus Development Corp. 3,981,094
149,900 Conseco, Inc. 7,438,788
108,000 (a)E*Trade Group, Inc. 2,693,250
126,100 Equitable Cos., Inc. 7,739,388
184,600 Frontier Insurance Group, Inc. 4,891,900
129,500 (a)Golden State Bancorp, Inc. 5,050,500
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FINANCE -- CONTINUED
232,387 MBNA Corp. $ 7,872,110
87,800 Mellon Bank Corp. 6,321,600
77,400 Merrill Lynch & Co., Inc. 6,791,850
93,605 Morgan Stanley, Dean Witter & Co. 7,383,094
113,400 Old Republic International Corp. 5,131,350
60,900 Providian Financial Corp. 3,665,419
116,550 Raymond James Financial, Inc. 3,795,159
106,800 Torchmark Corp. 4,759,275
88,300 Travelers Group, Inc. 5,402,856
Total 108,398,321
HEALTH CARE -- 12.8%
58,500 (a)Centocor, Inc. 2,467,969
79,700 (a)Dura Pharmaceuticals, Inc. 2,112,050
74,300 Guidant Corp. 4,968,813
93,100 HBO & Co. 5,568,544
163,200 (a)Healthsouth Corp. 4,926,600
50,900 Johnson & Johnson 3,632,988
85,900 Lilly (Eli) & Co. 5,975,419
52,100 Merck & Co., Inc. 6,278,050
243,300 (a)PSS World Medical, Inc. 5,459,044
69,900 Pfizer, Inc. 7,955,494
414,800 (a)PharMerica, Inc. 5,755,350
96,600 (a)Quintiles Transnational Corp. 4,781,700
93,800 Schering Plough Corp. 7,515,725
112,700 Smithkline Beecham Corp., ADR 6,712,694
96,300 (a)Universal Health Services, Inc., Class B 5,543,269
39,500 Warner-Lambert Co. 7,472,906
Total 87,126,615
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PRODUCER MANUFACTURING -- 4.1%
105,000 (a)Chicago Miniature Lamp, Inc. $ 4,029,375
97,700 (a)EVI, Inc. 5,202,525
39,600 General Electric Co. 3,370,950
117,600 Miller Herman, Inc. 3,550,050
68,900 Precision Castparts Corp. 4,280,413
129,500 Tyco International, Ltd. 7,057,750
Total 27,491,063
RETAIL TRADE -- 5.2%
142,300 (a)Dollar Tree Stores, Inc. 7,719,775
131,100 (a)General Nutrition Cos., Inc. 4,703,213
92,600 Home Depot, Inc. 6,447,275
179,700 (a)Safeway, Inc. 6,873,525
176,700 (a)Staples, Inc. 4,362,281
122,900 TJX Cos., Inc. 5,438,325
Total 35,544,394
SERVICES -- 5.3%
201,600 (a)Allied Waste Industries, Inc. 5,544,000
96,400 CBS Corp. 3,434,250
151,455 (a)Cendant Corp. 3,786,375
82,700 (a)Chancellor Media Corp., Class A 3,923,081
156,750 (a)Liberty Media Group, Class A, Series A (LBTYA) 5,202,141
59,200 (a)Premier Parks, Inc. 3,293,000
76,500 Service Corp. International 3,155,625
125,700 (a)Snyder Communications, Inc. 5,342,250
36,800 (a)Veritas DGC, Inc. 1,929,608
Total 35,610,330
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TECHNOLOGY -- 20.8%
217,400 (a)Advanced Fibre Communications $ 9,212,058
79,000 (a)America Online, Inc. 6,320,000
94,800 (a)Applied Materials, Inc. 3,424,650
47,400 (a)BMC Software, Inc. 4,434,863
68,800 (a)CIENA Corp. 3,835,600
134,300 (a)Cadence Design Systems, Inc. 4,876,769
92,600 (a)Cisco Systems, Inc. 6,782,950
79,500 (a)Citrix Systems Inc. 4,938,938
112,000 (a)Compuware Corp. 5,474,000
129,000 (a)Cymer, Inc. 2,878,313
81,700 (a)Dell Computer Corp. 6,597,275
136,000 (a)EMC Corp. Mass 6,273,000
92,800 (a)Gemstar International Group Ltd. 3,584,400
73,700 (a)HNC Software 2,874,300
71,400 Intel Corp. 5,770,013
95,600 (a)KLA-Tencor Corp. 3,853,875
112,600 Lucent Technologies, Inc. 8,571,811
242,000 (a) Mastech Corp. 6,413,000
76,500 (a) Microsoft Corp. 6,894,563
63,900 Northern Telecom Ltd. 3,889,913
95,600 (a)Peoplesoft, Inc. 4,445,400
137,500 (a)Platinum Technology, Inc. 3,506,250
59,050 (a)Rambus, Inc. 2,653,559
116,700 (a)SCI Systems, Inc. 4,806,581
87,800 (a)Sportsline USA, Inc. 3,094,950
97,200 (a)Sun Microsystems, Inc. 4,003,425
117,200 (a)Tellabs, Inc. 8,306,687
73,800 (a)Xilinx, Inc. 3,376,350
Total 141,093,493
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TRANSPORTATION -- 1.2%
74,000 Expeditors International Washington, Inc. $ 3,145,000
189,100 Southwest Airlines Co. 5,188,431
Total 8,333,431
UTILITIES -- 5.6%
98,400 Coastal Corp. 7,029,450
108,900 (a)ICG Communications, Inc. 3,811,500
84,100 (a)ITC DeltaCom, Inc. 2,407,363
146,600 (a)IXC Communications, Inc. 7,311,688
130,900 MCI Communications Corp. 6,585,906
106,500 (a)PanAmSat Corp. 6,223,594
86,900 (a)Teleport Communications Group, Inc., Class A 4,681,725
Total 38,051,226
TOTAL COMMON STOCKS (IDENTIFIED COST
$505,492,250) 646,723,572
(B)REPURCHASE AGREEMENT -- 3.3%
$ 22,205,000 BT Securities Corp., 5.53%, dated 4/30/1998, due
5/1/1998 (AT AMORTIZED COST) 22,205,000
TOTAL INVESTMENTS (IDENTIFIED COST
$505,492,250)(C) $ 668,928,572
</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 $505,492,250.
The net unrealized appreciation of investments on a federal tax basis amounts to
$163,436,322 which is comprised of $171,156,086 appreciation and $7,719,764
depreciation at April 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($678,290,314) at April 30, 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 GROWTH STRATEGIES FUND

STATEMENT OF ASSETS AND LIABILITIES

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $505,492,250 $ 668,928,572
and tax cost)
Cash 5,552,245
Income receivable 317,264
Receivable for investments sold 21,139,864
Receivable for shares sold 2,406,751
Total assets 698,344,696
LIABILITIES:
Payable for investments purchased $ 18,991,542
Payable for shares redeemed 804,850
Income distribution payable 35
Payable for taxes withheld 12,019
Accrued expenses 245,936
Total liabilities 20,054,382
NET ASSETS for 23,973,916 shares outstanding $ 678,290,314
NET ASSETS CONSIST OF:
Paid in capital $ 482,003,421
Net unrealized appreciation of investments 163,436,256
Accumulated net realized gain on investments 34,263,836
Distributions in excess of net investment income (1,413,199)
Total Net Assets $ 678,290,314
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($592,158,327 / 20,866,986 shares $28.38
outstanding)
Offering Price Per Share (100/94.50 of $28.38)* $30.03
Redemption Proceeds Per Share (100.00/100 of $28.38)** $28.38
CLASS B SHARES:
Net Asset Value Per Share ($74,197,840 / 2,678,550 shares outstanding) $27.70
Offering Price Per Share (100/100.00 of $27.70)* $27.70
Redemption Proceeds Per Share (94.50/100 of $27.70)** $26.18
CLASS C SHARES:
Net Asset Value Per Share ($11,934,145 / 428,380 shares outstanding) $27.86
Offering Price Per Share (100/100.00 of $27.86)* $27.86
Redemption Proceeds Per Share (99.00/100 of $27.86)** $27.58
</TABLE>

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

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

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

FEDERATED GROWTH STRATEGIES FUND

STATEMENT OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $13,820) $ 1,656,570
Interest 602,105
Total income 2,258,675
EXPENSES:
Investment advisory fee $ 2,180,768
Administrative personnel and services fee 219,285
Custodian fees 21,167
Transfer and dividend disbursing agent fees and expenses 157,293
Directors'/Trustees' fees 1,650
Auditing fees 8,373
Legal fees 1,867
Portfolio accounting fees 56,397
Distribution services fee -- Class B Shares 197,877
Distribution services fee -- Class C Shares 29,983
Shareholder services fee -- Class A Shares 650,970
Shareholder services fee -- Class B Shares 65,959
Shareholder services fee -- Class C Shares 9,994
Share registration costs 30,855
Printing and postage 22,650
Insurance premiums 3,077
Taxes 12,790
Miscellaneous 6,986
Total expenses 3,677,941
Waivers --
Waiver of shareholder services fee -- Class A Shares $(16,805)
Waiver of shareholder services fee -- Class C Shares (948)
Total waivers (17,753)
Net expenses 3,660,188
Net operating loss (1,401,513)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 35,008,941
Net change in unrealized appreciation of investments 42,146,155
Net realized and unrealized gain on investments 77,155,096
Change in net assets resulting from operations $ 75,753,583
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND

STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net (operating loss)/investment income $ (1,401,513) $ (882,924)
Net realized gain (loss) on investments ($35,008,941 and $0,
respectively, as computed for federal tax purposes) 35,008,941 113,887,481
Net change in unrealized appreciation/depreciation 42,146,155 58,806,461
Change in net assets resulting from operations 75,753,583 171,811,018
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares -- (26,986)
Distributions from net realized gains
Class A Shares (103,524,863) (32,989,453)
Class B Shares (8,434,004) (1,366,243)
Class C Shares (1,228,554) (434,938)
Change in net assets resulting from distributions
to shareholders (113,187,421) (34,817,620)
SHARE TRANSACTIONS--
Proceeds from sale of shares 379,112,689 345,861,726
Proceeds from shares issued in connection with the acquisition -- 74,233,048
Net asset value of shares issued to shareholders in payment of
distributions declared 85,270,596 22,808,813
Cost of shares redeemed (303,784,951) (347,178,563)
Change in net assets resulting from share transactions 160,598,334 95,725,024
Change in net assets 123,164,496 232,718,422
NET ASSETS:
Beginning of period 555,125,818 322,407,396
End of period $ 678,290,314 $ 555,125,818
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEINNING OF PERIOD $31.54 $25.84 $26.22 $21.28 $23.92 $21.16 $21.58 $16.78 $20.99 $17.18
INCOME FROM INVEST-
MENT OPERATIONS
Net investment
income (0.05) (0.04) 0.04 0.24 0.21 0.20 0.33 0.57 0.75 0.59
Net realized and un-
realized gain (loss)
on investments 3.28 8.56 5.01 5.64 (2.18) 2.96 0.45 5.97 (2.69) 3.80
Total from invest-
ment operations 3.23 8.52 5.05 5.88 (1.97) 3.16 0.78 6.54 (1.94) 4.39
LESS DISTRIBUTIONS
Distributions from
net investment
income 0.00 0.00** (0.04) (0.26) (0.19) (0.23) (0.33) (0.61) (0.79) (0.52)
Distributions from
net realized gain
on investments (6.39) (2.82) (5.39) (0.68) (0.48) (0.17) (0.87) (1.13) (1.48) (0.06)
Total
distributions (6.39) (2.82) (5.43) (0.94) (0.40) (0.40) (1.20) (1.74) (2.27) (0.58)
NET ASSET VALUE,
END OF PERIOD $28.38 $31.54 $25.84 $26.22 $21.28 $23.92 $21.16 $21.58 $16.78 $20.99
TOTAL RETURN(A) 13.19% 36.37% 23.16% 29.03% (8.43%) 15.06% 3.93% 41.54% (10.41%) 25.87%
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.18%* 1.14% 1.13% 1.10% 0.99% 0.96% 1.01% 1.01% 1.01% 1.01%*
Net investment
income (0.40%)* (0.14%) 0.15% 1.05% 0.89% 0.90% 1.54% 2.88% 4.00% 2.99%*
Expense waiver/
reimbursement(b) 0.01%* 0.10% 0.15% 0.16% -- -- -- 0.10% 0.22% 0.14%*
SUPPLEMENTAL DATA
Net assets, end
of period (000
omitted) $592,158 $509,678 $307,382 $249,110 $320,630 $460,811 $391,655 $275,561 $138,407 $134,735
Average commis-
sion rate paid(c) $0.0559 $.0571 $0.0566 -- -- -- -- -- -- --
Portfolio
turnover 61% 146% 89% 125% 59% 57% 46% 54% 67% 79%
</TABLE>

* Computed on an annualized basis.

** Amounts distributed per share do not round to $0.01.

(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.

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

FEDERATED GROWTH STRATEGIES FUND

FINANCIAL HIGHLIGHTS -- CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, OCTOBER 31,
1998 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $31.02 $25.65 $26.23
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.09) (0.10) (0.10)
Net realized and unrealized gain (loss) on investments 3.16 8.29 4.91
Total from investment operations 3.07 8.19 4.81
LESS DISTRIBUTIONS
Distributions from net realized gain on investments (6.39) (2.82) (5.39)
NET ASSET VALUE, END OF PERIOD $27.70 $31.02 $25.65
TOTAL RETURN(A) 12.86% 35.23% 22.03%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.94%* 1.99% 2.03%
Net investment income (1.16%)* (1.04%) (0.79%)
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $74,198 $39,588 $10,858
Average commission rate paid(b) $0.0559 $0.0571 $0.0566
Portfolio turnover 61% 146% 89%
</TABLE>

* Computed on an annualized basis.

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

(b) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

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

FEDERATED GROWTH STRATEGIES FUND

FINANCIAL HIGHLIGHTS -- CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, OCTOBER 31,
1998 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $31.16 $25.68 $26.22
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.08) (0.20) (0.05)
Net realized and unrealized gain (loss) on investments 3.17 8.50 4.90
Total from investment operations 3.09 8.30 4.85
LESS DISTRIBUTIONS
Distributions from net realized gain on investments (6.39) (2.82) (5.39)
Total distributions (6.39) 0.00 --
NET ASSET VALUE, END OF PERIOD $27.86 $31.16 $25.68
TOTAL RETURN(A) 12.87% 22.12% 0.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.92%* 1.91% 2.05%
Net operating loss (1.14%)* (0.91%) (0.72%)
Expense waiver/reimbursement(b) 0.02%* 0.09% 0.12%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $11,934 $5,860 $3,667
Average commission rate paid(c) $0.0559 $0.0571 $0.0566
Portfolio turnover 61% 146% 89%
</TABLE>

* Computed on an annualized basis.

(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.

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

FEDERATED GROWTH STRATEGIES FUND

NOTES TO FINANCIAL STATEMENTS

APRIL 30, 1998 (UNAUDITED)

1. ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Growth Strategies Fund (the "Fund"),
a diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers 3 classes of shares: Class A Shares, Class B Shares, and Class C
Shares. The investment objective of the fund is appreciation of capital.

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. U.S. government securities
are generally valued at the mean of the latest bid and asked price as
furnished by an independent pricing service. 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 Trustees (the "Trustees").
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.

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.

Distribution in excess of net investment income were a result of certain book
and tax timing differences. These distributions do not represent a return of
capital for federal income tax purposes.

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
net operating losses.

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. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 13,010,069 $ 341,699,878 15,379,814 $ 389,916,965
Shares issued to shareholders
in payment of distributions 3,073,854 76,047,398 878,652 21,166,808
declared
Shares redeemed (11,378,997) (299,081,619) (12,012,363) (340,958,561)
Net change resulting from
Class A Share transactions 4,704,926 $ 118,665,657 4,246,103 $ 70,125,212
<CAPTION>

SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,226,117 $ 31,821,342 954,973 $ 27,222,810
Shares issued to shareholders in
payment of distributions declared 336,615 8,152,832 53,641 1,280,406
Shares redeemed (160,493) (4,195,784) (155,624) (4,220,243)
Net change resulting from
Class B Share transactions 1,402,239 $ 35,778,390 852,990 $ 24,282,973
<CAPTION>

SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 215,252 $ 5,591,469 106,759 $ 2,954,997
Shares issued to shareholders in
payment of distributions declared 43,939 1,070,366 15,123 361,599
Shares redeemed (18,854) (507,548) (76,646) (1,999,759)
Net change resulting from
Class C share transactions 240,337 $ 6,154,287 45,236 $ 1,316,837
Net change resulting from
share transactions 6,347,502 $ 160,598,334 5,144,329 $ 95,725,022
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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, Inc. 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. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Trust'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
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

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 may voluntarily choose to waive any
portion of its fee. 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 Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

5. YEAR 2000

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 six
months ended April 30, 1998, were as follows:

PURCHASES $404,998,929
SALES $349,204,251

TRUSTEES

John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constanakis
William J. Copeland
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
Chairman

Glen R. Johnson
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

Matthew S. Hardin
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 investment 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, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400

www.federatedinvestors.com

Cusip 314172107
Cusip 314172206
Cusip 314172305
8010409 (6/98)

[Graphic]

Federated
Small Cap
Strategies Fund

3RD SEMI-ANNUAL REPORT
APRIL 30, 1998

ESTABLISHED 1995

[Graphic]

Dear Shareholder:

Federated Small Cap Strategies Fund was created in 1995, and I am pleased to
present its third Semi-Annual Report. This report covers the first half of the
fund's fiscal year, which is the six-month period from November 1, 1997 through
April 30, 1998. It begins with a discussion with Aash M. Shah, Vice President,
Federated Management, who co-manages the fund with Keith J. Sabol, Assistant
Vice President, Federated Management. Following their discussion are two
additional items of shareholder interest. First is a complete listing of the
fund's stock holdings. Second is the publication of the fund's financial
statements.

Federated Small Cap Strategies Fund is managed to offer shareholders significant
opportunities for long-term growth by owning a highly diversified portfolio of
small-cap stocks. These stocks, issued by companies with a typical market
capitalization of less than $1 billion, offer the potential for high returns
over time in exchange for a higher level of risk compared to stocks issued by
large, well-established companies. To help reduce risk and seek opportunities in
this dynamic market, the fund's portfolio is carefully selected and diversified
with an average of 122 stocks across 12 industry sectors.

While the first half of the fund's fiscal year was characterized by a weak
fourth quarter as investor concerns about Asian economic difficulties impacted
the U.S. stock market, the fund has performed well so far in 1998. Individual
share class total return performance, including capital appreciation follows.*
<TABLE> <CAPTION>

TOTAL CAPITAL NET ASSET
RETURN GAINS VALUE INCREASE
<S> <C> <C> <C>
Class A Shares 8.07% $0.03 $18.75 to $20.26 = 8%
Class B Shares 7.68% $0.03 $18.53 to $19.95 = 8%
Class C Shares 7.63% $0.03 $18.51 to $19.92 = 8%
</TABLE>

Over time, you can easily increase your opportunity to participate in the growth
of smaller American companies by reinvesting your dividends and capital gains
automatically in additional fund shares. You can also add to your account on a
regular basis through a systematic investment program. This program withdraws a
specific amount from your checking account on a regular basis to purchase more
fund shares. Buying shares regularly, (i.e. monthly additions of the same dollar
amount) automatically accumulates more shares in your account at lower prices.+
You can contact your investment representative or Federated Securities Corp. for
more information.

Thank you for selecting Federated Small Cap Strategies Fund to pursue your
long-term financial goals. We welcome your comments and suggestions.

Sincerely,

[Graphic]

Glen R. Johnson
President

June 15, 1998

+ Systematic investing does not ensure a profit or protect against loss in
declining markets.

INVESTMENT REVIEW
[Graphic]
Aash M. Shah, CFA
Vice President
Federated Management

[Graphic]
Keith J. Sabol
Assistant Vice President
Federated Management

[Graphic]

THE FIRST HALF OF THE FUND'S FISCAL YEAR WAS CHARACTERIZED BY BOTH WEAKNESS
AND STRENGTH IN THE MARKET OVERALL AND SMALL-CAP STOCKS IN PARTICULAR. WHAT
IS YOUR ANALYSIS?

In general, the six-month period was characterized by two distinctively
different patterns of performance -- a weak beginning and a strong finish. While
the large-cap market recorded slightly positive-to-flat returns in the fourth
quarter of 1997, which was the beginning of the fund's fiscal year, small-cap
stocks experienced negative returns as the Lipper Small Cap Index* was down
5.90%, the Standard & Poor's ("S&P") 600 Small Cap Index** was down 3.10%, and
the Russell 2000 Index** was down 3.40%. The fund experienced a difficult fourth
quarter of 1997, recording a (11.20%) total return for Class A Shares, as the
small-cap growth companies underperformed small-cap value stocks during the
quarter by 11.33%. This severe underperformance of small-cap growth stocks
accounted for the fund's underperformance during the quarter.

The performance picture has been much brighter for equities overall -- and
Federated Small Cap Strategies Fund -- so far during 1998. For the period from
January 1, 1998 through April 30, 1998, the overall equity market as measured by
the S&P 500 Index** recorded a total return of 15.10%. The average Lipper
small-cap fund was up 11.83%, the S&P 600 Small Cap Index was up 11.72%, and the
Russell 2000 Index was up 10.67%. The fund's share classes all recorded
year-to-date total returns of more than 13% -- outperforming all of the major
small-cap indices and the average small-cap fund. Year-to-date, the small-cap
growth and value styles have performed almost in tandem.

* 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 respective categories indicated. These figures do not reflect sales charges.

** The S&P 600 Small Cap Index is a capitalization weighted index that measures
the performance of selected U.S. stocks with a small market capitalization. The
Russell 2000 Index consists of approximately 2,000 small capitalization common
stocks. The S&P 500 Index is a capitalization weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries.
These indices are unmanaged, and investments cannot be made in an index.

[Graphic]

HOW DID FEDERATED SMALL CAP STRATEGIES FUND PERFORM OVER THE ENTIRE
SIX-MONTH REPORTING PERIOD ENDED APRIL 30, 1998 COMPARED TO OTHER FUNDS IN
THE LIPPER SMALL CAP FUND UNIVERSE?

The fund's six-month total returns for Class A, B, and C Shares were 8.07%,
7.68%, and 7.63%, respectively, based on net asset value.+ Due to weakness in
the fund's growth-oriented holdings in the fourth quarter of 1997, as discussed
previously, these returns lagged the 11.04% total return of the Lipper average.

[Graphic]

IN WHAT INDUSTRY SECTORS ARE YOU CURRENTLY FINDING
OPPORTUNITIES?

We currently have slight overweights in the retail and services sectors, and
underweights in transportation, energy, and utilities sectors. In our two
largest sectors, technology and finance, we are slightly overweight and close to
market neutral. We are maintaining our cash position below 2%, effectively fully
invested.

+ 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 period based on offering
price for Class A, B, and C Shares were 2.13%, 2.17%, and 6.61%, respectively.

[Graphic]

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF APRIL 30, 1998, AND WHAT WERE THE
INDUSTRY WEIGHTINGS?

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Applied Voice Technology, Inc. 1.3%
Lone Star Industries, Inc. 1.2%
ProBusiness Services, Inc. 1.2%
Dura Automotive Systems, Inc. 1.1%
Spartech Corp. 1.1%
StaffMark, Inc. 1.1%
FirstFed Financial Corp. 1.1%
Pacific Sunwear of California 1.1%
North Fork Bancorp., Inc. 1.1%
GBC Bancorp 1.1%
TOTAL 11.4%

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 600 INDEX
<S> <C> <C>
Technology 19.3% 18.4%
Finance 15.0% 16.7%
Services 14.5% 12.1%
Retail Trade 9.2% 6.1%
Health Care 7.5% 10.3%
Consumer Durables 6.7% 7.0%
Producer Manufacturing 5.3% 6.9%
Basic Industry 5.2% 7.0%
Consumer Non-Durables 5.0% 4.3%
Utilities 3.2% 4.6%
Energy/Minerals 3.1% 4.0%
Transportation 1.9% 2.6%
</TABLE>

[Graphic]

WHAT IS YOUR OUTLOOK FOR SMALL-CAP STOCKS THROUGH THE BALANCE OF 1998?

Even with the recent strong performance of small-cap stocks -- especially
small-cap growth stocks -- the market remains very attractive. Two powerful
longer term drivers are: 1) valuation levels of small-company stocks are
extremely attractive versus larger caps; and 2) earnings growth in the small-cap
market is expected to outpace larger cap stocks over the next 3-5 years. Our
analysis of the small-cap market reveals numerous opportunities to find
companies with rapidly growing revenues and earnings at attractive prices.
Growth companies in the small-cap sector still appear very reasonably priced
relative to large-cap companies.

There are two characteristics of this fund that make it an ideal investment
vehicle for this market. First, sector discipline -- we stay invested in all 12
economic sectors at all times with appropriate overweights and underweights.
Second is small-cap discipline -- we have kept the median capitalization of the
fund below $1 billion, making this truly a small-cap fund. The current median
capitalization of the holdings in the fund is $770 million.

FEDERATED SMALL CAP STRATEGIES FUND

PORTFOLIO OF INVESTMENTS

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>

SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- 95.9%
BASIC INDUSTRY -- 5.2%
72,200 Cambrex Corp. $ 4,007,100
106,300(a)Carbide/Graphite Group, Inc. 3,428,175
186,200 Furon Co. 3,898,563
66,700 Lone Star Industries, Inc. 5,511,088
88,600(a)Lone Star Technologies, Inc. 1,943,663
233,600 Spartech Corp. 4,949,400
Total 23,737,989
CONSUMER DURABLES -- 6.7%
106,300(a)Action Performance Cos., Inc. 3,680,638
135,600(a)American Homestar Corp. 2,813,700
60,600 Carlisle Cos., Inc. 3,075,450
127,900(a)Dura Automotive Systems, Inc. 4,988,100
80,300(a)Gentex Corp. 2,710,125
221,800(a)Helen of Troy Ltd. 4,546,900
66,200 Oakwood Homes Corp. 1,866,013
94,200(a)Stanley Furniture Co., Inc. 4,403,850
81,100(a)Toll Brothers, Inc. 2,260,663
Total 30,345,439
CONSUMER NON-DURABLES -- 5.0%
95,900(a)Blyth Industries, Inc. 3,518,331
154,100(a)Nautica Enterprise, Inc. 3,833,238
108,900(a)North Face, Inc. 2,443,444
134,700(a)Smithfield Foods, Inc. 4,091,513
74,700(a)Suiza Foods Corp. 4,425,975
153,400 Wolverine World Wide, Inc. 4,429,425
Total 22,741,926
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
ENERGY/MINERALS -- 3.1%
54,300 Camco International, Inc. $ 3,685,613
322,800(a)Comstock Resources, Inc. 4,156,050
122,000(a)EEX Corp. 1,181,875
90,700(a)Tuboscope Vetco International Corp. 2,148,456
148,000 Vintage Petroleum, Inc. 2,886,000
Total 14,057,994
FINANCE -- 15.0%
104,000(a)Amresco, Inc. 3,770,000
63,300 CMAC Investment Corp. 4,086,806
83,700 City National Corp. 3,112,594
83,200 Community First Bankshares, Inc. 4,191,200
69,360(a)Delphi Financial Group, Inc., Class A 3,953,520
148,700(a)Delta Financial Corp. 2,620,838
52,900 Enhance Financial Services Group, Inc. 3,630,263
44,600 Executive Risk, Inc. 2,974,263
75,900(a)FIRSTPLUS Financial Group, Inc. 3,681,150
106,500(a)FirstFed Financial Corp. 4,872,375
74,700 GBC Bancorp 4,762,125
131,300(a)Imperial Bancorp 3,848,731
109,400 Mutual Risk Management Ltd. 3,705,925
129,000 North Fork Bancorp, Inc. 4,789,125
108,200 Sirrom Capital Corp. 3,232,475
102,300(a)Triad Guaranty, Inc. 3,631,650
104,500(a)United Rentals, Inc. 3,598,719
61,100 Vesta Insurance Group, Inc. 3,459,788
Total 67,921,547
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
HEALTH CARE -- 7.5%
127,200(a)Access Health, Inc. $ 4,293,000
145,800(a)Aurora Bioscences, Inc. 1,458,000
175,500(a)Balanced Care Corp. 1,447,875
51,900(a)Curative Technologies, Inc. 1,608,900
148,700(a)FPA Medical Management, Inc. 1,858,750
108,100(a)Genesis Health Ventures, Inc. 2,857,894
133,700(a)Medicis Pharmaceutical Corp., Class A 2,449,575
93,700(a)PSS World Medical, Inc. 2,102,394
61,050(a)Patterson Dental Co. 1,797,159
162,200(a)PharMerica, Inc. 2,250,525
126,200(a)Phycor, Inc. 2,871,050
201,000(a)Prime Medical Services, Inc. 2,135,625
126,037(a)Respironics, Inc. 2,103,242
63,500(a)Universal Health Services, Inc., Class B 3,655,219
Total 33,774,971
PRODUCER MANUFACTURING -- 5.3%
135,200(a)AFC Cable Systems, Inc. 4,698,200
149,400(a)Ballantyne of Omaha, Inc. 3,034,688
11,200 C&D Technologies, Inc. 618,800
145,500(a)Cable Design Technologies, Class A 3,873,938
100,200(a)Chicago Miniature Lamp, Inc. 3,845,175
54,300(a)EVI, Inc. 2,891,475
104,400(a)Rayovac Corp. 2,427,300
148,500(a)U.S. Office Products Co. 2,626,594
Total 24,016,170
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
RETAIL TRADE -- 9.2%
59,600(a)CDW Computer Centers, Inc. $ 2,890,600
175,400 Claire's Stores, Inc. 3,825,913
59,000(a)Express Scripts, Inc., Class A 4,720,000
82,500(a)Funco, Inc. 1,567,500
81,800(a)Mens Wearhouse, Inc. 3,445,825
135,300(a)Microage, Inc. 2,164,800
103,800(a)O'Reilly Automotive, Inc. 2,854,500
109,000(a)Pacific Sunwear of California 4,809,625
138,000(a)Pomeroy Computer Resources 3,510,375
101,200(a)Proffitts, Inc. 4,022,700
140,600(a)Renters Choice, Inc. 3,848,925
134,100(a)Zale Corp. 4,039,763
Total 41,700,526
SERVICES -- 14.5%
123,000(a)ABR Information Services, Inc. 3,559,313
93,000(a)Allied Waste Industries, Inc. 2,557,500
151,200(a)American Business Information, Class A 2,041,200
151,200(a)American Business Information, Class B 2,154,600
137,550(a)BARRA, Inc. 3,301,200
132,000(a)Billing Concepts Corp. 3,696,000
90,600(a)Caribiner International, Inc. 1,812,000
110,600(a)Daisytek International Corp. 2,682,050
107,600(a)FactSet Research Systems 3,766,000
92,000(a)Labor Ready, Inc. 2,898,000
135,100(a)Landrys Seafood Restaurants, Inc. 3,850,350
188,000(a)Newpark Resources, Inc. 4,523,750
199,600(a)Personnel Group of America, Inc. 3,967,050
165,000(a)Philip Services Corp. 1,247,813
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
SERVICES -- CONTINUED
185,400(a)Prime Hospitality Corp. $ 3,835,463
196,400(a)ProBusiness Services, Inc. 5,450,100
99,600(a)Rural/Metro Corp. 3,237,000
43,600(a)Snyder Communications, Inc. 1,853,000
115,500(a)StaffMark, Inc. 4,908,750
116,000(a)World Access, Inc. 4,480,500
Total 65,821,639
TECHNOLOGY -- 19.3%
104,500(a)ATMI, Inc. 2,912,938
133,600(a)Apex MPC Solutions, Inc. 3,991,300
131,500(a)Applied Voice Technology, Inc. 5,802,421
35,300(a)Aspect Development, Inc. 2,234,931
123,600(a)Benchmark Electronics, Inc. 2,773,275
153,000(a)CHS Electronics, Inc. 3,193,875
112,400(a)Ciber, Inc. 3,653,000
80,200(a)Comverse Technology, Inc. 3,799,475
174,300(a)Cybex Computer Products Corp. 4,117,838
158,900(a)Cymer, Inc. 3,545,456
186,700(a)DSP Group, Inc. 3,944,038
86,000(a)Ducommun, Inc. 2,988,500
89,100(a)Eltron International, Inc. 2,305,463
43,200(a)Etec Systems, Inc. 2,451,600
72,900(a)HADCO Corp. 2,788,425
100,100(a)Integrated Circuit System, Inc. 1,514,013
143,200(a)MRV Communications, Inc. 3,848,500
174,000(a)Mastech Corp. 4,611,000
105,400(a)Micrel, Inc. 4,136,950
74,100(a)Microchip Technology, Inc. 2,102,588
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
TECHNOLOGY -- CONTINUED
54,800(a)Orbotech, Ltd. $ 1,979,650
106,800(a)Qlogic Corp. 4,752,600
70,700(a)SS&C Technologies, Inc. 1,608,425
47,800(a)Sanmina Corp. 4,302,000
112,800(a)Smart Modular Technologies, Inc. 2,784,750
72,700(a)Transaction Systems Architects, Inc., Class A 3,053,400
37,200(a)Vitesse Semiconductor Corp. 2,145,975
Total 87,342,386
TRANSPORTATION -- 1.9%
50,100 Airlines Express International Corp. 1,315,125
77,000 Comair Holdings, Inc. 2,103,063
39,800 Expeditors International Washington, Inc. 1,691,500
39,300(a)Heartland Express, Inc. 977,588
34,100 USFreightways Corp. 1,219,075
49,700 Werner Enterprises, Inc. 1,199,013
Total 8,505,364
UTILITIES -- 3.2%
21,500 Central Gas & Electric Service 866,719
17,000 Cilcorp, Inc. 812,813
29,000 Commonwealth Energy System 1,109,250
51,000 K N Energy, Inc. 2,993,063
22,400 New Jersey Resources Corp. 845,600
39,200 Piedmont Natural Gas, Inc. 1,335,250
67,000(a)Premiere Technologies, Inc. 2,135,625
</TABLE>
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
*COMMON STOCKS -- CONTINUED
UTILITIES -- CONTINUED
39,500 Sierra Pacific Resources $ 1,382,500
93,700(a)Transaction Network Services, Inc. 1,909,138
25,400 WICOR, Inc. 1,217,613
Total 14,607,571
TOTAL COMMON STOCKS (IDENTIFIED COST 434,573,522
$357,235,013)
U.S. TREASURY -- 2.5%
TREASURY SECURITIES -- 2.5%
$11,300,000(b)United States Treasury Bill, 4.80%, 6/18/1998 11,228,923
TOTAL INVESTMENTS (IDENTIFIED COST $ 445,802,445
$368,463,936)(C)
</TABLE>

* The Fund purchases Index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividend and capital gain
payments to shareholders and corporate actions while maintaining exposure to the
Index and minimizing trading costs. The total market value of open Index futures
contracts is $7,305,000 at April 30, 1998, which represents 1.6% of net assets.
Taking into consideration these open Index futures contracts, the Fund's
effective total exposure to the Index is 97.5%.

(a) Non-income producing security.

(b) The issue shows the rate of discount at time of purchase.

(c) The cost of investments for federal tax purposes amounts to $368,463,936.
The net unrealized appreciation of investments on a federal tax basis amounts to
$77,338,509 which is comprised of $92,339,003 appreciation and $15,000,494
depreciation at April 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($452,873,936) at April 30, 1998.

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

FEDERATED SMALL CAP STRATEGIES FUND

STATEMENT OF ASSETS AND LIABILITIES

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$368,463,936 and tax cost $368,463,936) $445,802,445
Cash 12,153,596
Income receivable 76,741
Receivable for shares sold 3,138,867
Receivable for daily variation margin 110,875
Deferred organizational costs 40,173
Total assets 461,322,697
LIABILITIES:
Payable for investments purchased $6,762,279
Payable for shares redeemed 1,419,951
Accrued expenses 266,531
Total liabilities 8,448,761
NET ASSETS for 22,575,557 shares outstanding $452,873,936
NET ASSETS CONSIST OF:
Paid in capital $372,578,645
Net unrealized appreciation of investments and futures contracts 77,280,416
Accumulated net realized gain on investments and futures contracts 5,439,248
Accumulated net investment loss (2,424,373)
Total net assets $452,873,936
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($170,948,643/8,438,948 shares outstanding) $20.26
Offering Price Per Share (100/94.50 of $20.26)* $21.44
Redemption Proceeds Per Share (100.00/100 of $20.26)** $20.26
CLASS B SHARES:
Net Asset Value Per Share ($246,379,460/12,352,192 shares outstanding) $19.95
Offering Price Per Share (100/100.00 of $19.95)* $19.95
Redemption Proceeds Per Share (94.50/100 of $19.95)** $18.85
CLASS C SHARES:
Net Asset Value Per Share ($35,545,833/1,784,417 shares outstanding) $19.92
Offering Price Per Share (100/100.00 of $19.92)* $19.92
Redemption Proceeds Per Share (99.00/100 of $19.92)** $19.72
</TABLE>

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

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

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

FEDERATED SMALL CAP STRATEGIES FUND

STATEMENT OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 440,166
Interest 448,582
Total income 888,748
EXPENSES:
Investment advisory fee $ 1,415,474
Administrative personnel and services fee 150,278
Custodian fees 15,392
Transfer and dividend disbursing agent fees and expenses 252,890
Directors'/Trustees' fees 4,156
Auditing fees 7,446
Legal fees 2,348
Portfolio accounting fees 57,331
Distribution services fee -- Class B Shares 769,673
Distribution services fee -- Class C Shares 111,906
Shareholder services fee -- Class A Shares 177,965
Shareholder services fee -- Class B Shares 256,558
Shareholder services fee -- Class C Shares 37,302
Share registration costs 33,437
Printing and postage 19,460
Insurance premiums 2,353
Taxes 543
Miscellaneous 3,598
Total expenses 3,318,110
Waiver --
Waiver of investment advisory fee $ (4,909)
Net expenses 3,313,201
Net operating loss (2,424,453)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain on investments and futures contracts 5,486,584
Net change in unrealized appreciation of investments and futures contracts 30,917,222
Net realized and unrealized gain on investments and futures contracts 36,403,806
Change in net assets resulting from operations $ 33,979,353
</TABLE>

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

FEDERATED SMALL CAP STRATEGIES FUND

STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, OCTOBER 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net operating loss $ (2,424,453) $ (1,905,688)
Net realized gain on investments and futures
contracts
($5,486,584 and $1,368,031, respectively, as 5,486,584 1,329,530
computed for federal tax purposes)
Net change in unrealized
appreciation/depreciation on
investments and futures contracts 30,917,222 44,425,343
Change in net assets resulting from 33,979,353 43,849,185
operations
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net realized gains
Class A Shares (20,318) (479,065)
Class B Shares (28,441) (622,004)
Class C Shares (4,031) (97,800)
Change in net assets resulting from (52,790) (1,198,869)
distributions to shareholders
SHARE TRANSACTIONS --
Proceeds from sale of shares 356,145,412 316,254,217
Net asset value of shares issued to
shareholders in payment of
distributions declared 45,180 1,012,743
Cost of shares redeemed (281,700,477) (76,309,740)
Change in net assets resulting from share 74,490,115 240,957,220
transactions
Change in net assets 108,416,678 283,607,536
NET ASSETS:
Beginning of period 344,457,258 60,849,722
End of period (including accumulated net
investment loss and
undistributed net investment income of $ 452,873,936 $344,457,258
$2,424,373 and $80, respectively)
</TABLE>

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

FEDERATED SMALL CAP STRATEGIES FUND

FINANCIAL HIGHLIGHTS -- CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.75 $14.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.07) (0.04) (0.05)(d)
Net realized and unrealized gain (loss) on
investments and futures contracts 1.61 4.33 4.75
Total from investment operations 1.54 4.29 4.70
LESS DISTRIBUTIONS
Distributions in excess of net investment income -- -- (0.02)
Distributions from net realized gain on investments
and futures contracts (0.03) (0.22) --
Total distributions (0.03) (0.22) (0.02)
NET ASSET VALUE, END OF PERIOD $20.26 $18.75 $14.68
TOTAL RETURN(A) 8.07% 29.55% 47.06%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.29%* 1.44% 1.35%
Net investment income (0.82%)* (0.65%) (0.39%)
Expense waiver/reimbursement(b) 0.00%* 0.00% 1.70%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $170,949 $134,903 $23,242
Average commission rate paid(c) $0.0532 $0.0501 $0.0264
Portfolio turnover 39% 118% 83%
</TABLE>

* Computed on an annualized basis.

(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.

(d) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

FEDERATED SMALL CAP STRATEGIES FUND

FINANCIAL HIGHLIGHTS -- CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996
<S> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD $18.53 $14.62 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.13) (0.09) (0.16)(d)
Net realized and unrealized gain (loss) on
investments and futures contracts 1.58 4.22 4.78
Total from investment operations 1.45 4.13 4.62
LESS DISTRIBUTIONS
Distributions from net realized gain on investments
and futures contracts (0.03) (0.22) --
NET ASSET VALUE, END OF PERIOD $19.95 $18.53 $14.62
TOTAL RETURN(A) 7.68% 28.56% 46.20%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.04%* 2.19% 2.10%
Net investment income (1.57%)* (1.40%) (1.27%)
Expense waiver/reimbursement(b) 0.00%* 0.00% 1.70%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $246,379 $183,180 $32,112
Average commission rate paid(c) $0.0532 $0.0501 $0.0264
Portfolio turnover 39% 118% 83%
</TABLE>

* Computed on an annualized basis.

(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.

(d) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

FEDERATED SMALL CAP STRATEGIES FUND

FINANCIAL HIGHLIGHTS -- CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996
<S> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD $18.51 $14.60 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.13) (0.10) (0.16)(d)
Net realized and unrealized gain (loss) on
investments and futures contracts 1.57 4.23 4.76
Total from investment operations 1.44 4.13 4.60
LESS DISTRIBUTIONS
Distributions from net realized gain on investments
and futures contracts (0.03) (0.22) --
NET ASSET VALUE, END OF PERIOD $19.92 $18.51 $14.60
TOTAL RETURN(A) 7.63% 28.60% 46.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.04%* 2.19% 2.10%
Net investment income (1.57%)* (1.40%) (1.28%)
Expense waiver/reimbursement(b) 0.00%* 0.00% 1.70%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $35,546 $26,375 $5,496
Average commission rate paid(c) $0.0532 $0.0501 $0.0264
Portfolio turnover 39% 118% 83%
</TABLE>

* Computed on an annualized basis.

(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.

(d) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

FEDERATED SMALL CAP STRATEGIES FUND

NOTES TO FINANCIAL STATEMENTS

APRIL 30, 1998 (UNAUDITED)

1. ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Small Cap Strategies Fund (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B Shares,
and Class C Shares. The investment objective of the Fund is to provide capital
appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

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 Trustees (the "Trustees").
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.

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.

DEFERRED EXPENSES -- The cost incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized over a period
not to exceed five years from the Fund's commencement date.

FUTURES CONTRACTS -- The Fund purchases stock index futures contracts to manage
cashflows, enhance yield, and to potentially reduce transaction costs. Upon
entering into a stock index futures contract with a broker, the Fund is required
to deposit in a segregated account a specified amount of cash or U.S. government
securities. Futures contracts are valued daily and unrealized gains or losses
are recorded in a "variation margin" account. Daily, the Fund receives from or
pays to the broker a specified amount of cash based upon changes in the
variation margin account. For the period ended April 30, 1998, the Fund had
realized gains of $7,375 on future contracts.

Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities.

At April 30, 1998, the Fund had outstanding futures contracts as set forth
below:
CONTRACTS TO APPRECIATION
EXPIRATION DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
June 1998 30 Russell 2000 Long $(58,093)

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. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.

Transactions in shares were as follows:
<TABLE>
<CAPTION>

SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
<S> <C> <C> <C> <C>

CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 15,049,185 $281,822,832 8,939,852 $152,717,553
Shares issued to
shareholders in
payment of distributions 765 14,034 22,727 351,365
declared
Shares redeemed (13,804,900) (3,351,598) (59,328,543) (259,136,292)
Net change resulting from
Class A Shares 1,245,050 $ 22,700,574 5,610,981 $ 93,740,375
transactions
</TABLE>

SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
<S> <C> <C> <C> <C>

CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 3,459,185 $ 63,826,038 8,333,326 $140,776,114
Shares issued to shareholders
in
payment of distributions 1,513 27,386 36,949 568,269
declared
Shares redeemed (992,444) (18,542,272) (682,324) (11,279,092)
Net change resulting from
Class B Shares transactions 2,468,254 $ 45,311,152 7,687,951 $130,065,291
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
<S> <C> <C> <C> <C>

CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 574,944 $ 10,496,542 1,377,339 $ 22,760,551
Shares issued to shareholders
in
payment of distributions 208 3,760 6,061 93,109
declared
Shares redeemed (215,894) (4,021,913) (334,548) (5,702,106)
Net change resulting from
Class C Shares transactions 359,258 6,478,389 1,048,852 $ 17,151,554
Net change resulting from
share transactions 4,072,562 $ 74,490,115 14,347,784 $240,957,220
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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, Inc. 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. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC.

PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%

For the period ended April 30, 1998, Class A did not incur a distribution
services fee.

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 may voluntarily choose to waive any portion of its fee. 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 -- Federated Services Company 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.

ORGANIZATIONAL EXPENSES -- Organizational and/or start-up administrative service
expenses of $10,292 were borne initially by FServ. The Fund has agreed to
reimburse FServ for the expenses during the five year period following the
effective date. For the period ended April 30, 1998, the Fund paid $5,589
pursuant to this agreement.

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

5. YEAR 2000

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 Advisor 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 April 30, 1998, were as follows:

PURCHASES $220,956,102
SALES $146,712,356

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

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
Chairman

Glen R. Johnson
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

Matthew S. Hardin
Assistant Secretary

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, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 314172404
Cusip 314172503
Cusip 314172602
G01658-05 (6/98)

[Graphic]

Federated Capital Appreciation Fund

22ND SEMI-ANNUAL REPORT
APRIL 30, 1998

ESTABLISHED 1977

PRESIDENT'S MESSAGE

[Graphic]

Dear Shareholder:

Federated Capital Appreciation Fund was created in 1977, and I am pleased to
present its 22nd Semi-Annual Report. This report covers the first half of of the
fund's fiscal year, which is the six-month period from November 1, 1997 through
April 30, 1998. It begins with a discussion with the fund's portfolio manager,
Arthur J. Barry, Assistant Vice President of Federated Management. Following his
discussion are three additional items of shareholder interest. First is a series
of graphs showing the fund's long-term investment performance. Second is a
complete listing of the fund's highly diversified stock holdings. Third is the
publication of the fund's financial statements.

While volatility impacted the stock market in March 1998, the fund's portfolio
of high-quality, mid- to large-cap common stocks participated in the subsequent
first quarter 1998 rally. For the six-month reporting period, the fund's share
classes outperformed the average capital appreciation fund on a total return
basis, as measured by the Lipper Capital Appreciation Funds Average.* Individual
share class total return performance, including capital appreciation, income
dividends, and realized gains follows.**

TOTAL CAPITAL
RETURN INCOME GAINS NET ASSET VALUE INCREASE
Class A Shares 16.54% $0.09 $2.33 $20.08 to $20.58 = 2%
Class B Shares 15.82% $0.02 $2.33 $20.04 to $20.50 = 2%
Class C Shares 16.35% $0.02 $2.33 $19.95 to $20.49 = 2%

Remember, as a shareholder, you have two easy ways to increase your opportunity
to participate in the growth and earnings of high-quality U.S. corporations.
First, you can reinvest your dividends and capital gains automatically in
additional shares to help your shares to increase in number through the benefit
of quarterly compounding. Second, you can "pay yourself first," by adding to
your account on a regular basis through a systematic investment program. This
program withdraws a specific amount from your checking account on a regular
basis to purchase more fund shares. Buying shares regularly, (i.e. monthly
additions of the same dollar amount) automatically accumulates more shares in
your account at lower prices.+ You can contact your investment representative or
Federated Securities Corp. for more information.

Thank you for entrusting a portion of your wealth to Federated Capital
Appreciation Fund. We welcome your comments and suggestions.

Sincerely,

Glen R. Johnson
President

June 15, 1998

+ Systematic investing does not ensure a profit or protect against loss in
declining markets.

INVESTMENT REVIEW

[Graphic]

Arthur J. Barry, CFA
Assistant Vice President
Federated Management

[Graphic]

OVERALL, THE FIRST HALF OF THE FUND'S FISCAL YEAR HAS SEEN WEAKNESS AND
STRENGTH IN THE STOCK MARKET. WHAT IS YOUR REVIEW OF THE MARKET OVER THE
SIX-MONTH REPORTING PERIOD ENDED APRIL 30, 1998?

The fourth quarter of 1997, which includes the beginning of the first half of
the fund's fiscal year, will go down on record as a shaky one for the equity
markets. Uncertainty over the growth and stability of many Asian economies
roiled our equity market. A flight to quality followed which resulted in
large-capitalization stocks outperforming the mid- and small-caps. To quantify
the results, the Standard & Poor's ("S&P") 500 Index (large-caps) returned 2.87%
while the S&P 400 Mid Cap Index (mid-caps) rose 0.83% and the S&P 600 Small Cap
Index (small-caps) fell 3.10%.* Fear of deflation brought interest rates down
and boosted financial stocks.

In contrast, the S&P 500 Index returned 13.90% in the first quarter of 1998
alone -- historically, a year's worth of returns -- with a year-to-date return
of 15.10% as of April 30, 1998. Again, large-caps outpaced the returns of mid-
and small-caps over both time frames. The market did not seem to believe Asia's
economic troubles would impact U.S. domiciled companies, or it at least decided
to look beyond the Asian impact, thinking it would be a short-term event. U.S.
exports to Asia represent 3% of domestic Gross Domestic Product, so the downturn
is palatable by U.S. multinationals. It is important to note that lower raw
material costs for these companies could result in expanding margins and offset
slowing revenue growth. We have seen the price of imports fall over the last
several months, especially for capital goods.

Interest rates had a muted influence on the market as the 30-year U.S. Treasury
bond began and ended the quarter slightly under 6.00%.

Following the historical pattern, cyclical stocks outperformed consumer staples.
Among the strongest performing industries were communication equipment,
software, retail, and home building. Tobacco and energy-related industries were
the worst performing sectors. Earnings shortfalls were particularly concentrated
in the technology sector with the majority blaming Asia as the culprit.

* The S&P 500 Index is a capitalization weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries. The S&P
400 Mid Cap Index is a capitalization weighted index that measures the
performance of the mid-range of the U.S. stock market. The S&P 600 Small Cap
Index is a capitalization weighed index that measures the performance of
selected U.S. stocks with a small market capitalization. These indices are
unmanaged, and investments cannot be made in an index.

[Graphic]

HOW DID FEDERATED CAPITAL APPRECIATION FUND PERFORM FOR ITS SHAREHOLDERS FOR THE
SIX-MONTH REPORTING PERIOD ENDED APRIL 30, 1998?

For the six-month reporting period, the fund's Class A, B, and C Shares produced
total returns of 16.54%, 15.82%, and 16.35%, respectively, based on net asset
value.** The fund's performance was competitive with the 17.31% total return of
the Lipper Growth Funds Average while outperforming the 12.84% total return of
the Lipper Capital Appreciation Funds Average for the same six-month reporting
period.+ The fund's performance, however, did trail the 22.47% six-month return
of the S&P 500 Index.

[Graphic]

WHAT INDUSTRY SECTORS ARE YOU UNDERWEIGHTING AND OVERWEIGHTING IN THE FUND?

The biggest drag on the fund's performance early in the first half of the fiscal
year was oil service-related stocks in which the fund was overweight; this
position was subsequently trimmed. We continue to like the risk/reward of oil
service stocks, but are cautious due to falling oil prices. To boost the
defensiveness of the fund, we increased our exposure to utilities. The
underweight in technology and overweight in finance were net positives for the
fund in the fourth quarter of 1997.

Despite the economy showing strength, we believe inflation will remain subdued,
especially if oil prices stay at depressed levels. We anticipate oil prices will
rebound over the course of the year, but not enough to reignite inflation. Going
forward, we expect more muted performance from cyclical stocks. The basic
industry sector has and should continue to concern investors, again due to the
Asian crisis. Therefore, we are being selective and avoiding commodity exposure
in this sector.

[Graphic]

WHAT WERE SOME OF THE FUND'S RECENT STOCK PURCHASES?

Our recent purchases include the following:

ALLIED WASTE (0.88% of assets): Allied is a fast-growing company in the waste
hauling industry. The company's growth could accelerate due to the merger
between U.S. Waste and WMX Technologies. To get regulatory approval, the
combined company will have to divest properties. Allied will be one of the few
buyers of these divested properties.

DOLLAR TREE (1.02% of assets): Dollar Tree is a fast-growing operator of stores
that concentrates on the $1 price point. Its competitors in this arena have
drifted away from this price point and have become more like generic discount
stores. The company achieves superior returns on capital because it designs
products to achieve certain gross margins on every item it sells.

JACOR COMMUNICATIONS (0.97% of assets): Jacor is a large acquirer and operator
of radio stations. The radio industry has consolidated, and larger operators are
more sophisticated, thus achieving higher margins. Jacor, in particular, has
acquired many "sticks" (low margin stations) which should provide for a few
years of margin expansion.

MONTANA POWER (1.05% of assets): Montana Power, an electric utility, is an asset
play. The company has run fiber optic cable through its territory, and the
demand for this cable is growing due to the Internet. Montana trades at the same
multiple as its peers despite its potential for superior earnings growth.

PACIFIC GATEWAY EXCHANGE (1.08% of assets): Pacific Gateway is a fast-growing
company in international long-distance service. The company currently has
operating agreements in 26 countries which allows it to carry traffic for
second-tier, long-distance companies. Once Europe's long-distance market is
deregulated in 1998, Pacific Gateway will be a beneficiary of the increased
competition.

PREMIER PARKS (1.28% of assets): Parks' business strategy is to acquire
neglected, under-marketed theme parks and operate them for higher margins.
Through its recent acquisition of Six Flags from Time Warner, they have become
the second largest theme park operator in the country. Premier Parks will use
Warner Brothers characters in some of its current parks, which should drive up
attendance and margins.

UNITED RENTALS (1.00% of assets): The former management team of United Waste has
turned its attention to consolidating the construction equipment rental market.
The team has proven its ability in the waste hauling industry and has a solid
business plan for consolidating this fragmented industry.

U.S. SURGICAL (0.89% of assets): U.S. Surgical is transforming itself into a
leader in the field of minimally invasive surgery. The company's valuation
has become very cheap while this transformation takes place due to the risk
involved. We have confidence that the company's management can accomplish
this task, as it has historically demonstrated exceptional new product
development skills.

[Graphic]

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF APRIL 30, 1998, AND WHAT WERE THE
INDUSTRY WEIGHTINGS?

PERCENTAGE OF
NAME NET ASSETS
Morgan Stanley, Dean Witter & Co. 1.95%
SmithKline Beecham Corp., ADR 1.55%
Chase Manhattan Corp. 1.50%
Bristol-Myers Squibb Co. 1.50%
CIGNA Corp. 1.46%
General Electric Co. 1.40%
DST Systems, Inc. 1.35%
Travelers Group, Inc. 1.35%
Tyco International, Ltd. 1.29%
Premier Parks, Inc. 1.28%
TOTAL 14.63%

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
Finance 18.1% 16.3%
Technology 15.1% 15.2%
Utilities 9.6% 9.5%
Services 9.2% 4.8%
Consumer Non-Durables 8.9% 10.9%
Producer Manufacturing 7.4% 7.7%
Health Care 6.9% 11.3%
Retail Trade 6.7% 4.6%
Energy/Minerals 6.6% 8.9%
Basic Industry 4.3% 5.5%
Consumer Durables 2.6% 3.4%
Transportation 2.1% 1.4%

[Graphic]

AS WE REACH MID-YEAR, WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET?

I am cautiously bullish, with an emphasis on "cautiously." The economy has been
strong, interest rates benign, and consumer confidence high. These factors have
bolstered the stock market. For the market to remain strong, however, this
Nirvana needs to continue. Any perception of a change in this outlook should
cause investors to realize profits.

[Graphic]

TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED CAPITAL APPRECIATION FUND

INITIAL INVESTMENT:

IF YOU HAD MADE AN INITIAL INVESTMENT OF $22,000 IN THE CLASS A SHARES OF
FEDERATED CAPITAL APPRECIATION FUND ON 1/1/77, REINVESTED DIVIDENDS AND CAPITAL
GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$429,756 ON 4/30/98. YOU WOULD HAVE EARNED A 14.95%* 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, Class A Shares' average annual 1-year, 5-year, and 10-year total
returns were 38.58%, 18.57%, and 15.68%, respectively. Class B Shares' average
annual 1-year and since inception (1/4/96) total returns were 39.64% and 25.08%,
respectively. Class C Shares' average annual 1-year and since inception (1/4/96)
total returns were 44.62% and 26.73%, respectively.**

"Graphic representation "A1" omitted. See Appendix."

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 CAPITAL APPRECIATION FUND

ONE STEP AT A TIME:

$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 21
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $155,616.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class A Shares of Federated
Capital Appreciation Fund on 1/1/77, reinvested your dividends and capital
gains, and did not redeem any shares, you would have invested only $22,000 but
your account would have reached a total value of $155,616* by 4/30/98. You would
have earned an average annual total return of 15.63%.

A practical investment plan helps you pursue long-term performance from
growth-oriented 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."

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 CAPITAL APPRECIATION FUND
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR A COLLEGE EDUCATION

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

David and Joan are planning for the college education of their child. On April
30, 1988, they invested $5,000 in the Class A Shares of Federated Capital
Appreciation Fund. Since then, David and Joan have made additional investments
of $250 every month.

As this chart shows, over 10 years, the original $5,000 investment along with
their additional monthly $250 investments totaling $35,000 has grown to $96,283.
This represents a 17.00% 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 result obtained by any particular shareholder. Past
performance does not guarantee future results.

FEDERATED CAPITAL APPRECIATION FUND

PORTFOLIO OF INVESTMENTS

APRIL 30, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--87.4%
BASIC INDUSTRY--4.3%
30,000 Carpenter Technology Corp. $ 1,741,875
46,000 Goodrich (B.F.) Co. 2,475,375
60,000 Sigma-Aldrich Corp. 2,392,500
36,000 Southdown, Inc. 2,547,000
Total 9,156,750
CONSUMER DURABLES--2.6%
38,000 Aeroquip-Vickers, Inc. 2,415,375
13,800 M.D.C. Holdings, Inc. 237,188
47,000 Mattel, Inc. 1,800,688
45,000 Sunbeam Corp. 1,130,625
Total 5,583,876
CONSUMER NON-DURABLES--7.6%
20,000 Avon Products, Inc. 1,643,750
28,000 Dean Foods Co. 1,312,500
72,300 Dial Corp. 1,762,313
25,000 (a)International Home Foods, Inc. 750,000
32,000 Interstate Bakeries Corp. 1,014,000
14,400 (a)Keebler Foods Co. 410,400
56,000 PepsiCo, Inc. 2,222,500
45,000 Philip Morris Cos., Inc. 1,679,075
52,900 RJR Nabisco Holdings Corp. 1,471,281
57,200 (a)Rayovac Corp. 1,329,900
37,000 Schweitzer-Mauduit International, Inc. 1,230,250
20,000 (a)Tommy Hilfiger Corp. 1,220,000
Total 16,045,969
ENERGY/MINERALS--5.4%
54,000 (a)BJ Services Co. 2,025,000
</TABLE>
FEDERATED CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY/MINERALS--CONTINUED
23,733 British Petroleum Co. PLC, ADR $ 2,242,769
39,000 (a)Friede Goldman International, Inc. 1,569,750
27,000 Mobil Corp. 2,133,000
19,400 Pennzoil Co. 1,242,813
55,000 Sun Co., Inc. 2,224,063
Total 11,437,395
FINANCE--18.1%
60,000 Ace, Ltd. 2,272,500
23,000 Allstate Corp. 2,213,750
10,000 American Express Co. 1,020,000
27,500 (a)Annunity & Life Re Ltd. 656,563
15,000 CIGNA Corp. 3,104,054
23,000 Chase Manhattan Corp. 3,186,938
15,000 Citicorp 2,257,500
33,000 Conseco, Inc. 1,637,625
58,300 Equity Office Properties Trust 1,657,906
26,000 Executive Risk, Inc. 1,733,875
40,000 Hartford Life, Inc., Class A 1,977,500
11,200 Heller Financial, Inc. 302,400
52,290 Morgan Stanley, Dean Witter & Co. 4,124,374
48,000 Nationwide Financial Services, Inc., Class A 2,082,000
16,000 Progressive Corp., Ohio 2,167,000
52,500 (a)Security Capital Group, Inc. 1,588,125
46,599 Travelers Group, Inc. 2,851,276
29,000 Vesta Insurance Group, Inc. 1,642,125
5,000 Wells Fargo & Co. 1,842,500
Total 38,318,011
</TABLE>

FEDERATED CAPITAL APPRECIATION FUND
SHARES VALUE
<S> <S> <C>
COMMON STOCKS--CONTINUED
HEALTH CARE--6.9%
20,000 American Home Products Corp. $ 1,862,500
30,000 (a)Amgen, Inc. 1,788,750
35,000 Baxter International, Inc. 1,940,313
30,000 Bristol-Myers Squibb Co. 3,176,250
60,000 (a)MedPartners, Inc. 615,000
55,000 Smithkline Beecham Corp., ADR 3,275,938
60,000 U.S. Surgical Corp. 1,890,000
Total 14,548,751
PRODUCER MANUFACTURING--7.4%
25,000 (a)EVI, Inc. 1,331,250
35,000 General Electric Co. 2,979,375
70,000 HON Industries, Inc. 2,240,000
45,000 Parker-Hannifin Corp. 2,008,125
31,000 Textron, Inc. 2,425,750
50,000 Tyco International, Ltd. 2,725,000
18,000 Xerox Corp. 2,043,000
Total 15,752,500
RETAIL TRADE--5.6%
49,000 (a) Borders Group, Inc. 1,574,125
16,000 Dayton-Hudson Corp. 1,397,000
40,000 (a)Dollar Tree Stores, Inc. 2,170,000
32,000 Home Depot, Inc. 2,228,000
117,000 (a)Officemax, Inc. 2,201,063
58,000 (a)Proffitts, Inc. 2,305,500
Total 11,875,688
SERVICES--5.7%
67,500 (a)Allied Waste Industries, Inc. 1,856,250
36,000 (a)Jacor Communications, Inc., Class A 2,047,500
</TABLE>
FEDERATED CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
90,000 (a)Newpark Resources, Inc. $ 2,165,625
17,000 Omnicom Group, Inc. 805,375
12,500 (a)Premier Parks, Inc. 695,313
84,402 (a)TCI Ventures Group, Class A 1,376,808
62,000 (a)United Rentals, Inc. 2,135,125
52,500 (a)Ziff-Davis, Inc. 945,000
Total 12,026,996
TECHNOLOGY--14.2%
18,000 (a)America Online, Inc. 1,440,000
30,000 (a)CIENA Corp. 1,672,500
21,000 (a)Citrix Systems Inc. 1,304,625
23,000 Computer Associates International, Inc. 1,346,938
75,200 (a)Creative Technology Ltd. 1,541,600
62,500 (a)Cymer, Inc. 1,394,531
52,000 (a)DST Systems, Inc. 2,866,500
25,000 (a)Dell Computer Corp. 2,018,750
23,000 Intel Corp. 1,858,688
17,000 Lockheed Martin Corp. 1,893,375
31,000 Lucent Technologies, Inc. 2,359,875
74,000 (a)Mastech Corp. 1,961,000
10,900 (a)Metromedia Fiber Network, Inc. 336,538
25,000 (a)Microsoft Corp. 2,253,125
</TABLE>

FEDERATED CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>

SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
110,000 (a)Sequent Computer System, Inc. $ 2,158,750
43,000 (a)Sportsline USA, Inc. 1,515,750
32,000 (a)Tellabs, Inc. 2,268,000
Total 30,190,545
UTILITIES--9.6%
41,000 CMS Energy Corp. 1,791,188
36,900 Enron Corp. 1,815,019
47,000 Entergy Corp. 1,169,125
39,800 (a)IXC Communications, Inc. 1,985,025
40,000 K N Energy, Inc. 2,347,500
48,000 MCI Communications Corp. 2,415,000
60,000 Montana Power Co. 2,231,250
40,000 (a)Pacific Gateway Exchange, Inc. 2,280,000
65,000 (a)Tele-Communications, Inc., Class A 2,096,250
70,000 Williams Cos., Inc. (The) 2,213,750
Total 20,344,107
TOTAL COMMON STOCKS (IDENTIFIED COST $123,900,292) 185,280,588
CORPORATE BONDS--3.7%
ENERGY MINERALS--1.2%
$ 1,790,000 Diamond Offshore Drilling, Inc., Conv. Bond, 3.75%, 2,461,304
2/15/2007
RETAIL TRADE--1.1%
3,550,000 Costco Cos., Inc., Conv. Bond, 8/19/2017 2,334,906
SERVICES--0.5%
1,060,000 (b)Omnicom Group, Inc., Conv. Bond, 2.25%, 1/6/2013 1,209,725
TECHNOLOGY--0.9%
1,300,000 (b)Solectron Corp., Conv. Bond, 6.00%, 3/1/2006 1,892,605
TOTAL CORPORATE BONDS (IDENTIFIED COST $6,225,047) 7,898,540
</TABLE>

FEDERATED CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--6.4%
CONSUMER NON-DURABLES--1.3%
17,800 Ralston Purina Co., SAILS, $1.08 $ 1,083,575
32,500 (b)Suiza Foods Corp., Conv. Pfd., $2.75 1,614,080
Total 2,697,655
SERVICES--3.0%
20,000 Cendant Corp., Conv. Pfd., $.94 823,750
143,200 Hollinger International Publishing, Inc., Conv. 1,924,250
Pfd., $.95
36,000 Premier Parks, Inc., Conv. Pfd., $4.05 2,025,000
43,000 Snyder Communications, Inc., STRYPES, $1.68 1,666,250
Total 6,439,250
TRANSPORTATION--2.1%
36,000 CNF Transportation, Inc., Conv. Pfd., Series A, 2,097,000
$2.50
10,000 Continental Airlines, Inc., Conv. Pfd., $4.25 1,241,080
18,800 (b)Union Pacific Corp., Conv. Pfd., $3.13 992,433
Total 4,330,513
TOTAL PREFERRED STOCKS (IDENTIFIED COST 13,467,418
$11,798,215)
(C)REPURCHASE AGREEMENT--4.3%
$ 9,205,000 BT Securities Corp., 5.53%, dated 4/30/1998, due
5/1/1998
(AT AMORTIZED COST) 9,205,000
TOTAL INVESTMENTS (IDENTIFIED COST $151,128,554)(D) $215,851,546
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At April 30, 1998, these securities amounted to
$5,708,843 which represents 2.7% of net assets.

(c) 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.

(d) The cost of investments for federal tax purposes amounts to $151,128,554.
The net unrealized appreciation of investments on a federal tax basis amounts to
$64,722,992 which is comprised of $67,499,075 appreciation and $2,776,083
depreciation at April 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($211,922,155) at April 30, 1998.

The following acronyms are used throughout this portfolio:

ADR --American Depository Receipt

PLC --Public Limited Company

SAILS --Stock Appreciation Income Linked Security

STRYPES --Structured Yield Product Exchangeable for Stock

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

FEDERATED CAPITAL APPRECIATION FUND

STATEMENT OF ASSETS AND LIABILITIES

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $151,128,554) $ 215,851,546
Cash 58,270
Income receivable 235,797
Receivable for shares sold 704,996
Total assets 216,850,609
LIABILITIES:
Payable for investments purchased $ 4,806,376
Payable for shares redeemed 8,295
Payable for taxes withheld 5,608
Accrued expenses 108,175
Total liabilities 4,928,454
NET ASSETS for 10,307,930 shares outstanding $ 211,922,155
NET ASSETS CONSIST OF:
Paid in capital $ 138,191,770
Net unrealized appreciation of investments 64,722,992
Accumulated net realized gain on investments 8,934,753
Undistributed net investment income 72,640
Total Net Assets $ 211,922,155
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($166,337,499 / 8,084,266 shares outstanding) $20.58
Offering Price Per Share (100/94.50 of $20.58)* $21.78
Redemption Proceeds Per Share (100.00/100 of $20.58)** $20.58
CLASS B SHARES:
Net Asset Value Per Share ($40,335,816 / 1,967,486 shares outstanding) $20.50
Offering Price Per Share (100/100.00 of $20.50)* $20.50
Redemption Proceeds Per Share (94.50/100 of $20.50)** $19.37
CLASS C SHARES:
Net Asset Value Per Share ($5,248,840 / 256,178 shares outstanding) $20.49
Offering Price Per Share (100/100.00 of $20.49)* $20.49
Redemption Proceeds Per Share (99.00/100 of $20.49)** $20.29
</TABLE>

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

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

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

FEDERATED CAPITAL APPRECIATION FUND

STATEMENT OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $7,899) $ 1,232,243
Interest 382,613
Total income 1,614,856
EXPENSES:
Investment advisory fee $ 683,640
Administrative personnel and services fee 91,740
Custodian fees 7,559
Transfer and dividend disbursing agent fees and expenses 70,116
Directors'/Trustees' fees 2,366
Auditing fees 6,910
Legal fees 1,584
Portfolio accounting fees 40,204
Distribution services fee--Class B Shares 106,425
Distribution services fee--Class C Shares 13,451
Shareholder services fee--Class A Shares 187,921
Shareholder services fee--Class B Shares 35,475
Shareholder services fee--Class C Shares 4,484
Share registration costs 40,390
Printing and postage 19,112
Insurance premiums 2,374
Taxes 3,183
Miscellaneous 2,753
Total expenses 1,319,687
Waivers --
Waiver of investment advisory fee (48,251)
Net expenses 1,271,436
Net investment income 343,420
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 8,871,705
Net change in unrealized appreciation of investments 18,808,999
Net realized and unrealized gain on investments 27,680,704
Change in net assets resulting from operations $ 28,024,124
</TABLE>

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

FEDERATED CAPITAL APPRECIATION FUND

STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
APRIL 30, OCTOBER, 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 343,420 $ 1,104,101
Net realized gain (loss) on investments ($8,871,705 and $20,327,687,
respectively, as computed for federal tax purposes) 8,871,705 20,317,712
Net change in unrealized appreciation/depreciation 18,808,999 18,103,419
Change in net assets resulting from operations 28,024,124 39,525,232
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (682,978) (745,779)
Class B Shares (23,333) --
Class C Shares (4,448) --
Distributions from net realized gains
Class A Shares (17,245,708) (6,319,819)
Class B Shares (2,692,221) (426,677)
Class C Shares (311,507) (48,727)
Change in net assets resulting from distributions to (20,960,195) (7,541,002)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 33,140,033 35,687,762
Net asset value of shares issued to shareholders in payment of
distributions declared 9,235,282 2,769,618
Cost of shares redeemed (9,942,484) (13,899,390)
Change in net assets resulting from share transactions 32,432,831 24,557,990
Change in net assets 39,496,760 56,542,220
NET ASSETS:
Beginning of period 172,425,395 115,883,175
End of period (including undistributed net investment income of
$72,640 and $439,979, respectively) $ 211,922,155 $ 172,425,395
</TABLE>

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

FEDERATED CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)**
<TABLE>
<CAPTION>

SIX MONTHS
ENDED YEAR PERIOD
(UNAUDITED) ENDED ENDED
APRIL 30, OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31,(A)
1998 1997 1996(B) 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $20.08 $16.17 $14.60 $11.47 $11.90 $10.97 $10.28 $ 8.43 $ 9.16 $ 8.34
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.05 0.09 0.04 0.18 0.20 0.19 0.23 0.19 0.24 0.23
income
Net realized and
unrealized gain
(loss)
on investments 2.87 4.85 1.89 4.07 (0.24) 1.05 0.92 2.11 (0.64) 1.22
Total from
investment 2.92 4.94 1.93 4.25 (0.04) 1.24 1.15 2.30 (0.40) 1.45
operations
LESS DISTRIBUTIONS
Distributions
from net
investment (0.09) (0.11) (0.03) (0.18) (0.19) (0.19) (0.23) (0.19) (0.25) (0.22)
income
Distributions
from net
realized gain on
investments (2.33) (0.92) (0.33) (0.94) (0.20) (0.12) (0.23) (0.26) (0.08) (0.41)
Total (2.42) (1.03) (0.36) (1.12) (0.39) (0.31) (0.46) (0.45) (0.33) (0.63)
distributions
NET ASSET VALUE,
END OF PERIOD $20.58 $20.08 $16.17 $14.60 $11.47 $11.90 $10.97 $10.28 $ 8.43 $ 9.16
TOTAL RETURN(C) 16.54% 32.10% 13.36% 37.17% (0.30%) 11.31% 11.38% 27.42% (4.43%) 17.58%
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.26%* 1.23% 1.23%* 1.08% 1.15% 1.15% 1.11% 1.12% 1.07% 1.13%
Net investment 0.51%* 0.85% 0.31%* 1.29% 1.63% 1.59% 2.13% 1.97% 2.76% 2.45%
income
Expense waiver/
reimbursement(d) 0.05%* 0.07% 0.27%* 0.15% -- -- -- -- -- --
SUPPLEMENTAL DATA
Net assets, end
of
period (000 $166,337 $148,175 $108,804 $98,200 $81,377 $88,949 $91,551 $90,503 $79,114 $95,422
omitted)
Average
commission
rate paid(e) $0.0527 $0.0515 0.0012 -- -- -- -- -- -- --
Portfolio 33% 85% 79% 81% 23% 26% 47% 54% 61% 41%
turnover
</TABLE>
* Computed on an annualized basis.
** All prior year amounts have been restated for a 6-for-1 stock split
effective as of October 29, 1997.
(a) Amounts presented prior to January 1, 1996 represents results of
operations for Federated Exchange Fund, Ltd.
(b) Reflects operations for the period from January 1, 1996 (start of business)
to October 31, 1996.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

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

FEDERATED CAPITAL APPRECIATION FUND

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)**
<TABLE>
<CAPTION>

SIX MONTHS
ENDED YEAR PERIOD
(UNAUDITED) ENDED ENDED
APRIL 30, OCTOBER 31, OCTOBER 31,
1998 1997 1996(D)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.04 $16.12 $14.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.02) 0.12 (0.04)(e)
Net realized and unrealized gain (loss) on investments 2.83 4.72 1.80
Total from investment operations 2.81 4.84 1.76
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) -- (0.01)
Distributions from net realized gain on investments (2.33) (0.92) (0.33)
Total distributions (2.35) (0.92) (0.34)
NET ASSET VALUE, END OF PERIOD $20.50 $20.04 $16.12
TOTAL RETURN(A) 15.82% 31.65% 12.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.01%* 1.98% 1.98%*
Net investment income (0.25)%* 0.07% (0.36)%*
Expense waiver/reimbursement(b) 0.05%* 0.06% 0.27%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $40,336 $21,636 $6,369
Average commission rate paid(c) $0.0527 $0.0515 $0.0012
Portfolio turnover 33% 85% 79%
</TABLE>

* Computed on an annualized basis.

** All prior year amounts have been restated for a 6-for-1 stock split effective
as of October 29, 1997.

(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.

(d) Reflects operations for the period from January 4, 1996 (date of initial
public investment) to October 31, 1996.

(e) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

FEDERATED CAPITAL APPRECIATION FUND

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)**
<TABLE>
<CAPTION>

SIX MONTHS
ENDED YEAR PERIOD
(UNAUDITED) ENDED ENDED
APRIL 30, OCTOBER 31, OCTOBER 31,
1998 1997 1996(D)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.95 $16.13 $14.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.02) 0.13 (0.04)(e)
Net realized and unrealized gain (loss) on investments 2.91 4.61 1.81
Total from investment operations 2.89 4.74 1.77
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) -- (0.01)
Distributions from net realized gain on investments (2.33) (0.92) (0.33)
Total distributions (2.35) (0.92) (0.34)
NET ASSET VALUE, END OF PERIOD $20.49 $19.95 $16.13
TOTAL RETURN(A) 16.35% 30.90% 12.05%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.01%* 1.98% 1.98%*
Net investment income (0.25)%* 0.08% (0.37)%*
Expense waiver/reimbursement(b) 0.05%* 0.06% 0.27%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $5,249 $2,614 $710
Average commission rate paid(c) $0.0527 $0.0515 $0.0012
Portfolio turnover 33% 85% 79%
</TABLE>

* Computed on an annualized basis.

** All prior year amounts have been restated for a 6-for-1 stock split effective
as of October 29, 1997.

(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.

(d) Reflects operations for the period from January 4, 1996 (date of initial
public investment) to October 31, 1996.

(e) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

FEDERATED CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS

APRIL 30, 1998 (UNAUDITED)

1. ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Capital Appreciation Fund (the
"Fund"), a Diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers 3 classes of shares: Class A Shares, Class B, Shares and
Class C Shares. The investment objective of the Fund is to provide capital
appreciation. Effective January 3, 1996, the Fund added Class B Shares and Class
C Shares.

All prior year per share amounts have been restated to reflect the 6-for-1 stock
split effective October 29, 1997.

Pursuant to the terms of the merger agreement dated October 10, 1995,
shareholders of Federated Exchange Fund, Ltd. agreed to acquire shares of the
Fund, effective January 2, 1996. As part of the transaction, 1,121,204 Class A
Shares of the Fund were issued in exchange for all the assets of the Federated
Exchange Fund, Ltd., which amounted to $98,200,258. The shares issued as a
result of this transaction represented substantially all of the Funds
outstanding shares as of the transaction date. Due to this, and due to
similarities in investment objectives and policies between the Fund and
Federated Exchange Fund, Ltd., the historical performance of Federated Exchange
Fund, Ltd. prior to January 2, 1996, has been incorporated into the Fund's
financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

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 Trustees (the "Trustees").
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"). Distributions to
shareholders are recorded on the ex-dividend date.

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.

RESTRICTED SECURITIES -- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid costs upon such resales. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.

Additional information on each restricted security held at April 30, 1998 is as
follows:

SECURITY ACQUISITION DATE ACQUISITION COST
Omnicom Group, Inc., Convertible Bond 12/4/1997 $1,060,000
Solectron Corp., Convertible Bond 1/17/1997 1,469,000
Suiza Foods Corp., Convertible Preferred 3/19/1998 1,625,000
Union Pacific Corp., Convertible 3/27/1998 940,000
Preferred

CHANGE IN FISCAL YEAR -- The fund has changed its fiscal year-end from December
31, to October 31, beginning January 2, 1996.

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. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.

Transactions in shares were as follows:

SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 737,875 $14,198,615 6,341,131 $ 19,684,007
Shares issued to shareholders in payment
of distributions declared 361,089 6,396,984 23,951 2,319,203
Shares redeemed (392,999) (7,529,815) (108,343) (11,482,142)
Net change resulting from
Class A Shares transactions 705,965 $ 13,065,784 6,256,739 $ 10,521,068

SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 845,468 $ 16,442,809 1,030,943 $ 14,045,085
Shares issued to shareholders in payment
of distributions declared 144,437 2,549,317 4,486 407,033
Shares redeemed (102,114) (1,987,508) (21,597) (1,992,700)
Net change resulting from
Class B Shares transactions 887,791 $ 17,004,618 1,013,832 $ 12,459,418

SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 132,237 $ 2,498,610 126,956 $ 1,958,669
Shares issued to shareholders in payment
of distributions declared 16,382 288,980 451 43,383
Shares redeemed (23,457) (425,161) (3,725) (424,548)
Net change resulting from
Class C Shares transactions 125,162 $ 2,362,429 123,682 $ 1,577,504
Net change resulting from
share transactions 1,718,918 $ 32,432,831 7,394,253 $ 24,557,990
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The Advisor may
voluntarily choose to waive any portion of its fee. The advisor can modify or
terminate this voluntary waiver at any time at its sole discretion.

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, Inc. 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. ("FSC") the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A, 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.

PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%

For the six months ended April 30, 1998, Class A did not incur a distribution
services fee.

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.

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 Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

5. YEAR 2000

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended April 30, 1998, were as follows:

PURCHASES $70,720,363

SALES $47,900,201

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

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

Chairman

Glen R. Johnson

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

Matthew S. Hardin

Assistant Secretary

[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com

Cusip 314172701
Cusip 314172800
Cusip 314172883
G01649-05 (6/98)

[Graphic]

Federated Aggressive Growth Fund

1ST SEMI-ANNUAL REPORT
APRIL 30, 1998

ESTABLISHED 1996

[Graphic]

Dear Shareholder:

Federated Aggressive Growth Fund was created in 1996, and I am pleased to
present its first Semi-Annual Report. This report covers the first half of the
fund's fiscal year which is the period from November 1, 1997 through April 30,
1998. It begins with a discussion with Keith J. Sabol, Assistant Vice President,
Federated Management, who co-manages the fund with Aash M. Shah, Vice President,
Federated Management. Following their discussion are two additional items of
shareholder interest. First is a complete list of the fund's stock holdings.
Second is the publication of the fund's financial statements.

Federated Aggressive Growth Fund pursues aggressive long-term growth by
investing in the securities of companies of all sizes that display positive
growth characteristics. The fund's portfolio includes common stocks and
convertible securities representing 12 key business sectors with many names that
you will recognize immediately: Borders Group, Inc., Dell Computer Corp., Ethan
Allen Interiors, Inc., HBO & Co., and Morgan Stanley, Dean Witter & Co.

As shown in the share class performance below, this diversified portfolio
continued to produce excellent total returns through gains realized from
security price appreciation.* For the first half of the fiscal year, the fund's
returns outpaced the 12.84% total return of its peer group, the Lipper Capital
Appreciation Funds Average.**

TOTAL RETURN CAPITAL GAINS NET ASSET VALUE INCREASE
Class A Shares 14.15% $0.0032 $13.31 to $15.19 = 14%
Class B Shares 13.74% $0.0032 $13.27 to $15.09 = 14%
Class C Shares 13.74% $0.0032 $13.20 to $15.01 = 14%

* 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 period based on
offering price for Class A, B, and C Shares were 7.91%, 8.24%, and 12.76%,
respectively.

** 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 respective categories indicated. These figures do not reflect sales
charges.

While the fund's performance continued to be extremely strong in a favorable
economic environment, it is important to remember that, as the past few months
have shown, short-term volatility is an inevitable part of stock investing. At
times, the volatility can be severe, however, the overall trend of the stock
market over history has been upward.

Remember, as a shareholder, you have two easy ways to increase your opportunity
to participate in the growth of quality American companies. First, you can
reinvest your dividends and capital gains automatically in additional shares to
help your shares increase in number through the benefit of compounding. Second,
you can "pay yourself first" by investing in the fund through a systematic
investment program. This program withdraws a specific amount from your checking
account on a regular basis to purchase more fund shares. Buying shares
regularly, (i.e., monthly additions of the same dollar amount) automatically
accumulates more shares in your account at lower prices.+ You can contact your
investment representative or Federated Securities Corp. for more information.

Thank you for entrusting a portion of your wealth to Federated Aggressive Growth
Fund. We hope you are pleased with your investment's progress, and as always, we
welcome your comments and suggestions.

Sincerely,

[Graphic]

Glen R. Johnson
President
June 15, 1998

+ Systematic investing does not ensure a profit or protect against loss in
declining markets.

INVESTMENT REVIEW

[Graphic]
Keith J. Sabol
Assistant Vice President
Federated Management

[Graphic]
Aash M. Shah, CFA
Vice President
Federated Management

[Graphic]
WHAT IS YOUR APPRAISAL OF THE FIRST HALF OF THE FUND'S FISCAL YEAR, WHICH WAS
BOTH VOLATILE AND REWARDING?

After a weak beginning, the equity market finished strong. Southeast Asian woes
were the key driver of the equity markets for the end of 1997. As in most times
when the market perceives crisis conditions, equity returns were generally weak
and large-cap, blue-chip stocks led. The Standard & Poor's ("S&P") 500 Index
rose 2.87% during the fourth quarter of 1997 while the S&P 600 Small Cap Index
declined 3.28%.*

After a shaky departure from 1997, 1998 has so far been a good period for
investors. The prospect that the impact of the Southeast Asian turmoil on U.S.
corporate earnings would be minor--coupled with indications that there would be
a slowing in the U.S. economy sufficient to preclude a rate hike by the Federal
Reserve Board--drove an impressive rally as the S&P 500 Index returned 15.10%
for the first four months of 1998--and 13.90% in the first quarter of 1998
alone. The S&P 600 Small Cap Index was strong but slightly behind, returning
11.72% from January 1, 1998 through April 30, 1998.

[Graphic]
HOW DID FEDERATED AGGRESSIVE GROWTH FUND PERFORM FOR ITS SHAREHOLDERS FOR
THE SIX-MONTH REPORTING PERIOD ENDED APRIL 30, 1998 COMPARED TO THE LIPPER
CAPITAL APPRECIATION FUNDS AVERAGE?

The fund continued to perform well. For the six-month reporting period, Class A,
B, and C Shares produced total returns of 14.15%, 13.74%, and 13.74%,
respectively, based on net asset value.** These returns all outpaced the 12.84%
return of the average capital appreciation fund tracked by the Lipper Capital
Appreciation Funds Average.

[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF APRIL 30, 1998, AND WHAT WERE THE
INDUSTRY WEIGHTINGS?

PERCENTAGE OF
NAME NET ASSETS
Citrix Systems Inc. 1.21%
Dupont Photomasks, Inc. 1.18%
United Rentals, Inc. 1.17%
Mail-Well, Inc. 1.15%
Sanmina Corp. 1.15%
Xylan Corp. 1.13%
Lexmark Intl. Group, Class A 1.13%
Suiza Foods Corp. 1.09%
Micrel, Inc. 1.08%
Cooper Cameron Corp. 1.07%
TOTAL 11.36%

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
Technology 34.2% 14.7%
Finance 10.4% 16.9%
Energy/Minerals 10.5% 7.6%
Services 9.0% 5.4%
Retail Trade 8.2% 5.2%
Health Care 6.9% 11.8%
Producer Manufacturing 4.6% 7.6%
Consumer Non-Durables 3.6% 10.8%
Consumer Durables 3.2% 3.4%
Transportation 1.9% 1.2%
Basic Industry 1.8% 4.8%
Utilities 0.9% 10.6%

[Graphic]
AS WE APPROACH MID-YEAR, WHAT IS YOUR OUTLOOK FOR THE MARKET?

We continue to be enthusiastic about the fund's prospects for the balance of the
year, as valuations have become attractive. Small-cap valuations are at 1990
recession lows on price/sales and price-to-cash flow relative to large caps.
Additionally, small-cap "growth" stocks appear cheap relative to small-cap
"value" stocks. Pacific Rim financial difficulties are likely to remain the key
driver of the markets, at least through the second quarter of 1998. Weakness in
Pacific Rim economies will maintain pressure on commodity prices and will
probably keep the U.S. in a low inflation period. Low and potentially falling
interest rates will be good for financial assets generally, and high duration
assets like growth funds in particular. That said, a bias toward lower rates may
reflect the consensus view. Current low levels of unemployment cause us to
remain vigilant regarding the prospect of inflation on the wage front, just one
factor that could induce a Federal Reserve Board interest rate hike.

We continue to believe that earnings expectations and earnings surprises are key
drivers of stock price performance. Therefore, we will continue to apply a
quantitative "front end" analysis that focuses on these key drivers. From a
fundamental standpoint, valuations generally are more appealing within the
smaller cap portion of the market.

FEDERATED AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--95.2%
BASIC INDUSTRY--1.8%
8,000 Millennium Chemicals, Inc. $ 287,000
3,400 Southdown, Inc. 240,550
Total 527,550
CONSUMER DURABLES--3.2%
6,000 Arvin Industries, Inc. 245,625
5,300 Ethan Allen Interiors, Inc. 269,969
12,500 (a)Fairfield Communities, Inc. 292,187
4,600 The First Years, Inc. 144,900
Total 952,681
CONSUMER NON-DURABLES--3.6%
7,300 (a)American Italian Pasta Co., Class A 226,300
10,600 (a)Nautica Enterprise, Inc. 263,675
12,000 (a)North Face, Inc. 269,250
5,500 (a)Suiza Foods Corp. 325,875
Total 1,085,100
ENERGY/MINERALS--10.5%
7,700 (a)BJ Services Co. 288,750
4,200 Camco International, Inc. 285,075
6,000 (a)Cliffs Drilling Co. 295,875
4,800 (a)Cooper Cameron Corp. 318,900
10,400 ENSCO International, Inc. 293,800
7,700 (a)Friede Goldman International, Inc. 309,925
8,100 (a)Input/Output, Inc. 201,487
16,500 (a)Key Energy Group, Inc. 308,344
9,400 (a)Pool Energy Services Co. 247,925
</TABLE>
FEDERATED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY/MINERALS--CONTINUED
13,000 (a)Trico Marine Services, Inc. $ 294,125
16,800 (a)UTI Energy Corp. 291,900
Total 3,136,106
FINANCE--10.4%
8,600 (a)Americredit Corp. 285,412
6,700 (a)Amresco, Inc. 242,875
3,850 Amsouth Bancorporation 240,144
5,200 Conseco, Inc. 258,050
6,000 Everest Re Holdings, Inc. 247,500
2,400 Executive Risk, Inc. 160,050
5,500 (a)FIRSTPLUS Financial Group, Inc. 266,750
1,600 Heller Financial, Inc. 43,200
9,350 (a)Imperial Bancorp 274,072
3,200 Morgan Stanley, Dean Witter & Co. 252,400
14,000 (a)Signature Resorts, Inc. 250,250
10,100 (a)United Rentals, Inc. 347,819
6,400 Webster Financial Corp. Waterbury 216,800
Total 3,085,322
HEALTH CARE--6.9%
6,700 (a)Agouron Pharmaceuticals, Inc. 227,800
14,200 (a)AmeriPath, Inc. 232,525
8,700 (a)Arterial Vascular Engineering, Inc. 307,762
22,800 (a)Balanced Care Corp. 188,100
15,800 (a)FPA Medical Management, Inc. 197,500
4,400 HBO & Co. 263,175
6,100 (a)Medicis Pharmaceutical Corp., Class A 260,775
</TABLE>
FEDERATED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
4,800 (a)Parexel International Corp. $ 160,800
6,400 (a)Safeskin Corp. 228,000
Total 2,066,437
PRODUCER MANUFACTURING--4.6%
5,300 (a)EVI, Inc. 282,225
11,400 (a)Halter Marine Group, Inc. 206,625
5,800 (a)Lexmark Intl. Group, Class A 335,675
9,400 Miller Herman, Inc. 283,762
8,600 (a)Terex Corp. 263,375
Total 1,371,662
RETAIL TRADE--8.2%
3,200 (a)1-800 CONTACTS, Inc. 59,600
6,000 (a)Abercrombie & Fitch Co., Class A 267,000
7,800 (a)Borders Group, Inc. 250,575
4,900 (a)Buckle, Inc. 248,062
11,700 (a)Gadzooks, Inc. 307,125
7,200 (a)Genesco, Inc. 121,950
4,600 (a)Kohl's Corp. 190,037
5,900 (a)Mens Wearhouse, Inc. 248,537
3,300 (a)PC Connections, Inc. 71,569
6,450 (a)Pacific Sunwear of California 284,606
5,000 (a)Pomeroy Computer Resources 127,187
5,100 (a)Stage Stores, Inc. 262,331
Total 2,438,579
SERVICES--9.0%
7,700 (a)AccuStaff, Inc. 276,237
10,200 (a)Billing Concepts Corp. 285,600
8,205 CKE Restaurants, Inc. 284,098
</TABLE>
FEDERATED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
12,000 (a)Career Education Corp. $ 273,000
4,100 (a)Consolidated Graphics, Inc. 236,519
16,800 (a)CulturalAccessWorldwide, Inc. 237,300
7,100 (a)Mail-Well, Inc. 343,462
8,800 (a)ProBusiness Services, Inc. 244,200
5,150 (a)Robert Half International, Inc. 278,744
5,400 (a)Snyder Communications, Inc. 229,500
Total 2,688,660
TECHNOLOGY--34.2%
6,700 (a)Advanced Fibre Communications 283,912
6,100 (a)Applied Materials, Inc. 220,362
6,900 (a)Applied Voice Technology, Inc. 304,463
5,000 (a)Aspec Technology, Inc. 69,375
2,800 (a)BMC Software, Inc. 261,975
4,800 (a)Baan Co. NV, ADR 213,000
15,000 (a)Brightpoint, Inc. 292,500
1,400 Brio Technology, Inc. 15,400
5,100 (a)CBT Group PLC, ADR 259,463
4,500 (a)CDnow, Inc. 144,000
5,600 (a)Cambridge Technology Partners, Inc. 292,600
7,700 (a)Check Point Software Technologies Ltd. 226,188
5,800 (a)Citrix Systems Inc. 360,325
6,600 (a)Computer Horizons Corp. 250,388
4,900 (a)Compuware Corp. 239,488
5,900 (a)Comverse Technology, Inc. 279,513
10,600 (a)Credence Systems Corp. 292,163
12,900 (a)Cymer, Inc. 287,831
12,300 (a)DSP Group, Inc. 259,838
</TABLE>
FEDERATED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
10,600 (a)Davox Corp. $ 237,175
3,500 (a)Dell Computer Corp. 282,625
6,500 (a)Dupont Photomasks, Inc. 352,625
6,400 (a)Genesis Microchip, Inc. 85,600
7,800 (a)Jabil Circuit, Inc. 273,975
4,600 (a)Keane, Inc. 231,150
11,600 (a)Mastech Corp. 307,400
8,200 (a)Micrel, Inc. 321,850
6,700 (a)Micromuse, Inc. 149,075
10,000 (a)Mobius Management Systems, Inc. 185,000
14,000 (a)NeoMagic Corp. 287,875
6,300 (a)Orbotech, Ltd. 227,588
10,300 (a)Powerwave Technologies, Inc. 194,413
6,900 (a)RELTEC Corp. 275,138
3,800 (a)Sanmina Corp. 342,000
9,600 (a)Sawtek, Inc. 291,600
12,900 (a)Smart Modular Technologies, Inc. 318,469
7,400 (a)Veeco Instruments, Inc. 298,775
3,000 (a)Verisign, Inc. 115,125
5,300 (a)Vitesse Semiconductor Corp. 305,744
6,450 (a)Wind River Systems, Inc. 223,331
11,800 (a)Xylan Corp. 335,931
Total 10,195,248
TRANSPORTATION--1.9%
6,800 Airborne Freight Corp. 269,450
7,600 SkyWest, Inc. 307,800
Total 577,250
</TABLE>
FEDERATED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
UTILITIES--0.9%
8,000 (a)Premiere Technologies, Inc. $ 255,000
TOTAL INVESTMENTS (IDENTIFIED COST $23,743,523)(B) $ 28,379,595
</TABLE>

(a) Non-income producing security.

(b) The cost of investments for federal tax purposes amounts to $23,743,523. The
net unrealized appreciation/depreciation of investments on a federal tax
basis amounts to $4,636,072 which is comprised of $5,302,073 appreciation
and $666,001 depreciation at April 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($29,779,956) at April 30, 1998.

The following acronyms are used throughout this portfolio:

ADR --American Depositary Receipt
PLC --Public Limited Company

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

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES

APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $ 28,379,595
$23,743,523)
Income receivable 704
Receivable for investments sold 685,671
Receivable for shares sold 1,214,166
Deferred organizational costs 12,208
Total assets 30,292,344
LIABILITIES:
Payable to Bank $239,612
Payable for investments purchased 268,600
Payable for shares redeemed 1,801
Accrued expenses 2,375
Total liabilities 512,388
NET ASSETS for 1,970,244 shares outstanding $ 29,779,956
NET ASSETS CONSIST OF:
Paid in capital $ 25,285,014
Net unrealized appreciation of investments 4,636,072
Accumulated net realized gain on investments 37,444
Distributions in excess of net investment income (178,574)
Total net assets $ 29,779,956
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($9,158,265 / 602,816 shares outstanding) $15.19
Offering Price Per Share (100/94.50 of $15.19)* $16.07
Redemption Proceeds Per Share $15.19
CLASS B SHARES:
Net Asset Value Per Share ($18,207,847 / 1,206,644 shares outstanding) $15.09
Offering Price Per Share $15.09
Redemption Proceeds Per Share (94.50/100 of $15.09)** $14.26
CLASS C SHARES:
Net Asset Value Per Share ($2,413,844 / 160,784 shares outstanding) $15.01
Offering Price Per Share $15.01
Redemption Proceeds Per Share (99.00/100 of $15.01)** $14.86
</TABLE>

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

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

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

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $180) $ 14,639
Interest 10,182
Total income 24,821
EXPENSES:
Investment advisory fee $ 88,825
Administrative personnel and services fee 91,740
Custodian fees 4,070
Transfer and dividend disbursing agent fees and expenses 33,998
Directors'/Trustees' fees 2,408
Auditing fees 3,612
Legal fees 1,448
Portfolio accounting fees 37,681
Distribution services fee--Class B Shares 40,259
Distribution services fee--Class C Shares 5,555
Shareholder services fee--Class A Shares 6,935
Shareholder services fee--Class B Shares 13,419
Shareholder services fee--Class C Shares 1,852
Share registration costs 15,860
Printing and postage 2,714
Insurance premiums 2,534
Taxes 2,534
Miscellaneous 2,834
Total expenses 358,278
Waivers and reimbursements--
Waiver of investment advisory fee $(88,825)
Reimbursement of other operating expenses (67,988)
Total waivers and reimbursements (156,813)
Net expenses 201,465
Net operating loss (176,644)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 35,578
Net change in unrealized appreciation of investments 3,291,583
Net realized and unrealized gain on investments 3,327,161
Change in net assets resulting from operations $ 3,150,517
</TABLE>

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

FEDERATED AGGRESSIVE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net operating loss $ (176,644) $ (67,586)
Net realized gain on investments ($35,578 and $72,836,
respectively, as computed for federal tax purposes) 35,578 72,836
Net change in unrealized appreciation 3,291,583 1,344,489
Change in net assets resulting from operations 3,150,517 1,349,739
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions in excess of net investment income
Class A Shares -- (1,722)
Class B Shares -- (165)
Class C Shares -- (43)
Distributions from net realized gains
Class A Shares (1,113) --
Class B Shares (1,978) --
Class C Shares (293) --
Change in net assets resulting from distributions
to shareholders (3,384) (1,930)
SHARE TRANSACTIONS--
Proceeds from sale of shares 19,087,809 15,270,771
Net asset value of shares issued to shareholders in
payment of distributions declared 3,043 391
Cost of shares redeemed (4,746,751) (4,330,249)
Change in net assets resulting from share transactions 14,344,101 10,940,913
Change in net assets 17,491,234 12,288,722
NET ASSETS:
Beginning of period 12,288,722 --
End of period $ 29,779,956 $ 12,288,722
</TABLE>

(a) For the period from November 25, 1996 (date of initial public investment) to
October 31, 1997.

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

FEDERATED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED PERIOD ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.06) (0.05)
Net realized and unrealized gain on investments 1.94 3.37
Total from investment operations 1.88 3.32
LESS DISTRIBUTIONS
Distributions in excess of net investment income -- (0.01)
NET ASSET VALUE, END OF PERIOD $15.19 $13.31
TOTAL RETURN(B) 14.15% 33.21%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.76%* 1.74%*
Net operating loss (1.47%)* (0.96%)*
Expense waiver/reimbursement(c) 1.81%* 8.97%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $9,158 $4,148
Average commission rate paid(d) $0.0387 $0.0380
Portfolio turnover 45% 97%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 25, 1996 (date of initial
public investment) to October 31, 1997.

(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.

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

FEDERATED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.27 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.10) (0.08)
Net realized and unrealized gain on investments 1.92 3.35
Total from investment operations 1.82 3.27
LESS DISTRIBUTIONS
Distributions in excess of net investment income -- (0.00)**
NET ASSET VALUE, END OF PERIOD $15.09 $13.27
TOTAL RETURN(B) 13.74% 32.75%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.51%* 2.51%*
Net operating loss (2.24%)* (1.96%)*
Expense waiver/reimbursement(c) 1.75%* 7.25%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $18,208 $7,184
Average commission rate paid(d) $0.0387 $0.0380
Portfolio turnover 45% 97%
</TABLE>

* Computed on an annualized basis.

** Amounts distributed per share do not round to $0.01.

(a) Reflects operations for the period from November 25, 1996 (date of initial
public investment) to October 31, 1997.

(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.

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

FEDERATED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.10) (0.06)
Net realized and unrealized gain on investments 1.91 3.26
Total from investment operations 1.81 3.20
LESS DISTRIBUTIONS
Distributions in excess of net investment income -- (0.00)**
NET ASSET VALUE, END OF PERIOD $15.01 $13.20
TOTAL RETURN(B) 13.74% 32.04%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.51%* 2.53%*
Net investment income (2.23%)* (1.95%)*
Expense waiver/reimbursement(c) 1.78%* 7.23%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,414 $957
Average commission rate paid(d) $0.0387 $0.0380
Portfolio turnover 45% 97%
</TABLE>

* Computed on an annualized basis.

** Amounts distributed per share do not round to $0.01.

(a) Reflects operations for the period from November 25, 1996 (date of initial
public investment) to October 31, 1997.

(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.

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

FEDERATED AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS

APRIL 30, 1998 (UNAUDITED)

1. ORGANIZATION

The Fund offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares. The investment objective of the Fund is to provide appreciation
of capital.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Trust 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.

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 net operating
losses.

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.

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.

FUTURES CONTRACTS --The Fund purchases stock index futures contracts to manage
cashflows, enhance yield, and to potentially reduce transaction costs. Upon
entering into a stock index futures contract with a broker, the Fund is required
to deposit in a segregated account a specified amount of cash or U.S. government
securities. Futures contracts are valued daily and unrealized gains or losses
are recorded in a "variation margin" account. Daily, the Fund receives from or
pays to the broker a specified amount of cash based upon changes in the
variation margin account. For the period ended April 30, 1998, the Fund had
realized gains of $15,736 on future contracts.

Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities.

At April 30, 1998, the Fund had no outstanding futures contracts.

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. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.

Transactions in shares were as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 552,795 $ 7,459,785 656,969 $ 7,390,752
Shares issued to shareholders in
payment of distributions declared 77 998 19 184
Shares redeemed (261,636) (3,378,357) (345,408) (3,685,007)
Net change resulting from
Class A Shares transactions 291,236 $ 4,082,426 311,580 $ 3,705,929

<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997(A)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 717,968 $ 9,769,380 582,846 $ 6,793,396
Shares issued to shareholders in
payment of distributions declared 138 1,781 17 164
Shares redeemed (52,702) (716,078) (41,623) (458,090)
Net change resulting from
Class B Shares transactions 665,404 $ 9,055,083 541,240 $ 6,335,470

<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997(A)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 136,274 $ 1,858,644 89,902 $ 1,086,623
Shares issued to shareholders in
payment of distributions declared 20 264 4 43
Shares redeemed (48,021) (652,316) (17,395) (187,152)
Net change resulting from
Class C Shares transactions 88,273 $ 1,206,592 72,511 $ 899,514
Net change resulting from
share transactions 1,044,913 $ 14,344,101 925,331 $ 10,940,913
</TABLE>

(a) For the period from November 25, 1996 (date of initial public investment) to
October 31, 1997.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE --Federated Management, the Trust's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 1.00% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Trust. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.

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, Inc. 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 Trust 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 Fund's shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule annually, to
compensate FSC.

PERCENTAGE OF
AVERAGE
DAILY NET ASSETS
SHARE CLASS NAME OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%

For six months ended April 30, 1998, Class A Shares did not incur a distribution
services fee.

SHAREHOLDER SERVICES FEE --Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25%
of average daily net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts.

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.

ORGANIZATIONAL EXPENSES --Organizational expenses of $13,192 were borne
initially by the Adviser. The Fund has reimbursed the Adviser for these
expenses. These expenses have been deferred and are being amortized over the
five-year period following the Fund's effective date. For the six months ended
April 30, 1998, the Fund expensed $1,704 of organizational expenses.

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

5. YEAR 2000

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1998, were as follows:

PURCHASES $21,697,170
SALES $ 8,280,183

TRUSTEES

John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
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
Chairman

Glen R. Johnson
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

Matthew S. Hardin
Assistant Secretary

[Graphic]Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com

Cusip 314172875
Cusip 314172867
Cusip 314172859
G02072-01 (6/98)

[Graphic]

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 January
1, 1977 to April 30, 1998. The "y" axis is measured in increments of $100,000
ranging from $0 to $500,000 and indicates that the ending value of a
hypothetical initial investment of $22,000 in Federated Capital Appreciation
Fund's Class A Shares, assuming a 5.50% sales charge and the reinvestment of all
capital gains and dividends, would have grown to $429,756 on April 30, 1998.

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 January
1, 1977 to April 30, 1998. The "y" axis is measured in increments of $25,000
ranging from $0 to $175,000 and indicates that the ending value of hypothetical
yearly investments of $1,000 in Federated Capital Appreciation Fund's Class A
Shares, assuming the reinvestment of all capital gains and dividends, would have
grown to $155,616 on April 30, 1998.

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 above it. The "x" axis reflects computation periods from April
30, 1988 to April 30, 1998. The "y" axis is measured in increments of $21,000
ranging from $0 to $105,000 and indicates that the ending value of a
hypothetical initial investment of $5,000 and subsequent monthly investments of
$250 over 10 years in Federated Capital Appreciation Fund's Class A Shares would
have grown to $96,283 on April 30, 1998.

B1. 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 August
23, 1984 to April 30, 1998. The "y" axis is measured in increments of $20,000
ranging from $0 to $140,000 and indicates that the ending value of a
hypothetical initial investment of $14,000 in the Federated Growth Strategies
Fund's Class A Shares, assuming a 5.50% sales charge and the reinvestment of all
capital gains and dividends, would have grown to $120,717 on April 30, 1998.

B2. 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 August
23, 1984 to April 30, 1998. The "y" axis is measured in increments of $10,000
ranging from $0 to $60,000 and indicates that the ending value of hypothetical
yearly investments of $1,000 in Federated Growth Strategies Fund's Class A
Shares, assuming the reinvestment of all capital gains and dividends, would have
grown to $48,975 on April 30, 1998.

B3. 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 April
30, 1988 to April 30, 1998. The "y" axis is measured in increments of $20,000
ranging from $0 to $100,000 and indicates that the ending value of a
hypothetical initial investment of $5,000 and subsequent monthly investments of
$250 over 10 years in Federated Growth Strategies Fund's Class A Shares would
have grown to $92,936 on April 30, 1998.