FEDERATED EQUITY FUNDS, N-30D, 1999-12-27

FEDERATED EQUITY FUNDS
N-30D, 1999-12-27

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ANNUAL REPORT

[Graphic]

Glen R. Johnson

President

Federated Aggressive Growth Fund

President's Message

Dear Valued Shareholder:

Federated Aggressive Growth Fund was created in 1996, and I am pleased to
present its third Annual Report. The fund invests in over 100 companies--
small-, medium- and large-cap--many representing the fastest-growing companies
in the U.S. These companies have very high price-to-earnings ratios and
estimated growth rates. In today's market, the fastest-growing companies are in
technology, and about 50% of the fund's assets are invested in this particular
sector. 1 Many of our small- and medium-sized companies may not be familiar to
shareholders, but the companies are selected for their growth potential. The
fund's managers seek to buy companies that you may learn of in the next year or
so--these are stocks for aggressive stock owners.

This report covers the 12-month reporting period from November 1, 1998 through
October 31, 1999. It begins with an interview with Keith J. Sabol, Vice
President, who co-manages the fund with Aash M. Shah, Vice President, both of
Federated Investment Management Company. Following their discussions are two
additional items of shareholder interest. First is a complete listing of the
fund's stock holdings, and second is the publication of the fund's financial
statements.

During the reporting period, the stock market's upward momentum--and daily
volatility--continued, led by large-cap growth stocks and Internet stocks.
Thanks to good security selection and the fund's focus on the technology and
energy sectors, it was a truly outstanding year for shareholders of Federated
Aggressive Growth Fund. The fund's returns of more than 86%, based on net asset
value, across all share classes were far superior to the 46.17% return of the
Lipper Small-Cap Growth Funds Average and the 25.68% return of the Standard &
Poor's ("S&P") 500 Index. 2

1 Funds whose investments are concentrated in a specific industry or sector may
be subject to a higher degree of market risk than funds whose investments are
diversified.

2 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category indicated. These figures do not take sales charges into account.
The S&P 500 Index is an unmanaged index comprised of stocks in industry,
transportation, financial and public utility companies. Investments cannot be
made in an index.

Individual share class total return performance for the 12-month reporting
period follows. 3

<TABLE>

TOTAL RETURN NET ASSET VALUE INCREASE <S> <C> <C> Class A
Shares 87.85% $11.19 to $21.02 = 87.85% Class B Shares 86.45% $11.07 to $20.64 =
86.45% Class C Shares 86.39% $11.02 to $20.54 = 86.39%

</TABLE>

Like most stock funds, Federated Aggressive Growth Fund has seen its share of
volatility. But this past year of significant outperformance supports the fact
that, in any 5-, 10-, 15- or 20-year period, there have been many periods when
stock prices have declined, and these same periods were then followed by very
positive periods of investment returns.

Of course, we continue to see significant day-to-day volatility in the stock
market. I strongly urge you to consider taking advantage of share price
fluctuations in volatile markets by adding to your account on a regular basis.
One way you can add to your account is through a systematic investment program,
whereby a specific amount is withdrawn 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. 4 Please contact your investment representative
for more information, and note that the fund's share price volatility may make
it suitable for regular investments.

Thank you for participating in the growth and earnings opportunities of over
100 dynamic U.S. companies. As always, we welcome your comments and
suggestions.

Sincerely,

[Graphic]

Glen R. Johnson

President

December 15, 1999

3 Performance quoted is based on net asset value, represents past performance
and is no guarantee 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 (i.e., less any applicable sales charge), for Class A, B, and C Shares
were 77.53%, 80.95% and 85.39%, respectively.

4 Systematic investing does not assure a profit or protect against loss in
declining markets. Because dollar-cost averaging involves continuous investment
regardless of fluctuating price levels, investors should consider their
financial ability to continue purchasing during periods of low price levels.

[Graphic]

Keith J. Sabol

Vice President

Federated Investment Management Company

[Graphic]

Aash M. Shah, CFA

Vice President

Federated Investment Management Company

Investment Review

WHAT IS YOUR ANALYSIS OF THE FUND'S FISCAL YEAR, WHICH WAS A HIGHLY REWARDING
PERIOD FOR SMALL-CAP GROWTH STOCKS?

The early part of the period saw substantial rallies in stocks of nearly every
flavor. Blue-chip technology companies, represented by the NASDAQ 100 Index, 1
continued to dominate the overall market, gaining 31.12% for the fourth quarter
of 1998. In the broader market, the technology and communications services
sectors were the leaders, while the utilities and consumer staples sectors were
the laggards. After a breather in the fourth quarter of 1998, large-cap stocks,
particularly blue-chip technology companies, again dominated early in 1999. For
the first half of the fund's fiscal year, which was the six-month period ended
April 30, 1999, the S&P 500 Index returned 22.32%, while mid-cap stocks, as
measured by the S&P 400 Index,1 returned 18.86%. Small-cap stocks, as measured
by the Russell 2000 Index,1 returned 15.16%.

1 NASDAQ is the National Association of Securities Dealers Automated Quotation
System, which lists price information for a broad spectrum of large, medium and
small capitalization stocks. The NASDAQ 100 Index is comprised of the largest
100 stocks listed in the NASDAQ Composite Index. The S&P 400 Index is an
unmanaged index of 400 U.S. stocks selected to represent the market size,
liquidity and industry group representation of the mid-cap market. The Russell
2000 Index is a broadly diversified, unmanaged index consisting of approximately
2,000 small capitalization common stocks that can be used to compare the total
returns of funds whose portfolios are invested primarily in small capitalization
common stocks.
Investments cannot be made in an index.

As the second half of the fund's fiscal year began, equity markets experienced
much broader participation of small capitalization issues. As a result, the
second quarter of 1999 saw the S&P 600 Small Cap Index 2 up 15.40%, leading both
the S&P 500 Index and NASDAQ Composite Index, which were up 7% and 9.11%,
respectively. The market was relatively flat throughout most of May and June,
depressed by concerns over increasing inflation reflected in climbing bond
yields. Relieved by the Federal Reserve Board's (the "Fed") decision to raise
rates only 25 basis points and its move to a neutral bias, the market pushed
higher in the last week of June. Federated Aggressive Growth Fund's second
quarter performance was particularly strong, as the fund's net asset value rose
more than 13.50% over the course of this quarter alone, comparing favorably with
the S&P 600/Barra Growth Index,2 which managed only an 11.10% gain.

The successive interest rate hikes imposed by the Fed were the major influence
on the equity markets late in the fund's fiscal year. Higher interest rates
caused the prevailing valuation regime to be called into question, and as a
result, both small-cap and large-cap stocks generally declined. For the third
quarter of 1999, the S&P 500 Index fell 6.25%, and the S&P 600 Small Cap Index
dropped 4.84%. Though both indexes lost ground, this was the second consecutive
quarter in which small-cap stocks outperformed large-cap stocks. The NASDAQ
market bucked the prevailing trend, gaining 2.30% against a decidedly stiff head
wind. The fund's third quarter 1999 performance was also a strong one, as the
fund's net asset value climbed more than 4% over the course of the quarter, and
compared favorably with the S&P 600/Barra Growth Index, which lost 2.58%.
October wound up the fund's performance on a strong note, up 14.30%.

IT WAS AN OUTSTANDING 12-MONTH PERIOD FOR THE FUND. WHAT WERE THE FUND'S
TOTAL RETURN NUMBERS RELATIVE TO ITS PEERS?

The fund's total returns for Class A, B, and C Shares were 87.85%, 86.45%, and
86.39%, respectively, based on net asset value, for the 12-month period ended
October 31, 1999. 3 These returns far exceeded the 46.17% return of the Lipper
Small-Cap Growth Funds Average and the 25.68% return of the S&P 500 Index.4

2 The S&P 600 Small Cap Index is an unmanaged, market capitalization-weighted
index of stocks representing all major industries in the small-cap range of the
U.S. stock market. The S&P 600 Barra Growth Index is an unmanaged index
comprised of those small-cap companies with higher price-to-book ratios--a
characteristic associated with growth stocks. Investments cannot be made in an
index.

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

WHAT ACCOUNTED FOR THE FUND'S EXTREMELY HIGH LEVEL OF PERFORMANCE?

Emerging technology products and services have dramatically impacted the
productivity of U.S. companies, enhancing their competitiveness and helping to
fuel a period of exceptionally low inflation growth for our economy. Our focus
on many of these technology companies was a major driver of the fund's
outstanding performance. Additionally, we took advantage of low oil prices and
increased our energy sector exposure in February and March, another decision
that had a substantial performance impact.

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

ISS GROUP, INC. (0.76% of net assets): This firm is a leading provider of
network security monitoring, detection and response solutions that protect
the security and integrity of enterprise information systems.

KEYNOTE SYSTEMS, INC. (1.13% of net assets): Keynote provides Internet
performance measurement and diagnostic services that enable electronic
commerce companies to measure, assure, and improve the quality of service of
their web sites.

MEDQUIST, INC. (0.70% of net assets): Medquist is a national provider of
medical transcription services, the process by which dictation is converted
into an electronic medical report.

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF OCTOBER 31, 1999, AND WHAT WERE THE
INDUSTRY SECTOR WEIGHTINGS?

<TABLE>

PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Micromuse, Inc. 2.4%
Modem Media.Poppe Tyson, Inc. 2.4%
WebTrends Corp. 1.8%
Mercury Interactive Corp. 1.8%
Cognizant Technology Solutions Corp. 1.7%
USWeb Corp. 1.5%
Maker Communications, Inc. 1.5%
Diamond Technology Partners 1.4%
VerticalNet, Inc. 1.4%
NetIQ Corp. 1.3%
TOTAL 17.2%

</TABLE>

<TABLE>

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Technology 56.9% 23.4%
Consumer Cyclicals 11.1% 9.0%
Energy 7.4% 5.9%
Capital Goods 5.6% 8.5%
Financials 5.0% 15.5%
Health Care 4.6% 10.7%
Consumer Staples 4.5% 11.9%
Communications Services 3.3% 8.5%
Transportation 1.0% 0.8%

</TABLE>

AFTER AN OUTSTANDING 12-MONTH PERIOD FOR THE FUND, WHAT IS YOUR OUTLOOK FOR
GROWTH STOCKS AND YOUR STRATEGY AS WE APPROACH THE YEAR 2000?

From the small-cap relative performance peak on March 31, 1994 through the third
quarter of 1999, the S&P 500 Index has outperformed the Russell 2000 Index by
more than 117% on a price-only basis, and despite having outperformed in each of
the past two quarters, small-cap stocks have underperformed over the past 12
months by about 10%. This suggests that small-cap stocks may be beginning a
cycle of strong relative performance that appears to have substantial room to
run. Market valuations support this assessment. Obviously, valuations relative
to the S&P 500 Index appear cheap, but even compared to their own history,
small-cap valuations have become compelling. For example, on an enterprise
value-to-sales basis, small-cap stocks are trading at levels just slightly
richer than both last October's lows and valuations that prevailed at the bottom
of the 1990 recession. The bottom line: from a historical perspective, emerging
growth stocks appear inexpensive.

From a strategy perspective, we continue to believe that earnings growth,
earnings expectations, and earnings surprises are the key drivers of stock price
performance. Therefore, we will continue to apply a quantitative front-end
analysis that focuses on these key drivers. We believe that economies
traumatized by the 1997 global crisis are recovering more rapidly than generally
recognized, and that the fund's substantial exposure to the technology and
energy sectors are a good way to capture the benefit of this insight.

Last Meeting of Shareholders

A Special Meeting of Shareholders of Federated Equity Funds (Trust) was held on
November 5, 1999. On September 7, 1999, the record date for shareholders voting
at the meeting, there were 79,491,366 total outstanding shares. The following
items were considered by shareholders and the results of their voting were as
follows:

AGENDA ITEM 1

Election of Trustees: 1

<TABLE>

WITHHELD
AUTHORITY
FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 48,710,653 1,327,455
Nicholas P. Constantakis 48,707,894 1,330,214
John F. Cunningham 48,714,704 1,323,404
J. Christopher Donahue 48,665,494 1,372,614
Charles F. Mansfield, Jr. 48,713,783 1,324,325
John S. Walsh 48,705,907 1,332,201

</TABLE>

1 The following Trustees of the Trust continued their terms as Trustees of
the Trust: John F. Donahue, John T. Conroy, Jr., William J. Copeland,
Lawrence D. Ellis, M.D., Peter E. Madden, John E. Murray, Jr, J.D., S.J.D.
and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the Fund's fundamental investment policies:

(a) To amend the Fund's fundamental investment policy regarding diversification.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,185,550 18,223 420,907
Federated Capital Appreciation Fund 6,727,977 686,959 1,352,171
Federated Growth Strategies Fund 14,180,323 325,629 3,211,302
Federated Large Cap Growth Fund 6,082,834 154,234 2,436,647
Federated Small Cap Strategies Fund 9,454,825 141,464 3,659,065

</TABLE>

(b) To amend the Fund's fundamental investment policy regarding borrowing money
and issuing senior securities.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,165,993 35,779 422,908
Federated Capital Appreciation Fund 6,579,806 829,682 1,357,619
Federated Growth Strategies Fund 14,024,566 484,842 3,207,846
Federated Large Cap Growth Fund 5,961,263 238,186 2,474,266
Federated Small Cap Strategies Fund 9,349,533 213,072 3,692,749

</TABLE>

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,175,105 30,541 419,034
Federated Capital Appreciation Fund 6,946,523 463,423 1,357,161
Federated Growth Strategies Fund 14,115,683 349,459 3,252,112
Federated Large Cap Growth Fund 6,017,898 200,527 2,455,290
Federated Small Cap Strategies Fund 9,392,209 195,646 3,667,499

</TABLE>

(d) To amend the Fund's fundamental investment policy regarding investments in
commodities.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,169,209 37,811 417,660
Federated Growth Strategies Fund 14,034,192 510,830 3,172,232
Federated Large Cap Growth Fund 5,923,742 296,977 2,452,996
Federated Small Cap Strategies Fund 9,321,384 262,628 3,671,342

</TABLE>

(e) To amend the Fund's fundamental investment policy regarding underwriting
securities.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,176,983 25,615 422,082
Federated Capital Appreciation Fund 6,935,034 473,821 1,358,252
Federated Growth Strategies Fund 14,039,862 446,742 3,230,650
Federated Large Cap Growth Fund 6,005,617 198,132 2,469,966
Federated Small Cap Strategies Fund 9,394,956 192,822 3,667,576

</TABLE>

(f) To amend the Fund's fundamental investment policy regarding lending by the
Fund.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,157,719 48,737 418,224
Federated Capital Appreciation Fund 6,751,451 632,303 1,383,353
Federated Growth Strategies Fund 14,006,658 511,958 3,198,638
Federated Large Cap Growth Fund 5,950,205 258,510 2,465,000
Federated Small Cap Strategies Fund 9,322,094 255,799 3,667,461

</TABLE>

(g) To amend the Fund's fundamental investment policy regarding concentration of
the Fund's investments in the securities of companies in the same industry.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,181,313 22,969 420,398
Federated Growth Strategies Fund 14,112,938 346,045 3,258,271
Federated Large Cap Growth Fund 6,017,558 194,699 2,461,458
Federated Small Cap Strategies Fund 9,398,399 180,973 3,675,982

</TABLE>

(h) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding buying securities on margin.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,164,210 40,601 419,869
Federated Growth Strategies Fund 13,838,738 597,953 2,280,563
Federated Large Cap Growth Fund 5,896,937 275,029 2,501,749
Federated Small Cap Strategies Fund 9,227,979 289,005 3,738,360

</TABLE>

(i) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding pledging assets.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Capital Appreciation Fund 6,452,981 950,846 1,363,280
Federated Large Cap Growth Fund 5,936,846 256,888 2,479,981
Federated Small Cap Strategies Fund 9,278,674 277,707 3,698,973

</TABLE>

AGENDA ITEM 3

To remove certain of the Fund's fundamental investment policies.

(a) To remove the Fund's fundamental investment policy regarding selling
securities short.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,154,766 45,338 424,576
Federated Capital Appreciation Fund 6,659,157 698,089 1,409,861
Federated Growth Strategies Fund 13,968,464 544,502 3,204,288
Federated Large Cap Growth Fund 5,927,807 284,012 2,461,896
Federated Small Cap Strategies Fund 9,305,910 253,583 3,695,861

</TABLE>

(b) To remove the Fund's fundamental investment policy regarding investing in
oil, gas and minerals.

<TABLE>

ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,169,721 36,916 418,043
Federated Growth Strategies Fund 13,997,610 475,650 3,243,994
Federated Large Cap Growth Fund 5,927,807 284,012 2,461,896

</TABLE>

Federated Aggressive Growth Fund-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Aggressive Growth Fund (Class A Shares) (the "Fund") from November 25,
1996 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Small Growth Index (LSGI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C> 1
Year 77.53% Start of Performance (11/25/96) 26.41%

</TABLE>

[Graphic -SEE APPENDIX]

Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.

1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LSGI have been adjusted to reflect
reinvestment of dividends on securities in the indexes.

2 The S&P 500 and the LSGI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indexes are unmanaged.

3 Total return quoted reflects all applicable sales charges.

Federated Aggressive Growth Fund-Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Aggressive Growth Fund (Class B Shares) (the "Fund") from November 25,
1996 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Small Growth Index (LSGI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C> 1
Year 80.95% Start of Performance (11/25/96) 27.19%

</TABLE>

[Graphic -SEE APPENDIX]

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

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

Federated Aggressive Growth Fund-Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Aggressive Growth Fund (Class C Shares) (the "Fund") from November 25,
1996 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Small Growth Index (LSGI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C> 1
Year 85.39% Start of Performance (11/25/96) 27.83%

</TABLE>

[Graphic -SEE APPENDIX]

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

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

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS--99.4%
CAPITAL GOODS--5.6%
10,100 1 Dupont Photomasks, Inc. $ 499,950
6,100 1 Flextronics International
Ltd. 433,100
8,200 1 Jabil Circuit, Inc. 428,450
68,000 1 Newpark Resources, Inc. 437,750
30,000 1 Orbital Sciences Corp. 442,500
5,100 1 Sanmina Corp. 459,319
9,900 1 Terex Corp. 261,731
34,000 1 Zomax Optical Media, Inc. 947,750
TOTAL 3,910,550
COMMUNICATION SERVICES--
3.3%
12,050 1 Covad Communications
Group, Inc. 578,400
23,000 1 IDT Corp. 526,125
16,000 1 IXC Communications, Inc. 691,000
17,000 1 MGC Communications, Inc. 467,500
2,300 1 Triton PCS Holdings, Inc.,
Class A 81,075
TOTAL 2,344,100
CONSUMER CYCLICALS--11.1%
21,000 1 bebe stores, Inc. 553,875
21,400 1 Career Education Corp. 470,800
15,000 1 Diamond Technology
Partners, Class A 969,375
23,750 1 Insight Enterprises, Inc. 887,656
5,000 1 Internet Capital Group,
Inc. 581,875
21,500 1 MIPS Technologies, Inc. 620,812
24,200 1 Modem Media. Poppe Tyson,
Inc. 1,669,800
16,700 1 Navigant Consulting, Inc. 476,994
20,412 1 Pacific Sunwear of
California 616,187
6,400 1 Stamps.com, Inc. 368,000
50,300 1 Value America, Inc. 625,606
TOTAL 7,840,980
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued
CONSUMER STAPLES--4.5%
33,800 1 Balance Bar Co. $ 245,050
16,200 1 Citadel Communications
Corp. 782,662
10,200 1 Echostar Communications
Corp., Class A 631,125
16,500 1 Hollywood Entertainment
Corp. 233,062
20,000 1 P. F. Chang's China Bistro,
Inc. 430,000
6,000 1 Radio One, Inc., Class A 299,250
4,600 1 Spanish Broadcasting
System, Inc., Class A 122,475
9,100 1 TiVo, Inc. 390,162
TOTAL 3,133,786
ENERGY--7.4%
14,800 1 BJ Services Co. 507,825
15,000 1 Cal Dive International,
Inc. 504,375
13,900 1 Cooper Cameron Corp. 537,756
24,900 ENSCO International, Inc. 482,437
22,700 1 Gulf Island Fabrication,
Inc. 227,000
31,800 1 Pool Energy Services Co. 693,637
15,900 1 Precision Drilling Corp. 368,681
29,870 1 R&B Falcon Corp. 371,508
33,000 1 UTI Energy Corp. 633,187
42,000 1 Varco International, Inc. 443,625
13,500 Weatherford International,
Inc. 457,312
TOTAL 5,227,343
FINANCIALS--5.0%
12,000 1 Advance Paradigm, Inc. 511,500
36,900 1 Americredit Corp. 641,137
28,000 1 Mede America Corp. 623,000
25,900 Metris Cos., Inc. 891,931
24,000 1 Net.Bank, Inc. 531,000
14,000 1 TeleBanc Financial Corp. 336,000
TOTAL 3,534,568
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued
HEALTH CARE--4.6%
6,000 1 Gilead Sciences, Inc. $ 379,125
55,000 1 Hanger Orthopedic Group,
Inc. 677,187
42,300 1 Osteotech, Inc. 552,544
21,200 1 Protein Design
Laboratories, Inc. 849,325
72,500 1 Theragenics Corp. 770,312
TOTAL 3,228,493
TECHNOLOGY--56.9%
17,700 1 24/7 Media, Inc. 764,419
19,200 1 AVT Corp. 643,200
16,200 1 Accrue Software, Inc. 870,750
6,300 1 Aether Systems, Inc. 438,244
1,100 1 Akamai Technologies, Inc. 159,706
11,800 1 Allaire Corp. 860,662
46,300 1 AnswerThink Consulting
Group, Inc. 763,950
6,300 1 Applied Materials, Inc. 565,819
26,100 1 CBT Group PLC, ADR 538,313
500 Charter Semiconductor
Manufacturing Ltd., ADR 16,594
5,000 1 Check Point Software
Technologies Ltd. 578,438
8,600 1 Clarent Corp. 815,925
26,200 1 Cognizant Technology
Solutions Corp. 1,203,563
15,300 1 Complete Business
Solutions, Inc. 221,850
6,000 1 Comverse Technology, Inc. 681,000
28,200 1 Concentric Network Corp. 722,625
3,500 1 Conexant Systems, Inc. 326,813
17,800 1 Credence Systems Corp. 812,125
25,400 1 Cymer, Inc. 938,213
4,800 1 DSP Communications, Inc. 168,900
26,000 1 Digital River, Inc. 589,875
9,300 1 E-Tek Dynamics, Inc. 619,613
17,000 1 Etec Systems, Inc. 649,188
13,300 1 Gadzoox Networks, Inc. 633,413
16,000 1 Hi/fn, Inc. 581,000
14,000 1 ISS Group, Inc. 533,750
8,100 1 Informatica Corp. 585,225
3,400 1 Intertrust Technologies
Corp. 185,300
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued
TECHNOLOGY--CONTINUED
1,200 1 Interwoven, Inc. $ 94,050
3,600 1 JNI Corp. 192,375
17,600 1 Keynote Systems, Inc. 798,600
20,000 1 Kopin Corp. 840,000
7,600 1 Liberate Technologies,
Inc. 517,750
22,000 1 MMC Networks, Inc. 701,250
38,300 1 Maker Communications, Inc. 1,022,131
18,900 1 Marimba, Inc. 538,650
48,100 1 Mastech Corp. 823,713
15,500 1 Medquist, Inc. 496,000
15,200 1 Mercury Interactive Corp. 1,233,100
15,000 1 Micrel, Inc. 815,625
15,800 1 Micromuse, Inc. 1,688,625
8,000 1 Mindspring Enterprises,
Inc. 205,500
29,200 1 Neon Systems, Inc. 518,300
20,800 1 NetIQ Corp. 950,300
7,700 1 Novellus Systems, Inc. 596,750
40,300 1 ONYX Software Corp. 901,713
20,700 1 PRI Automation, Inc. 830,588
18,700 1 Packeteer, Inc. 635,800
18,000 1 Paradyne Networks, Inc. 546,750
4,000 1 Phone.com, Inc. 822,000
65,700 1 Pilot Network Services,
Inc. 771,975
1,100 1 QuickLogic Corp. 20,213
17,000 1 RF Micro Devices, Inc. 877,625
4,100 1 Razorfish, Inc. 302,375
16,000 1 SCM Microsystems, Inc. 756,000
8,200 1 Software.com, Inc. 551,963
900 1 Sycamore Networks, Inc. 193,500
28,000 1 USWeb Corp. 1,085,000
9,100 1 Veeco Instruments, Inc. 308,831
17,000 1 VerticalNet, Inc. 952,000
16,200 1 Vitesse Semiconductor
Corp. 743,175
1,100 1 Vixel Corp. 35,200
20,000 1 WebTrends Corp. 1,235,000
TOTAL 40,070,900
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS--continued
TRANSPORTATION--1.0%
28,800 1 SkyWest, Inc. $ 714,600
TOTAL COMMON STOCKS
(IDENTIFIED COST
$46,422,323) 70,005,320
REPURCHASE AGREEMENT--1.7%
2
$ 1,190,000 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (AT AMORTIZED
COST) 1,190,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$47,612,323) 3 $ 71,195,320

</TABLE>

1 Non-income producing security.

2 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.

3 The cost of investments for federal tax purposes amounts to $47,785,368. The
net unrealized appreciation of investments on a federal tax basis amounts to
$23,409,952 which is comprised of $26,438,881 appreciation and $3,028,929
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($70,419,936) at October 31, 1999.

The following acronym is used throughout this portfolio:

ADR --American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$47,612,323 and tax
cost $47,785,368) $ 71,195,320
Income receivable 530
Receivable for investments
sold 56,636
Receivable for shares sold 537,793
Deferred organizational
costs 6,324
TOTAL ASSETS 71,796,603
LIABILITIES:
Payable for investments
purchased $ 1,261,997
Payable for shares
redeemed 24,746
Payable to Bank 6,275
Accrued expenses 83,649
TOTAL LIABILITIES 1,376,667
Net assets for 3,397,930
shares outstanding $ 70,419,936
NET ASSETS CONSIST OF:
Paid in capital $ 46,278,989
Net unrealized
appreciation of
investments 23,582,997
Accumulated net realized
gain on investments and
futures contracts 557,950
TOTAL NET ASSETS $ 70,419,936
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
CLASS A SHARES:
Net Asset Value Per Share
($18,077,801 / 860,142
shares outstanding) $21.02
Offering Price Per Share
(100/94.50 of $21.02) 1 $22.24
Redemption Proceeds Per
Share $21.02
CLASS B SHARES:
Net Asset Value Per Share
($44,091,191/ 2,136,105
shares outstanding) $20.64
Offering Price Per Share $20.64
Redemption Proceeds Per
Share (94.50/100 of
$20.64) 1 $19.50
CLASS C SHARES:
Net Asset Value Per Share
($8,250,944 / 401,683
shares outstanding) $20.54
Offering Price Per Share $20.54
Redemption Proceeds Per
Share (99.00/100 of
$20.54) 1 $20.33

</TABLE>

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 13,363
Interest 58,723
TOTAL INCOME 72,086
EXPENSES:
Investment advisory fee $ 450,984
Administrative personnel
and services fee 185,000
Custodian fees 12,070
Transfer and dividend
disbursing agent fees and
expenses 185,174
Directors'/Trustees' fees 3,599
Auditing fees 10,355
Legal fees 2,522
Portfolio accounting fees 73,671
Distribution services fee--
Class B Shares 215,084
Distribution services fee--
Class C Shares 37,778
Shareholder services fee--
Class A Shares 28,453
Shareholder services fee--
Class B Shares 71,695
Shareholder services fee--
Class C Shares 12,593
Share registration costs 42,233
Printing and postage 37,860
Insurance premiums 1,227
Miscellaneous 9,436
TOTAL EXPENSES 1,379,734
WAIVERS:
Waiver of investment
advisory fee (335,672)
Net expenses 1,044,062
Net operating loss (971,976)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FUTURES CONTRACTS:
Net realized gain on
investments and futures
contracts 4,286,845
Net change in unrealized
appreciation
of investments 24,983,153
Net realized and
unrealized gain on
investments and
future contracts 29,269,998
Change in net assets
resulting from operations $ 28,298,022

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED OCTOBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (971,976) $ (486,680)
Net realized gain (loss) on
investments and future
contracts ($4,294,478 and
($2,591,507),
respectively, as computed
for federal tax purposes) 4,286,845 (2,756,919)
Net change in unrealized
appreciation/depreciation
of investments 24,983,153 (2,744,645)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 28,298,022 (5,988,244)
Distributions from net
realized gain on
investments and futures
contracts
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)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 70,282,661 42,004,648
Net asset value of shares
issued to shareholders in
payment of
distributions declared -- 2,778
Cost of shares redeemed (56,436,875) (20,028,392)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 13,845,786 21,979,034
Change in net assets 42,143,808 15,987,406
NET ASSETS:
Beginning of period 28,276,128 12,288,722
End of period $ 70,419,936 $ 28,276,128

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 2
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.19 $13.31 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.25) 3 (0.20) 3 (0.05)
Net realized and
unrealized gain/(loss) on
investments and
futures contracts 10.08 (1.92) 337
TOTAL FROM INVESTMENT
OPERATIONS 9.83 (2.12) 332
LESS DISTRIBUTIONS:
Distributions in excess of
net investment income -- -- (0.01)
Distributions from net
realized gain on
investments and futures
contracts -- (0.00) 4 --
TOTAL DISTRIBUTIONS -- (0.00) 4 (0.01)
NET ASSET VALUE, END OF
PERIOD $21.02 $11.19 $13.31
TOTAL RETURN 5 87.85% (15.91%) 33.21%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 2.50% 3.12% 10.71% 7
Net operating loss 6 (2.34%) (2.92%) (9.93%) 7
Expenses (after waiver) 1.76% 1.76% 1.74% 7
Net operating loss (after
waiver) (1.60% ) (1.56% ) (0.96%) 7
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $18,078 $7,549 $4,148
Portfolio turnover 99% 91% 97%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years were audited by other auditors.

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

3 Per share numbers have been calculated using the average shares method, which
more appropriately represents the per share data for the period since the use of
the undistributed income method did not accord with the results of operations.

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 2
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.07 $13.27 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.36) (0.30) 3 (0.08)
Net realized and
unrealized gain/(loss) on
investments and
futures contracts 9.93 (1.90) 3.35
TOTAL FROM INVESTMENT
OPERATIONS 9.57 (2.20) 3.27
LESS DISTRIBUTIONS:
Distributions in excess of
net investment income -- -- (0.00) 4
Distributions from net
realized gain on
investments and futures
contracts -- (0.00) 4 --
TOTAL DISTRIBUTIONS -- (0.00) 4 (0.00) 4
NET ASSET VALUE, END OF
PERIOD $20.64 $11.07 $13.27
TOTAL RETURN 5 86.45% (16.56%) 32.75%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 3.25% 3.83% 9.76% 7
Net operating loss 6 (3.08%) (3.65%) (9.21%) 7
Expenses (after waiver) 2.51% 2.51% 2.51% 7
Net operating loss (after
waiver) (2.34%) (2.33%) (1.96%) 7
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $44,091 $17,783 $7,184
Portfolio turnover 99% 91% 97%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years were audited by other auditors.

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

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 2
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.02 $13.20 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.36) (0.29) 3 (0.06)
Net realized and
unrealized gain/(loss) on
investments and
futures contracts 9.88 (1.89) 3.26
TOTAL FROM INVESTMENT
OPERATIONS 9.52 (2.18) 3.20
LESS DISTRIBUTIONS:
Distributions in excess of
net investment income -- -- (0.00) 4
Distributions from net
realized gain on
investments and
futures contracts -- (0.00) 4 --
TOTAL DISTRIBUTIONS -- (0.00) 4 (0.00) 4
NET ASSET VALUE, END OF
PERIOD $20.54 $11.02 $13.20
TOTAL RETURN 5 86.39% (16.49%) 32.04%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 3.25% 3.83% 9.76% 7
Net operating loss 6 (3.08%) (3.64%) (9.18%) 7
Expenses (after waiver) 2.51% 2.51% 2.53% 7
Net operating loss (after
waivers) (2.34%) (2.32%) (1.95%) 7
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $8,251 $2,944 $957
Portfolio turnover 99% 91% 97%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years were audited by other auditors.

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

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

ORGANIZATION

Federated Equity Fund (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as a diversified, open-end management
investment company. The Trust consists of five portfolios. The financial
statements included herein are only those of Federated Aggressive Growth 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
appreciation of capital.

SIGNIFICANT ACCOUNTING POLICIES

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

INVESTMENT VALUATIONS

Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of 60 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.

Income and capital gain distributions are determined in accordance with the
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for net
operating losses. The following reclassifications have been made to the
financial statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED
DISTRIBUTIONS IN
EXCESS OF NET ACCUMULATED NET
INVESTMENT INCOME REALIZED LOSS
<S> <C>
$971,976 $(971,976)

</TABLE>

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

FEDERAL TAXES

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

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 costs 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 to hedge against the effects of changes
in the value of portfolio securities due to anticipated changes in the interest
rates and market conditions. 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 the changes in the variation margin account. When a contract
is closed, the Fund recognizes a realized gain or loss. For the period ended
October 31, 1999, the Fund had realized losses of $35,592 on futures contracts.

Futures contracts have market risks, including the risk that the change in value
of the contract may not correlate with changes in the value of the underlying
securities. At October 31, 1999, 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.

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>

YEAR ENDED OCTOBER 31 1999 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,362,919 $ 21,757,131 1,555,844 $ 19,799,352
Shares issued to
shareholders in payment of
distributions declared -- -- 77 997
Shares redeemed (1,177,472) (18,564,652) (1,192,806) (14,847,728)
NET CHANGE RESULTING FROM
CLASS A
SHARE TRANSACTIONS 185,447 $ 3,192,479 363,115 $ 4,952,621

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,013,691 $ 32,485,681 1,432,908 $ 18,824,917
Shares issued to
shareholders in payment of
distributions declared -- -- 138 1,781
Shares redeemed (1,484,175) (24,012,690) (367,697) (4,278,757)
NET CHANGE RESULTING FROM
CLASS B
SHARE TRANSACTIONS 529,516 $ 8,472,991 1,065,349 $ 14,547,941

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,065,293 $ 16,039,849 264,256 $ 3,380,379
Shares issued to
shareholders in payment of
distributions declared -- -- -- --
Shares redeemed (930,835) (13,859,533) (69,542) (901,907)
NET CHANGE RESULTING FROM
CLASS C
SHARE TRANSACTIONS 134,458 $ 2,180,316 194,714 $ 2,478,472
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 849,421 $ 13,845,786 1,623,178 $ 21,979,034

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, the Fund'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 Fund. 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

<TABLE>

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

</TABLE>

For the period ended October 31, 1999, the Class A Shares did not incur a
distribution services fee.

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary 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.

INTERFUND TRANSACTIONS

During the period ended October 31, 1999, the Fund engaged in purchase
transactions with funds that have a common investment adviser (or affiliated
investment advisers), common Directors/Trustees, and/or common officers. These
purchase transactions were made at current market value pursuant to Rule 17a-7
under the Act amounting to $408,125.

ORGANIZATIONAL EXPENSES

Organizational expenses of $13,912 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 period ended October 31, 1999, the Fund expensed $2,066 of
organizational expenses.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 57,415,316
Sales $ 44,540,532

</TABLE>

YEAR 2000 (UNAUDITED)

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.

CHANGE OF INDEPENDENT AUDITOR (UNAUDITED)

On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit
Committee, requested and subsequently accepted the resignation of Ernst & Young
LLP ("E&Y") as the Fund's independent auditors. E&Y's reports on the Fund's
financial statements for the fiscal years ended October 31, 1997 and October 31,
1998 contained no adverse opinion or disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i)
there were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of E&Y, would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports on the financial statements for such years; and (ii) there were no
reportable events of the kind described in Item 304 (a)(1)(v) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.

The Fund, by action of its Trustees, upon the recommendation of the Audit
Committee, has engaged Deloitte & Touche LLP ("D&T") as the independent auditors
to audit the Fund's financial statements for the fiscal year ended October 31,
1999. During the Fund's fiscal years ended October 31, 1997 and October 31,
1998, neither the Fund nor anyone on its behalf has consulted D&T on items which
(i) concerned the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Fund's financial statements, or (ii) concerned the
subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of
Regulation S-K) of reportable events (as described in the paragraph (a)(1)(v) of
said Item 304).

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS AND

THE SHAREHOLDERS OF FEDERATED AGGRESSIVE GROWTH FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Federated Aggressive Growth Fund (the
"Fund") as of October 31, 1999, and the related statement of operations,
statement of changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1998, and the financial highlights for the periods ended October 31, 1998 and
1997, were audited by other auditors whose report dated December 21, 1998,
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to provide reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Aggressive
Growth Fund as of October 31, 1999, the results of its operations, the changes
in its net assets and its financial highlights for the year then ended in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

December 17, 1999

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

JOHN F. CUNNINGHAM

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

GLEN R. JOHNSON

President

J. THOMAS MADDEN

Chief Investment Officer

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

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 the 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
World-Class Investment Manager
ANNUAL REPORT AS OF OCTOBER 31, 1999

Federated Aggressive Growth fund

Established 1996

3RD ANNUAL REPORT

[Graphic]
Federated
Federated Aggressive Growth fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172875

Cusip 314172867

Cusip 314172859

G02072-03 (12/99)

[Graphic]

ANNUAL REPORT

[Graphic]

GLEN R. JOHNSON

President

Federated Capital Appreciation Fund

President's Message

Dear Valued Shareholder:

Federated Capital Appreciation Fund was created in 1977, and I am pleased to
present its 23rd Annual Report. As of October 31, 1999, the fund's total net
assets of $381.5 million were spread across 123 issues of small- medium- and
large-cap corporations. Many of these companies are household names such as
America Online, Sun Microsystems, Cisco Systems, and Apple Computer. These
securities, selected for their growth potential, can be very volatile. Managers
seek out many of the fastest-growing companies in the U.S. and these
corporations have high price-to-earnings ratios along with high estimated growth
rates.

This report covers the 12-month reporting period from November 1, 1998 through
October 31, 1999. It begins with an interview with the fund's portfolio manager,
Arthur J. Barry, Vice President of Federated Investment Management Company.
Following his discussion are three additional items of shareholder interest.
First is a series of graphs showing the fund's excellent long-term investment
performance. Second is a complete listing of the fund's high-quality stock
holdings, and third is the publication of the fund's financial statements.

To quote from Mr. Barry's commentary, "It was a great time to own equities."
During the reporting period, the stock market's upward momentum-and daily
volatility-continued, led by large-cap growth stocks and Internet stocks. Thanks
to the fund's focus on technology holdings in particular, it was also a great
time for shareholders of Federated Capital Appreciation Fund. The fund's returns
of more than 40%, based on net asset value, across all share classes were far
superior to the 25.68% return of the overall stock market as represented by the
Standard and Poor's ("S&P") 500 Index. 1 Individual share class total return
performance for the 12-month reporting period ended October 31, 1999, including
income and realized gains distributions, follows.2

<TABLE>

TOTAL RETURN INCOME CAPITAL GAINS NET ASSET VALUE INCREASE
<S> <C> <C> <C> <C>
Class A Shares 41.17% $0.07 $0.82 $18.73 to $25.36 = 35%
Class B Shares 40.12% - $0.82 $18.62 to $25.09 = 35%
Class C Shares 40.09% - $0.82 $18.61 to $25.07 = 35%

</TABLE>

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

2 Performance quoted is based on net asset value, reflects past performance and
is no guarantee of 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. Total returns for the reporting period, based on offering
price (i.e., less any applicable sales charge), for Class A, B and C Shares were
33.40%, 34.62% and 39.09%, respectively.

Like any growth stock fund, Federated Capital Appreciation Fund has seen its
share of volatility. But this past year of significant outperformance supports
the fact that in any 5-, 10-, 15- or 20-year period, there have been many
periods when stock prices have declined, and these same periods were then
followed by very positive periods of investment returns.

Of course, we continue to see significant day-to-day volatility in the stock
market. By automatically reinvesting your quarterly dividends and capital gains
in additional fund shares, you can take advantage of share price fluctuations in
volatile markets. You can also add to your account through a systematic
investment program, whereby a specific amount is withdrawn 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. 3 Please contact your investment
representative for more information.

Thank you for participating in the growth and earnings opportunities of over
100 high-quality U.S. growth-oriented companies. As always, we welcome your
comments and suggestions.

Sincerely,

[Graphic]

Glen R. Johnson

President

December 15, 1999

3 Systematic investing does not assure a profit or protect against loss in
declining markets. Because dollar-cost averaging involves continuous investment
regardless of fluctuating price levels, investors should consider their
financial ability to continue purchasing during periods of low price levels.

[Graphic]

ARTHUR J. BARRY, CFA

Vice President

Federated Investment Management Company

Investment Review

WHAT IS YOUR REVIEW OF THE VOLATILE, YET STRONG, STOCK MARKET OVER THE 12- MONTH
REPORTING PERIOD?

In general, it was a great time to own equities with the S&P 500 Index advancing
25.68% for the reporting period. The reporting period began with the equity
market recovering from a two-month swoon. The Federal Reserve Board (the "Fed")
had lowered interest rates to ease the financial liquidity crisis highlighted by
Long Term Capital Management's problems. This move restored confidence and
enthusiasm for financial instruments despite the prospect for weak earnings due
to global weakness. The strength of the U.S. economy and the Fed's response to
slow growth placed an upward bias in interest rates during the fund's fiscal
year. Interest rates, as defined by the yield of the 30-year U.S. Treasury bond,
began the year at 5.20% and troughed in December at 4.95%, before beginning
their upward trend, ending the year yielding 6.15%.

All stocks were not created equal, though. Despite the negative implications of
rising interest rates on longer duration growth assets, the technology sector
was the clear leader, up 66%, with the communication services sector the
runner-up, advancing 40%. The laggards were the consumer staples, utilities and
transportation sectors, each barely above the break-even point for the 12-month
reporting period. Value stocks, defined by lower price-to- earnings and
price-to-book multiples, had their moment of glory during the month of April.
Other than that one month of spectacular returns, it was a dismal time period
for value stocks. The S&P/Barra Value Index registered a 19% return, which in a
normal year would be fantastic. 1 Compared to the S&P/Barra Growth Index's 31.5%
advance, however, value stocks provided an anemic return.1 Also, smaller
capitalization stocks did not fare as well, as the S&P 600 Small-Cap Index and
the S&P 400 Mid-Cap Index gained 12% and 21.07%, respectively.1

Helping the technology and communications sectors were positive secular trends
(wireless handset sales, infrastructure spending, Internet growth, etc.) and
good earnings revisions. Compare that to cheap value stocks that had trouble
meeting earnings expectations, and the result is a stock market advancing on
narrow breadth. A fear of a spending slowdown due to the year 2000 gave
investors opportunities to buy well-positioned companies, such as Oracle and
Mastech, at cheap prices from investors unwilling to look beyond the current
quarter.

HOW DID FEDERATED CAPITAL APPRECIATION FUND PERFORM FOR ITS SHAREHOLDERS DURING
THE FISCAL YEAR?

For the 12-month reporting period ended October 31, 1999, the fund's Class A
Shares produced a very substantial total return of 41.17%, based on net asset
value. 2 The fund's Class B and C Shares delivered total returns of 40.12% and
40.09%, respectively, based on net asset value.2 The fund's returns were far
above the 25.68% return of the S&P 500 Index, and the 21.07% return of the S&P
400 Mid-Cap Index.

The top contributors to performance were technology stocks. All adding more than
100 basis points in performance were: AMERICA ONLINE, SUN MICROSYSTEMS, CISCO
SYSTEMS, RF MICRO DEVICES, and APPLE COMPUTER. Strong nontechnology performers
were: AMGEN, MORGAN STANLEY, METRONET COMMUNICATIONS (NOW AT&T CANADA) and
GLOBAL CROSSING.

The portfolio consisted of many value stocks, which tended to be our biggest
losers. The drag to performance were the tobacco sector (both PHILIP MORRIS and
R.J. REYNOLDS) and the pollution control sector (both ALLIED WASTE and REPUBLIC
SERVICES).

WHAT CHANGES DID YOU MAKE TO THE FUND'S SECTOR WEIGHTINGS AND MARKET
CAPITALIZATION?

Overall, the changes were not drastic. The sector weightings are roughly in line
with those of a year ago; the value portion of the portfolio is more mid-cap
oriented, and growth stocks dominated our top ten holdings.

In the fourth quarter of 1998, which was early in our fiscal year, we became
more aggressive. From that point, we tried to let the fund's winners run.
Therefore, the portfolio displayed a tendency to become a little more growth-
oriented during the year, as these stocks garnered a larger weighting in the
portfolio due to their outperformance. The portfolio maintained roughly half of
its assets in the value camp. During the year, most of the opportunities we
uncovered in value stocks tended to be focused on mid-cap stocks. So the
portfolio's value portion gravitated toward mid-cap and away from large-cap.

1 The S&P/Barra Value Index is an index representing approximately 50% of the
S&P 500 Index of common stock's market capitalization and is comprised of those
companies with lower price-to-book ratios. The S&P/Barra Growth Index is an
index that represents approximately 50% of the S&P 500 Index market
capitalization and is comprised of those companies with higher price-to-book
ratios, a characteristic associated with growth stocks. The S&P 600 Small-Cap
Index consists of 600 domestic stocks chosen to represent the liquidity and
industry groups of the small-cap market. The S&P 400 Mid-Cap Index consists of
400 domestic stocks chosen to represent the liquidity and industry groups of the
mid-cap market. These indexes are unmanaged, and investments cannot be made in
an index.

Letting our winners run is the primary reason that the fund's top ten holdings
are growth stocks. We still hold all ten stocks from last year's list of largest
holdings, but only the following three of them repeated: AMERICA ONLINE, MCI
WORLDCOM and MORGAN STANLEY. The rest either underperformed the portfolio, or we
trimmed them due to some fundamental or valuation concern. During September and
October of 1999, many value names faced selling pressure for tax loss purposes.
At that time, we added BLACK & DECKER, MASTECH, KROGER, and REPUBLIC SERVICES.

Overall, the fund is slightly overweighted in the technology, communications and
utilities sectors, and underweighted in the capital goods, consumer staples and
finance sectors. I would characterize our changes to sector weighting as
insignificant. The portfolio ended the year with 56% of invested assets in
large-cap stocks and 44% in mid-cap stocks, with 50% allocated to growth stocks
versus 50% in value stocks.

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

Our purchases during the period included the following:

MICRON TECHNOLOGY (0.99% of net assets): Micron is the leader in the dynamic
random access memory chips (DRAM) market. Prices have fallen dramatically for
this commodity, and the industry is suffering. Over the next year, we believe
Micron will benefit from a recovery in the industry and from the transition to
smaller dye sizes.

PROVIDIAN FINANCIAL (0.91% of net assets): Providian's stock has come under
severe pressure as its business practices have become scrutinized. While its
practices may be aggressive, we do not believe Providian will suffer any
permanent damage from the complaints, and the stock looks very cheap.

BJ'S WHOLESALE (0.83% of net assets): BJ's Wholesale is a large discounter,
similar to Costco or Sam's, located principally in the Northeast. We believe the
price-to-earnings ratio discount, while deserved, is too large versus Costco,
especially as BJ's implements growth strategies such as ancillary services and
private label goods.

SDL, INC. (1.16% of net assets): SDL is a leader in optical lasers used in
transmitting information through fiber optic networks. Many companies are laying
fiber optic cable to meet the demand for bandwidth, but to "light" the network
for use, they must buy SDL's "active" lasers. The barrier to entry into this
business is very high.

TELEPHONE AND DATA SYSTEM (TDS) (0.91% of net assets): Our acquisition of TDS
was a way to gain exposure to the attractive wireless service arena at a
discount to its assets. This firm owns shares in Aerial Communications and U.S.
Cellular that are worth more than the market capitalization of TDS.

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF OCTOBER 31, 1999, AND HOW WAS THE
FUND DIVERSIFIED BY INDUSTRY?

<TABLE>

PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Cisco Systems, Inc. 1.59%
America Online, Inc. 1.53%
RF Micro Devices, Inc. 1.42%
Morgan Stanley, Dean Witter & Co. 1.37%
General Electric Co. 1.35%
Citigroup, Inc. 1.35%
Solectron Corp. 1.32%
Sun Microsystems, Inc. 1.30%
MCI Worldcom, Inc. 1.30%
Apple Computer, Inc. 1.29%
TOTAL 13.82%

</TABLE>

<TABLE>

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Technology 27.1% 23.5%
Communication Services 10.9% 8.5%
Financials 10.7% 15.5%
Health Care 9.0% 10.7%
Consumer Cyclicals 8.7% 9.0%
Consumer Staples 8.6% 11.9%
Capital Goods 6.5% 8.5%
Utilities 4.6% 2.8%
Basic Materials 4.5% 3.0%
Energy 4.5% 5.9%
Transportation 0.9% 0.8%

</TABLE>

IT HAS BEEN A GOOD YEAR FOR SHAREHOLDERS OF FEDERATED CAPITAL APPRECIATION
FUND. WHAT IS YOUR OUTLOOK AS WE APPROACH THE YEAR 2000?

While we really like the secular trends in the technology and communications
sectors, valuations have started to become a little rich. We feel like the
market has risen too far too fast. The momentum could continue as those
institutional investors, who have lagged peers, try to catch up in the waning
months of 1999. Beginning in 2000, investors have a fresh start and may seek
bargains. The result could be renewed interest in value stocks in the beginning
of the year.

Last Meeting of Shareholders

AGENDA ITEM 1

Election of Trustees: 1

<TABLE>

</TABLE>

AGENDA ITEM 2

To make changes to the Fund's fundamental investment policies:

(a) To amend the Fund's fundamental investment policy regarding diversification.

<TABLE>

</TABLE>

(b) To amend the Fund's fundamental investment policy regarding borrowing money
and issuing senior securities.

<TABLE>

</TABLE>

<TABLE>

</TABLE>

(d) To amend the Fund's fundamental investment policy regarding investments in
commodities.

<TABLE>

</TABLE>

(e) To amend the Fund's fundamental investment policy regarding underwriting
securities.

<TABLE>

</TABLE>

(f) To amend the Fund's fundamental investment policy regarding lending by the
Fund.

<TABLE>

</TABLE>

(g) To amend the Fund's fundamental investment policy regarding concentration of
the Fund's investments in the securities of companies in the same industry.

<TABLE>

</TABLE>

(h) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding buying securities on margin.

<TABLE>

</TABLE>

(i) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding pledging assets.

<TABLE>

</TABLE>

AGENDA ITEM 3

To remove certain of the Fund's fundamental investment policies:

(a) To remove the Fund's fundamental investment policy regarding selling
securities short.

<TABLE>

</TABLE>

(b) To remove the Fund's fundamental investment policy regarding investing in
oil, gas and minerals.

<TABLE>

</TABLE>

Two Ways You May Seek to Invest for Success:

INITIAL INVESTMENT:

IF YOU MADE AN INITIAL INVESTMENT OF $23,000 IN THE CLASS A SHARES OF FEDERATED
CAPITAL APPRECIATION FUND ON 1/31/77, REINVESTED DIVIDENDS AND CAPITAL GAINS,
AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH $603,681 ON
10/31/99. YOU WOULD HAVE EARNED A 15.18% 1 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 9/30/99, the Class A Shares' average annual 1-year, 5-year, and 10-year
total returns were 32.26%, 21.25%, and 14.61%, respectively. Class B Shares'
average annual 1-year and since inception (1/4/96) total returns were 33.43% and
20.23%, respectively. Class C Shares' average annual 1-year, and since inception
(1/4/96) total returns were 37.90% and 20.68%, respectively. 2

[Graphic] - See Appendix

1 Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50% sales
charge applicable to an initial investment in Class A Shares. Data quoted
represents past performance and is no guarantee 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.

2 The total returns stated take into account all applicable sales charges. The
maximum sales charges and contingent deferred sales charges for the fund are as
follows: Class A Shares, 5.50% sales charge; Class B Shares, 5.50% contingent
deferred sales charge; Class C Shares, 1.00% contingent deferred sales charge.

ONE STEP AT A TIME:

$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 22
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $202,849.

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 1/31/77, reinvested your dividends and capital
gains, and did not redeem any shares, you would have invested only $23,000, but
your account would have reached a total value of $202,849 1 by 10/31/99. You
would have earned an average annual total return of 15.92%.

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 can work 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] - See Appendix

1 This chart assumes that the subsequent annual investments are made on the last
day of the anniversary month. No method of investing can guarantee a profit or
protect against loss in down markets.

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 children. On
October 31, 1989, 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
$101,940. This represents a 17.93% average annual total return. 1 For the Rices,
a dedicated program of monthly investments really paid off.

[Graphic] - See Appendix

1 This hypothetical scenario is provided for illustrative purposes only and
does not represent the result obtained by any particular shareholder. Past
performance is no guarantee of future results.

Federated Capital Appreciation Fund-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Capital Appreciation Fund (Class A Shares) (the "Fund") from October
31, 1989 to October 31, 1999 compared to the Standard and Poor's 500 Index (S&P
500)2 and the Lipper Growth and Income Funds Average (LGIFA).3

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 4 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 33.40%
5 Years 22.63%
10 Years 15.96%
Start of Performance (1/1/77) 15.18%

</TABLE>

[Graphic] - See Appendix

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 Represents a hypothetical investment of $10,000 in the Fund with no sales
load. Effective January 1, 1996, the fiscal year end of this Fund was changed
from December 31 to October 31. Effective November 14, 1995, the maximum sales
charge was 5.50% ($10,000 investment minus $550 sales charge = $9,450). The
Fund's performance assumes the reinvestment of all dividends and distributions.
The S&P 500 and the LGIFA have been adjusted to reflect reinvestment of
dividends on securities in the index and the average.

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

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

4 Total return quoted reflects all applicable sales charges.

Federated Capital Appreciation Fund-Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 the
Federated Capital Appreciation Fund (Class B Shares) (the "Fund") from January
4, 1996 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Growth and Income Funds Average
(LGIFA).3

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 4 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 34.62%
Start of Performance (1/4/96) 22.05%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 3.00% contingent deferred sales charge on any redemption
less than four years from the purchase date. The maximum contingent deferred
sales charge is 5.50% on any redemption less than one year from the purchase
date. The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGIFA have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.

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

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

Federated Capital Appreciation Fund-Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Capital Appreciation Fund (Class C Shares) (the "Fund") from January
4, 1996 (start of performance) to October 31, 1999, compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Growth and Income Funds Average
(LGIFA).3

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 4 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 39.09%
Start of Performance (1/4/96) 22.47%

</TABLE>

[Graphic] - See Appendix

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

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

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

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>

SHARES VALUE
<S> <C> <C>
COMMON STOCKS-89.5%
BASIC MATERIALS-3.8%
106,500 Corn Products
International, Inc. $ 3,467,906
66,600 Martin Marietta Materials 2,593,237
75,000 Plum Creek Timber Co., Inc. 1,968,750
120,000 1 Smurfit-Stone Container Corp. 2,595,000
39,000 Southdown, Inc. 1,884,187
220,000 USEC, Inc. 1,993,750
TOTAL 14,502,830
CAPITAL GOODS-6.5%
38,000 General Electric Co. 5,151,375
88,600 HON Industries, Inc. 1,738,775
23,920 Koninklijke (Royal)
Philips Electronics NV, ADR 2,486,185
290,900 1 Republic Services, Inc. 3,563,525
66,923 1 Solectron Corp. 5,035,956
40,500 Textron, Inc. 3,126,094
94,424 Tyco International Ltd. 3,771,058
TOTAL 24,872,968
COMMUNICATION SERVICES-10.2%
118,200 1 AT&T Canada, Inc., Class B 3,811,950
65,813 AT&T Corp. 3,076,758
98,178 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 3,896,439
105,500 Cincinnati Bell, Inc. 2,195,719
45,000 GTE Corp. 3,375,000
107,600 1 Global Crossing Ltd. 3,725,650
80,500 1 IXC Communications, Inc. 3,476,594
57,707 1 MCI Worldcom, Inc. 4,951,982
40,000 1 MGC Communications, Inc. 1,100,000
90,000 1 Pacific Gateway Exchange, Inc. 2,047,500
30,000 Telephone and Data System,
Inc. 3,457,500
12,500 1 Triton PCS Holdings, Inc.,
Class A 440,625
35,000 1 Viatel, Inc. 1,168,125
70,600 1 Williams Communications
Group, Inc. 2,250,375
TOTAL 38,974,217
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-8.2%
28,000 1 Abercrombie & Fitch Co.,
Class A $ 763,000
103,000 1 BJ's Wholesale Club, Inc. 3,173,687
74,000 Black & Decker Corp. 3,182,000
18,500 1 CMG Information Services, Inc. 2,024,594
229,100 1 Dal-Tile International, Inc. 2,133,494
24,000 1 Gemstar International
Group Ltd. 2,085,000
131,744 Hollinger International, Inc. 1,366,844
52,000 Home Depot, Inc. 3,926,000
28,800 1 Internet Capital Group, Inc. 3,351,600
87,000 Mattel, Inc. 1,163,625
17,000 Omnicom Group, Inc. 1,496,000
92,000 1 Tommy Hilfiger Corp. 2,599,000
95,000 True North Communications, Inc. 3,829,687
TOTAL 31,094,531
CONSUMER STAPLES-7.0%
148,000 Blockbuster, Inc., Class A 1,794,500
41,663 1 Clear Channel
Communications, Inc. 3,348,664
33,300 Dial Corp. 778,387
80,000 Earthgrains Co. 1,825,000
73,500 Fort James Corp. 1,933,969
97,000 1 Kroger Co., Inc. 2,018,812
66,000 PepsiCo, Inc. 2,289,375
73,000 Philip Morris Cos., Inc. 1,838,687
24,300 R.J. Reynolds Tobacco
Holdings, Inc. 527,006
51,500 1 Safeway, Inc. 1,818,594
92,500 1 Suiza Foods Corp. 3,335,781
153,800 The Pepsi Bottling Group, Inc. 2,797,237
28,900 1 United GlobalCom, Inc.,
Class A 2,514,300
TOTAL 26,820,312
ENERGY-4.5%
58,738 BP Amoco PLC, ADR 3,392,119
97,000 Conoco, Inc., Class B 2,631,125
50,500 1 Cooper Cameron Corp. 1,953,719
68,200 Halliburton Co. 2,570,287
28,400 Mobil Corp. 2,740,600
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
ENERGY-CONTINUED
220,000 1 R&B Falcon Corp. $ 2,736,250
52,000 Sunoco, Inc. 1,254,500
TOTAL 17,278,600
FINANCIALS-10.7%
106,000 Ace, Ltd. 2,060,375
62,000 Allstate Corp. 1,782,500
16,000 American Express Co. 2,464,000
25,000 Bank of America Corp. 1,609,375
20,000 CIGNA Corp. 1,495,000
45,000 Capital One Financial Corp. 2,385,000
26,000 Chase Manhattan Corp. 2,271,750
95,098 Citigroup, Inc. 5,147,179
80,000 Conseco, Inc. 1,945,000
34,000 1 E*Trade Group, Inc. 809,625
47,290 Morgan Stanley, Dean
Witter & Co. 5,216,678
82,800 Nationwide Financial
Services, Inc., Class A 3,136,050
32,000 Providian Financial Corp. 3,488,000
80,400 UnionBanCal Corp. 3,492,375
74,000 Wells Fargo Co. 3,542,750
TOTAL 40,845,657
HEALTH CARE-8.5%
49,200 American Home Products Corp. 2,570,700
40,000 1 Amgen, Inc. 3,190,000
68,000 AstraZeneca Group PLC, ADR 3,111,000
50,000 Baxter International, Inc. 3,243,750
51,000 Bristol-Myers Squibb Co. 3,917,437
14,000 1 Genentech, Inc. 2,040,500
35,300 Merck & Co., Inc. 2,808,556
124,000 1 Oxford Health Plans, Inc. 1,464,750
43,000 Smithkline Beecham Corp., ADR 2,752,000
62,300 Teva Pharmaceutical
Industries Ltd., ADR 3,013,762
53,364 Warner-Lambert Co. 4,259,114
TOTAL 32,371,569
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
TECHNOLOGY-26.1%
45,000 1 Adaptec, Inc. $ 2,025,000
17,400 1 Aether Systems, Inc. 1,210,387
45,000 1 America Online, Inc. 5,835,938
61,400 1 Apple Computer, Inc. 4,919,675
7,500 1 Broadcom Corp., Class A 958,594
82,000 1 Cisco Systems, Inc. 6,068,000
46,000 1 Citrix Systems, Inc. 2,949,750
35,000 1 Conexant Systems, Inc. 3,268,125
114,000 1 Crown Castle International
Corp. 2,194,500
42,000 1 DST Systems, Inc. 2,674,875
58,000 1 Dell Computer Corp. 2,327,250
10,700 1 Digital Insight Corp. 423,988
66,800 1 EMC Corp. Mass 4,876,400
38,000 1 Electronics for Imaging, Inc. 1,531,875
28,000 1 Exodus Communications, Inc. 2,408,000
6,000 1 Inktomi Corp. 608,625
24,000 Intel Corp. 1,858,500
2,500 1 Juniper Networks, Inc. 689,063
23,900 1 Keynote Systems, Inc. 1,084,463
47,000 1 Lexmark Intl. Group, Class A 3,668,938
44,000 Lucent Technologies, Inc. 2,827,000
82,000 1 MMC Networks, Inc. 2,613,750
148,100 1 Mastech Corp. 2,536,213
53,000 Micron Technology, Inc. 3,779,563
50,000 1 Microsoft Corp. 4,628,125
36,000 Nokia Oyj, ADR 4,160,250
53,500 Nortel Networks Corp. 3,313,656
67,700 1 Oracle Corp. 3,219,981
105,000 1 RF Micro Devices, Inc. 5,420,625
36,000 1 SDL, Inc. 4,439,250
47,000 1 Sun Microsystems, Inc. 4,973,188
4,700 1 Sycamore Networks, Inc. 1,010,500
106,000 1 Vitesse Semiconductor Corp. 4,862,750
TOTAL 99,366,797
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS-continued
TRANSPORTATION-0.8%
52,000 Union Pacific Corp. $ 2,899,000
UTILITIES-3.2%
93,800 Enron Corp. 3,746,138
102,000 Montana Power Co. 2,900,625
64,200 Peco Energy Co. 2,451,638
132,000 SCANA Corp. 3,283,500
TOTAL 12,381,901
TOTAL COMMON STOCKS
(IDENTIFIED COST $226,554,718) 341,408,382
CORPORATE BONDS-1.7%
COMMUNICATION SERVICES-0.7%
$ 3,050,000 Comcast Corp., Conv. Bond,
Series Sprint PCS Group,
2.00%, 10/15/2029 2,573,438
CONSUMER CYCLICALS-0.5%
1,060,000 2 Omnicom Group, Inc., Conv.
Bond, 2.25%, 1/6/2013 1,951,460
HEALTH CARE-0.5%
1,150,000 Sepracor, Inc., Conv.
Bond, 6.25%, 2/15/2005 2,157,504
TOTAL CORPORATE BONDS
(IDENTIFIED COST $5,425,767) 6,682,402
PREFERRED STOCKS-4.8%
BASIC MATERIALS-0.7%
165,000 Dimon, Inc., Conv. Pfd., $2.01 794,063
45,000 Monsanto Co., Conv. Pfd.,
$2.60 1,704,375
TOTAL 2,498,438
CONSUMER STAPLES-1.6%
40,000 Cox Communications, Inc.,
INCOME PRIDES, $3.66 2,480,000
41,000 Premier Parks, Inc., Conv.
Pfd., $4.05 2,214,000
37,800 Ralston Purina Co., Series
Interstate Bakeries,
SAILS, $4.34 1,571,063
TOTAL 6,265,063
TECHNOLOGY-1.0%
77,000 1, 2 Verio, Inc., Conv. Pfd.,
Series A 3,696,000
TRANSPORTATION-0.1%
10,000 Canadian National Railway,
Conv. Pfd., $2.83 505,000
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
PREFERRED STOCKS-continued
UTILITIES-1.4% 73,000 K N Energy, Inc., Conv.
Pfd., $3.55 $ 2,500,250
54,500 Texas Utilities Co.,
Cumulative PRIDES, $4.63 2,769,281
TOTAL 5,269,531
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $19,626,367) 18,234,032
REPURCHASE AGREEMENT-5.7% 3
$ 21,620,000 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (at amortized
cost) 21,620,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$273,226,852) 4 $ 387,944,816

</TABLE>

1 Non-income producing security.

2 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At October 31, 1999, these
securities amounted to $5,647,460 which represents 1.5% of net assets.

3 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.

4 The cost of investments for federal tax purposes amounts to $273,244,079. The
net unrealized appreciation of investments on a federal tax basis amounts to
$114,700,737 which is comprised of $128,570,589 appreciation and $13,869,852
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($381,477,836) at October 31, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
PRIDES -Preferred Redeemable Increased Dividend Equity Securities
SAILS -Stock Appreciation Income Linked Security

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

ASSETS:
Total investments in
securities, at value
(identified cost
$273,226,852 and tax
cost $273,244,079) $ 387,944,816
Cash 3,375
Income receivable 236,525
Receivable for investments
sold 6,572,991
Receivable for shares sold 2,048,588
TOTAL ASSETS 396,806,295
LIABILITIES:
Payable for investments
purchased $ 14,354,237
Payable for shares
redeemed 779,471
Accrued expenses 194,751
TOTAL LIABILITIES 15,328,459
Net assets for 15,095,718
shares outstanding $ 381,477,836
NET ASSETS CONSIST OF:
Paid in capital $ 245,161,091
Net unrealized
appreciation of
investments 114,717,964
Accumulated net realized
gain on investments 21,975,044
Accumulated distributions
in excess of net investment
income (376,263)
TOTAL NET ASSETS $ 381,477,836
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
CLASS A SHARES:
Net Asset Value Per Share
($262,083,173 / 10,335,796
shares outstanding) $25.36
Offering Price Per Share
(100/94.50 of $25.36) 1 $26.84
Redemption Proceeds Per
Share $25.36
CLASS B SHARES:
Net Asset Value Per Share
($106,528,270 / 4,246,644
shares outstanding) $25.09
Offering Price Per Share $25.09
Redemption Proceeds Per
Share (94.50/100 of
$25.09) 1 $23.71
CLASS C SHARES:
Net Asset Value Per Share
($12,866,393 / 513,278
shares outstanding) $25.07
Offering Price Per Share $25.07
Redemption Proceeds Per
Share (99/100 of $25.07) 1 $24.82

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1999

INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $21,984) $ 3,675,297
Interest 743,668
TOTAL INCOME 4,418,965
EXPENSES:
Investment advisory fee $ 2,172,794
Administrative personnel
and services fee 212,917
Custodian fees 19,558
Transfer and dividend
disbursing agent fees and
expenses 269,126
Directors'/Trustees' fees 4,064
Auditing fees 16,478
Legal fees 3,070
Portfolio accounting fees 98,884
Distribution services fee-
Class B Shares 559,919
Distribution services fee-
Class C Shares 66,941
Shareholder services fee-
Class A Shares 515,312
Shareholder services fee-
Class B Shares 186,640
Shareholder services fee-
Class C Shares 22,314
Share registration costs 70,496
Printing and postage 64,515
Insurance premiums 1,815
Miscellaneous 7,787
TOTAL EXPENSES 4,292,630
Net investment income 126,335
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 21,987,600
Net change in unrealized
appreciation of
investments 70,472,545
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS 92,460,145
Change in net assets
resulting from operations $ 92,586,480

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

YEAR ENDED OCTOBER 31 1999 1998

INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 126,335 $ 575,456
Net realized gain on
investments ($22,008,654
and $9,401,664,
respectively, as computed
for federal tax purposes) 21,987,600 9,739,436
Net change in unrealized
appreciation of
investments 70,472,545 (1,668,574)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 92,586,480 8,646,318
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Class A Shares (589,166) (930,172)
Class B Shares - (23,332)
Class C Shares - (4,448)
Distributions from net
realized gains on
investments
Class A Shares (6,933,488) (17,245,708)
Class B Shares (2,217,536) (2,692,221)
Class C Shares (250,672) (311,507)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (9,990,862) (21,207,388)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 170,508,287 97,596,378
Net asset value of shares
issued to shareholders in
payment of
distributions declared 5,791,068 9,343,176
Cost of shares redeemed (91,131,681) (53,089,335)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 85,167,674 53,850,219
Change in net assets 167,763,292 41,289,149
NET ASSETS:
Beginning of period 213,714,544 172,425,395
End of period (including
undistributed net
investment income of $0 and
$86,568, respectively) $ 381,477,836 $ 213,714,544

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) 1

<TABLE>

PERIOD
ENDED
YEAR ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31,
DECEMBER 31, 2
1999 3 1998 1997 1996 4
1995 1994
<S> <C> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.73 $20.08 $16.17 $14.60
$11.47 $11.90
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.09 0.09 0.04
0.18 0.20
Net realized and unrealized gain
on investments 7.46 1.01 4.85 1.89
4.07 (0.24)
TOTAL FROM INVESTMENT OPERATIONS 7.52 1.10 4.94 1.93
4.25 (0.04)
LESS DISTRIBUTIONS:
Distributions from net investment
income (0.07) (0.12) (0.11) (0.03)
(0.18) (0.19)
Distributions from net realized gain
on investments (0.82) (2.33) (0.92) (0.33)
(0.94) (0.20)
TOTAL DISTRIBUTIONS (0.89) (2.45) (1.03) (0.36)
(1.12) (0.39)
NET ASSET VALUE, END OF PERIOD $25.36 $18.73 $20.08 $16.17
$14.60 $11.47
TOTAL RETURN 5 41.17% 6.23% 32.10% 13.36%
37.17% (0.30%)

RATIOS TO AVERAGE NET ASSETS:
Expenses 6 1.27% 1.31% 1.30% 1.50% 7
1.23% 1.15%
Net investment income 6 0.26% 0.42% 0.78% 0.04% 7
1.14% 1.63%
Expenses (after waivers) 1.27% 1.29% 1.23% 1.23% 7
1.08% 1.15%
Net investment income (after waivers) 0.26% 0.44% 0.85% 0.31% 7
1.29% 1.63%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $262,083 $158,587 $148,175 $108,804
$98,200 $81,377
Portfolio turnover 55% 68% 85% 79%
81% 23%

</TABLE>

1 All years prior to 1998 have been restated to reflect a 6-for-1 stock split
effective as of October 29, 1997.

2 Amounts presented prior to January 1, 1996 represent results of operations for
Federated Exchange Fund, Ltd.

3 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

4 Reflects operations for the period from January 1, 1996 (start of business) to
October 31, 1996.

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) 1

<TABLE>

PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31,
1999 2 1998 1997 1996 3
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $18.62 $20.04 $16.12 $14.70
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (net
operating loss) (0.07) (0.03) 0.12 (0.04) 4
Net realized and
unrealized gain on
investments 7.36 0.96 4.72 1.80
TOTAL FROM INVESTMENT
OPERATIONS 7.29 0.93 4.84 1.76
LESS DISTRIBUTIONS:
Distributions from net
investment income - (0.02) - (0.01)
Distributions from net
realized gain on
investments (0.82) (2.33) (0.92) (0.33)
TOTAL DISTRIBUTIONS (0.82) (2.35) (0.92) (0.34)
NET ASSET VALUE, END OF
PERIOD $25.09 $18.62 $20.04 $16.12
TOTAL RETURN 5 40.12% 5.20% 31.65% 12.00%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 2.02% 2.06% 2.04% 2.25% 7
Net investment income (net
operating loss) 6 (0.49%) (0.33%) 0.01% (0.63%) 7
Expenses (after waivers) 2.02% 2.04% 1.98% 1.98% 7
Net investment income (net
operating loss)
(after waivers) (0.49%) (0.31%) 0.07% (0.36%) 7
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $106,528 $49,242 $21,636 $6,369
Portfolio turnover 55% 68% 85% 79%

</TABLE>

1 All years prior to 1998 have been restated to reflect a 6-for-1 stock split
effective as of October 29, 1997.

2 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

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

4 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.

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) 1

<TABLE>

PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31,
1999 2 1998 1997 1996 3
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $18.61 $19.95 $16.13 $14.70
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (net
operating loss) (0.07) (0.04) 0.13 (0.04) 4
Net realized and
unrealized gain on
investments 7.35 1.05 4.61 1.81
TOTAL FROM INVESTMENT
OPERATIONS 7.28 1.01 4.74 1.77
LESS DISTRIBUTIONS:
Distributions from net
investment income - (0.02) - (0.01)
Distributions from net
realized gain on
investments (0.82) (2.33) (0.92) (0.33)
TOTAL DISTRIBUTIONS (0.82) (2.35) (0.92) (0.34)
NET ASSET VALUE, END OF
PERIOD $25.07 $18.61 $19.95 $16.13
TOTAL RETURN 5 40.09% 5.67% 30.90% 12.05%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 2.02% 2.06% 2.04% 2.25% 7
Net investment income (net
operating loss) 6 (0.49%) (0.33%) 0.02% (0.64%) 7
Expenses (after waivers) 2.02% 2.04% 1.98% 1.98% 7
Net investment income (net
operating loss) (after
waivers) (0.49%) (0.31%) 0.08% (0.37%) 7
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $12,866 $5,885 $2,614 $710
Portfolio turnover 55% 68% 85% 79%

</TABLE>

1 All years prior to 1998 have been restated to reflect a 6-for-1 stock split
effective as of October 29, 1997.

2 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

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

4 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.

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

7 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

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 six 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 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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 under criteria established by the Trustees. 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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>

YEAR ENDED OCTOBER 31 1999 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,965,271 $ 89,316,033 3,215,849 $ 59,576,047
Shares issued to
shareholders in payment of
distributions declared 167,223 3,486,237 366,688 6,503,204
Shares redeemed (2,264,150) (48,870,735) (2,493,386) (46,093,087)
NET CHANGE RESULTING FROM
CLASS A SHARE
TRANSACTIONS 1,868,344 $ 43,931,535 1,089,151 $ 19,986,164

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,203,365 $ 50,445,518 1,733,696 $ 33,737,245
Shares issued to
shareholders in payment of
distributions declared 100,461 2,066,497 144,522 2,550,992
Shares redeemed (702,195) (15,802,656) (312,900) (5,988,176)
NET CHANGE RESULTING FROM
CLASS B SHARE
TRANSACTIONS 1,601,631 $ 36,709,359 1,565,318 $ 30,300,061

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,323,919 $ 30,746,736 224,084 $ 4,283,086
Shares issued to
shareholders in payment of
distributions declared 11,597 238,334 16,382 288,980
Shares redeemed (1,138,515) (26,458,290) (55,205) (1,008,072)
NET CHANGE RESULTING FROM
CLASS C SHARE
TRANSACTIONS 197,001 $ 4,526,780 185,261 $ 3,563,994
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 3,666,976 $ 85,167,674 2,839,730 $ 53,850,219

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 Adviser may voluntarily choose
to waive any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.

ADMINISTRATIVE FEE

DISTRIBUTION SERVICES FEE

<TABLE>

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

</TABLE>

For the year ended October 31, 1999, Class A Shares did not incur a distribution
services fee.

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary 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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 226,072,399
Sales $ 154,914,916

</TABLE>

YEAR 2000 (UNAUDITED)

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.

CHANGE OF INDEPENDENT AUDITORS (UNAUDITED)

On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit
Committee, requested and subsequently accepted the resignation of Ernst & Young
LLP ("E&Y") as the Fund's independent auditors. E&Y's reports on the Fund's
financial statements for the fiscal years ended October 31, 1997 and October 31,
1998 contained no adverse opinion or disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i)
there were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of E&Y, would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports on the financial statements for such years; and (ii) there were no
reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS

AND THE SHAREHOLDERS OF FEDERATED CAPITAL APPRECIATION FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Federated Capital Appreciation Fund (the
"Fund") as of October 31, 1999, and the related statement of operations,
statement of changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1998, and the financial highlights for the periods presented prior to and
including October 31, 1998 were audited by other auditors whose report dated
December 21, 1998, expressed an unqualified opinion on those statements.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Capital
Appreciation Fund as of October 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the year then ended
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

December 17, 1999

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

WILLIAM J. COPELAND

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

GLEN R. JOHNSON

President

J. THOMAS MADDEN

Chief Investment Officer

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT

Federated Capital Appreciation Fund

Established 1977

23RD ANNUAL REPORT
AS OF OCTOBER 31, 1999

[Graphic]
Federated
Federated Capital Appreciation Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172701

Cusip 314172800

Cusip 314172883

G01649-04 (12/99)

[Graphic]

GLEN R. JOHNSON
President
Federated Communications Technology Fund

President's Message

Dear Fellow Shareholder:

Federated Communications Technology Fund was created on September 21, 1999, and
I am pleased to present its first Annual Report. The fund has investments in
over 90 corporations - some easily recognizable names and even more corporations
that are not readily known to many investors.

As of October 31, 1999, the fund's net assets totaled $55.9 million. Federated
Communications Technology Fund gives investors the opportunity to participate in
a revolution, as developments in communications technology have already
profoundly changed the way individuals live and work. The companies behind these
developments represent significant and sophisticated investment opportunities.

This report covers the short period from September 21, 1999, the fund's date of
inception, through October 31, 1999. It begins with an interview with the fund's
portfolio managers, James E. Grefenstette, Vice President, and Trent E. Nevills,
Assistant Vice President, both of Federated Investment Management Company.
Following their discussion, which covers the fund's objective and strategy and
market conditions, are two additional items of shareholder interest. First is a
complete listing of the fund's investments, and second is the publication of the
fund's financial statements. I urge you to review the fund's holdings and note
its broad diversification.

To give you a balanced, risk-managed portfolio, this fund invests in more than
90 leading companies across four key areas of communications technology:

INFRASTRUCTURE companies involved in the enabling technologies that make
possible the appliances and services we see and use;

INTERFACE companies involved in appliances that consumers and businesses use
to access information and respond to demands;

SERVICE companies that develop and own links that move data with unprecedented
economy and speed; and

APPLICATIONS companies that provide content such as entertainment, information,
e-commerce, and voicemail.

While many of the portfolio's holdings are familiar to you - such as Apple
Computer, Microsoft, Motorola, Nokia, Sprint, and Yahoo - undoubtedly, many more
of the holdings will be unfamiliar to you. Please take this opportunity to read
the discussion with the portfolio managers, which may familiarize you
with how the fund's managers select companies.

Although this report covers approximately a five-week time frame, the fund's
performance was highly positive. Please note, however that when it comes to
performance, any equity fund that invests in a particular sector is subject to
greater volatility than a broad equity fund that invests in a wide range of
sectors. Please remember that the true measure of this fund's performance is
clearly in years rather than months. There will be periods of fluctuation, both
with negative and positive returns.

Individual share class total return performance for the period from September
21, 1999, the fund's inception date, through October 31, 1999, follows. 1

<TABLE>
<CAPTION>
TOTAL RETURN NET ASSET VALUE INCREASE <S> <C> <C> Class A
Shares 24.20% $10.00 to $12.42 = 24% Class B Shares 24.20% $10.00 to $12.42 =
24% Class C Shares 24.20% $10.00 to $12.42 = 24% </TABLE>

We plan to keep you up-to-date as to the details of your investment. You may add
to your investment account at any time and thus increase the number of shares
you own for future growth potential. We recommend that you add to your account
on a regular basis to take advantage of price fluctuations and dollar-cost
averaging. 2

Thank you for joining the growing number of investors who have shown their
confidence in this exciting sector and in our firm by placing $56 million in
Federated Communications Technology Fund.

Sincerely,

[Graphic]

Glen R. Johnson
President
December 15, 1999

1 Performance quoted is based on net asset value, reflects past performance and
is no guarantee 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
(i.e., less any applicable sales charge), for Class A, B, and C Shares were
17.39%, 18.70%, and 23.20%, respectively.

2 Systematic investing does not assure a profit or protect against loss in
declining markets. Because dollar-cost-averaging involves continuous investment
regardless of fluctuating price levels, investors should consider their
financial ability to continue purchases during periods of low price levels.

[Graphic]

JAMES E. GREFENSTETTE, CFA
Vice President
Federated Investment Management Company

[Graphic]

TRENT E. NEVILLS
Assistant Vice President
Federated Investment Management Company

Investment Review

THIS FUND INVESTS IN THE STOCKS OF COMMUNICATIONS TECHNOLOGY AND
COMMUNICATIONS SERVICES COMPANIES THAT ARE REVOLUTIONIZING OUR SOCIETY. WHAT
DOES THAT MEAN TO INVESTORS?

We manage the fund to give investors the opportunity to participate in what may
be the greatest growth opportunity that the market is likely to see as we enter
the next century.

Communications and technology are the leading investment themes of this
information age. Thanks to rapid and dramatic advances in technology, we are
moving to a single global network-making communication possible from anyone,
anywhere, to any device, at any time. Advances in infrastructure, interfaces and
services are causing a dramatic drop in the cost of creating, sending and
storing information while vastly increasing its availability. Specifically, as
market opportunities continue to unfold, we will witness exciting introductions
such as the wireless Internet, increased bandwidth to the home, and the
much-talked-about "information at your fingertips."

Behind these advances-which deserve the term "revolutionary"-are companies that
represent new investment opportunities on a daily basis.

WHAT TYPE OF COMPANIES DOES THE FUND INVEST IN?

The fund invests across the communications technology spectrum-unlike
restrictively focused Internet funds. We narrowed the +600 companies in this
universe to an investable universe of about 360, from which we target about
60-90 holdings. These companies are incorporated in a template of the following
four distinct aspects of communications technology:

* INFRASTRUCTURE: Companies involved in the enabling technologies-hardware,
software, semi-conductors, fiber optics, etc.-that make possible the appliances
and services we see and use.

* INTERFACES: These companies are involved in appliances - telephones,
personal computers, cable set-top boxes, etc. - that consumers and businesses
use to access information and respond to demands.

* SERVICES: Companies involved in the services area develop and own links such
as long-distance telephone carriers - that move data with unprecedented economy
and speed among the various communications appliances.

* APPLICATIONS: These firms provide content - such as entertainment,
information, e-commerce, voicemail, etc.

HOW HAS THE COMMUNICATIONS TECHNOLOGY SECTOR PERFORMED IN THE PAST?

The fund references the following benchmarks-the Merrill Lynch Technology 100
Index and the NASDAQ Telecommunications Index. These benchmarks are referenced
because no single index combines the technology and telecommunications sectors.
The performance history of each index compares very favorably with the Standard
& Poor's ("S&P") 500 Index. 1

<TABLE>

ANNUALIZED TOTAL RETURNS AS OF OCTOBER 31, 1999
YEAR-TO- ONE THREE FIVE TEN
DATE YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C>
Merrill Lynch Technology 100 Index 57.12% 111.77% 44.21% 37.88% 27.97%
NASDAQ Telecom-munications Index 48.14% 86.65% 53.06% 34.69% 19.29%
S&P 500 Index 12.03% 25.68% 26.52% 26.01% 17.80%

</TABLE>

THIS FUND IS UNDERSTANDABLY A LONG-TERM INVESTMENT, BUT HOW HAS IT PERFORMED
SINCE ITS INCEPTION DATE OF SEPTEMBER 21, 1999 THROUGH OCTOBER 31, 1999?

The fund has produced a very strong total return. The total return, based on
net asset value, was 24.20% for Class A, B, and C Shares. 2

1 Past performance does not guarantee future results. The Merrill Lynch 100
Technology Index is an unmanaged, equally weighted index of the 100 largest
technology stocks, as defined by market capitalization and trading volume. The
NASDAQ Telecommunications Index is an unmanaged capitalization- weighted index
designed to measure the performance of all NASDAQ stocks in the
telecommunications sector. The S&P 500 Index is an unmanaged index comprising
stocks in industry, transportation, financial and public utility companies.
Investments may not be made in an index.

WHAT IS YOUR PROCESS FOR SELECTING AND MANAGING THE FUND'S HOLDINGS?

To ensure that we maintain adequate and responsible exposure to this exciting
sector, we have developed a very interesting process for this fund.

First, we have created a template that represents a communications system and
the companies that deliver those products and services. We further break that
exposure down into 26 subcategories, and then treat the resulting +300
securities as our benchmark. Initially, we have heavily weighted the fund toward
infrastructure and the appliances used in communicating (notably cellular
telephones and wireless components). We have rounded the portfolio out with
next-generation service providers offering high bandwidth data- oriented
services.

Our second innovation is the degree to which we have integrated the quantitative
with the fundamental. We developed our own valuation system that interfaces with
the portfolio management system, resulting in a carefully balanced, risk-managed
portfolio. One feature of the portfolio that we hope to demonstrate as we move
forward is its inherent ability to take advantage of volatility. Communications
technology is certainly a segment with a lot of volatility and to turn that into
an asset is something we are very focused upon.

TURNING SPECIFICALLY TO VALUATION, HOW DO YOU DETERMINE WHAT COMPANIES OFFER THE
BEST CURRENT VALUE?

We select companies that are: positioned in the industries where they want
long-term exposure; selling at attractive relative and absolute valuation; and
bringing positive risk/return characteristics to the portfolio. We believe that
our system of decision-making can position the fund to outperform in both up and
down markets.

OF COURSE, THIS SECTOR ALSO INVOLVES THE POTENTIAL FOR RISK. HOW DO YOU
ATTEMPT TO MINIMIZE THE RISK LEVEL?

We strive to minimize risk through a disciplined, proprietary approach and by
diversifying across the entire communications technology spectrum, both
domestically and internationally.

HOW WAS THE FUND POSITIONED ACROSS THESE FOUR INDUSTRIES-INFRASTRUCTURE,
INTERFACES, SERVICES, AND APPLICATIONS-AS OF OCTOBER 31, 1999?

The portfolio was allocated as follows:

[Graphic]

As we have discussed, the fund currently overweights the infrastructure
industry-such as our holdings in INKTOMI, SUN MICROSYSTEMS and BROADCOM-and
underweights the applications industry-such as YAHOO and AMERICA ONLINE.
However, the fund is price sensitive and will always own what we believe
represents the best current value.

CAN YOU GIVE SHAREHOLDERS AN EXAMPLE OF A KEY HOLDING IN EACH OF THE FOUR
INDUSTRIES?

Many shareholders will immediately recognize what these names stand for.

APPLICATIONS

AMERICA ONLINE, INC. (AOL): (1.32% of net assets): In less than a decade, AOL
has become part of our popular culture. More than 20 million people subscribe
to this on-line giant.

INTERFACES

NOKIA CORP. (1.12% of net assets): This Finnish company that dates back to
1865 is a leading cellular telephone maker that is extending its lead into
the next generation.

INFRASTRUCTURE

SUN MICROSYSTEMS, INC. (1.12% of net assets): A manufacturer of superchips,
this company is one of the Internet's first and most successful visionaries.

SERVICES

SPRINT PCS CORP. (1.13% of net assets): Sprint is a wireless service provider
that is using, today, the technology that will increasingly be used for high-
speed wireless data in the future.

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF OCTOBER 31, 1999?

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NET ASSETS
<S> <C>
RF Micro Devices, Inc. 1.93%
Maker Communications, Inc. 1.82%
Citrix Systems, Inc. 1.74%
PMC-Sierra, Inc. 1.70%
MMC Networks, Inc. 1.54%
Vitesse Semiconductors, Corp. 1.53%
F5 Networks, Inc. 1.51%
Broadcom Corp. 1.51%
Inktomi Corp. 1.38%
Visual Networks, Inc. 1.37%
TOTAL 16.03%

</TABLE>

FINALLY, HOW DOES THIS FUND FIT INTO AN INVESTOR'S PORTFOLIO?

The potential opportunity related to communications and technology stocks is so
great that most equity investors should establish a specific allocation to this
sector. Many equity investors may have some communications technology exposure
by owning broad-based equity funds. However, this fund offers a single-decision
way to establish a well-diversified position, potentially manage risk, and make
the most of opportunities that should continue to revolutionize our society into
the new millennium.

Federated Communications Technology Fund - Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Communications Technology Fund (Class A Shares) (the "Fund") from
September 21, 1999 (start of performance) to October 31, 1999 compared to the
Merrill Lynch 100 Technology Index (ML100TI),2 NASDAQ Telecommunications Index
(NASDAQTI)2 and the Lipper Science and Technology Average (LSTA).3

<TABLE>

AVERAGE ANNUAL TOTAL RETURN 4 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C>
Start of Performance (9/21/99) (Cumulative) 17.39%

</TABLE>

[Graphic SEE APPENDIX]

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

1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The ML100TI, NASDAQTI and the LSTA have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.

2 The ML100TI and NASDAQTI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. Indexes are unmanaged.

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

4 Total return quoted reflects all applicable sales charges.

Federated Communications Technology Fund - Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Communications Technology Fund (Class B Shares) (the "Fund") from
September 21, 1999 (start of performance) to October 31, 1999 compared to the
Merrill Lynch 100 Technology Index (ML100TI),2 NASDAQ Telecommunications Index
(NASDAQTI)2 and the Lipper Science and Technology Average (LSTA).3

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN 4 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C>
Start of Performance (9/21/99) (Cumulative) 18.70%
</TABLE>

[Graphic - SEE APPENDIX]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects the maximum 5.50% contingent deferred sales charge on any
redemption less than one year from purchase date. The Fund's performance assumes
the reinvestment of all dividends and distributions. The ML100TI, NASDAQTI and
the LSTA have been adjusted to reflect reinvestment of dividends on securities
in the index and the average.

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

Federated Communications Technology Fund - Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Communications Technology Fund (Class C Shares) (the "Fund") from
September 21, 1999 (start of performance) to October 31, 1999 compared to the
Merrill Lynch 100 Technology Index (ML100TI),2 NASDAQ Telecommunications Index
(NASDAQTI)2 and the Lipper Science and Technology Average (LSTA).3

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN 4 FOR THE PERIOD ENDED OCTOBER 31, 1999 <S> <C>
Start of Performance (9/21/99) (Cumulative) 23.20%
</TABLE>

[Graphic - SEE APPENDIX]

1 Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be imposed on any redemption less than
one year from purchase date. The Fund's performance assumes the reinvestment of
all dividends and distributions. The ML100TI, NASDAQTI and the LSTA have been
adjusted to reflect reinvestment of dividends on securities in the index and the
average.

4 Total return quoted reflects all applicable sales charges.

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-93.0%
BROADCASTING (T.V., RADIO
& CABLE)-1.9%
13,100 Comcast Corp., Class A $ 551,837
10,400 1 RCN Corp. 497,900
TOTAL 1,049,737
CELLULAR/WIRELESS
TELECOMMS-4.8%
13,500 1 AirGate PCS, Inc. 675,000
5,700 1 NEXTEL Communications,
Inc., Class A 491,269
7,600 1 Sprint Corp. (PCS Group) 630,325
4,700 1 Triton PCS Holdings, Inc.,
Class A 165,675
7,200 1 VoiceStream Wireless Corp. 711,000
TOTAL 2,673,269
COMMUNICATIONS EQUIPMENT-
9.4%
10,500 AudioCodes Ltd. 635,250
10,700 1 C-Cube Microsystems, Inc. 476,150
7,800 1 Copper Mountain Networks,
Inc. 575,250
11,400 1 Metromedia Fiber Network,
Inc., Class A 376,913
5,100 Motorola, Inc. 496,931
5,400 Nokia Oyj Corp., Class A,
ADR 624,038
9,600 Nortel Networks Corp. 594,600
2,400 1 Qualcomm, Inc. 534,600
1,900 1 Sycamore Networks, Inc. 408,500
8,600 1 Tellabs, Inc. 543,950
TOTAL 5,266,182
COMPUTERS (HARDWARE)-5.6%
20,700 1 Ancor Communications, Inc. 655,931
6,100 1 Apple Computer, Inc. 488,762
30,200 1 Computer Network
Technology 485,087
27,100 1 MMC Networks, Inc. 863,813
5,900 1 Sun Microsystems, Inc. 624,294
TOTAL 3,117,887
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
COMPUTERS (NETWORKING)-
5.0%
8,600 1 Alteon Websystems, Inc. $ 617,050
8,800 1 Cisco Systems, Inc. 651,200
3,700 1 Foundry Networks, Inc. 701,150
2,000 1 JNI Corp. 106,875
1,500 1 Juniper Networks, Inc. 413,438
1,500 1 Phone.com, Inc. 308,250
TOTAL 2,797,963
COMPUTERS (PERIPHERALS)-
2.8%
6,000 1 EMC Corp. Mass 438,000
6,100 1 Lexmark Intl. Group, Class A
476,181
8,600 1 Network Appliance, Inc. 636,400
TOTAL 1,550,581
COMPUTERS
SOFTWARE/SERVICES-29.4%
12,300 1 Active Software, Inc. 445,106
9,100 1 Aether Systems, Inc. 633,019
5,700 1 America Online, Inc. 739,219
15,500 1 Bluestone Software, Inc. 571,562
8,100 1 Broadvision, Inc. 596,362
15,200 1 Citrix Systems, Inc. 974,700
18,500 1 Concentric Network Corp. 474,062
7,000 1 Crossroads Systems, Inc. 497,875
23,400 1 Daleen Technolgies, Inc. 687,375
7,000 1 Exodus Communications,
Inc. 602,000
6,100 1 F5 Networks, Inc. 846,375
11,900 1 ITXC Corp. 538,475
7,600 1 Inktomi Corp. 770,925
3,000 1 Intertrust Technologies
Corp. 163,500
5,900 1 Kana Communications, Inc. 496,338
9,800 1 Keynote Systems, Inc. 444,675
6,500 1 Microsoft Corp. 601,656
31,000 1 Novell, Inc. 621,938
12,900 1 PsiNet, Inc. 464,400
4,600 1 RealNetworks, Inc. 504,563
4,300 1 Redback Networks, Inc. 496,650
12,800 1 USWeb Corp. 496,000
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
COMPUTERS
SOFTWARE/SERVICES-
CONTINUED
15,500 1 Verio, Inc. $ 578,344
4,000 1 Verisign, Inc. 494,000
5,300 1 Veritas Software Corp. 571,738
37,200 1 Viador, Inc. 664,950
18,400 1 Visual Networks, Inc. 765,900
4,000 1 Yahoo, Inc. 716,250
TOTAL 16,457,957
ELECTRONICS -
SEMICONDUCTORS-20.5%
6,200 1 Applied Micro Circuits
Corp. 482,437
16,100 1 Atmel Corp. 621,862
6,600 1 Broadcom Corp. 843,562
6,900 1 Conexant Systems, Inc. 644,287
17,200 1 Cree Research, Inc. 734,225
16,500 1 Hi/fn, Inc. 599,156
3,700 1 JDS Uniphase Corp. 617,438
13,500 1 Kopin Corp. 567,000
12,100 1 LSI Logic Corp. 643,569
10,600 Linear Technology Corp. 741,338
38,100 1 Maker Communications, Inc. 1,016,794
10,100 1 PMC-Sierra, Inc. 951,925
6,400 1 Qlogic Corp. 666,400
20,900 1 RF Micro Devices, Inc. 1,078,963
18,600 1 Vitesse Semiconductor
Corp. 853,275
5,400 1 Xilinx, Inc. 424,575
TOTAL 11,486,806
EQUIPMENT
(SEMICONDUCTORS)-0.7%
5,400 1 ASM Lithography Holding
NV, ADR 392,175
METALS MINING-0.9%
7,000 1 Level 3 Communications,
Inc. 478,625
RETAIL (HOME SHOPPING)-
0.5%
20,000 1 iGo Corp. 282,500
SERVICES
(ADVERTISING/MARKETING)-
0.9%
3,700 1 DoubleClick, Inc. 518,000
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS-continued
SERVICES (COMMERCIAL &
CONSUMER)-2.2%
6,900 1 Gemstar International
Group Ltd. $ 599,437
21,600 1 MIPS Technologies, Inc. 623,700
TOTAL 1,223,137
TELEPHONE LONG DISTANCE-
8.4%
13,600 1 Adelphia Business
Solutions, Inc. 385,900
6,500 1 Allegiance Telecom, Inc. 448,500
13,100 1 Covad Communications
Group, Inc. 628,800
7,600 1 Internap Network Services
Corp. 702,050
20,500 1 MGC Communications, Inc. 563,750
8,900 1 NEXTLINK Communications,
Inc. 532,331
20,800 1 Northpoint Communications
Group, Inc. 557,700
10,800 1 Qwest Communications
International, Inc. 388,800
15,000 1 Williams Communications
Group, Inc. 478,125
TOTAL 4,685,956
TOTAL COMMON STOCKS
(IDENTIFIED COST
$43,877,730) 51,980,775
REPURCHASE AGREEMENT-4.0%
$2,245,000 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (at amortized
cost) 2,245,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$46,122,730) 2 $ 54,225,775

</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $46,560,219. The
net unrealized appreciation of investments on a federal tax basis amounts to
$7,665,556 which is comprised of $8,385,808 appreciation and $720,252
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($55,929,142) at October 31, 1999.

The following acronym is used throughout this portfolio:

ADR -American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$46,122,730 and tax cost
$46,560,219) $ 54,225,775
Cash 50,443
Income receivable 1,259
Receivable for investments
sold 497,801
Receivable for shares sold 6,078,295
Prepaid expenses 124,566
TOTAL ASSETS 60,978,139
LIABILITIES:
Payable for investments
purchased $ 5,013,933
Payable for shares
redeemed 9,903
Accrued expenses 25,161
TOTAL LIABILITIES 5,048,997
Net assets for 4,502,693
shares outstanding $ 55,929,142
NET ASSETS CONSIST OF:
Paid in capital $ 47,782,369
Net unrealized
appreciation of
investments 8,103,045
Accumulated net realized
gain on investments 43,728
TOTAL NET ASSETS $ 55,929,142
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
CLASS A SHARES:
Net Asset Value Per Share
($13,892,678 / 1,118,474
Shares Outstanding) $12.42
Offering Price Per Share
(100/94.50 of $12.42) 1 $13.14
Redemption Proceeds Per
Share $12.42
CLASS B SHARES:
Net Asset Value Per Share
($34,771,465 / 2,799,346
Shares Outstanding) $12.42
Offering Price Per Share $12.42
Redemption Proceeds Per
Share (94.50/100 of
$12.42) 1 $11.74
CLASS C SHARES:
Net Asset Value Per Share
($7,264,999 / 584,873
Shares Outstanding) $12.42
Offering Price Per Share $12.42
Redemption Proceeds Per
Share (99/100 of $12.42) $12.30

</TABLE>

1 See "What Do Shares Cost?" in the prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED OCTOBER 31, 1999 1

<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 260
Interest 11,397
TOTAL INCOME 11,657
EXPENSES:
Investment advisory fee $ 24,748
Administrative personnel
and services fee 20,781
Custodian fees 635
Transfer and dividend
disbursing agent fees and
expenses 6,338
Directors'/Trustees' fees 750
Auditing fees 10,000
Legal fees 500
Portfolio accounting fees 11,331
Distribution services fee-
Class B Shares 14,724
Distribution services fee-
Class C Shares 3,911
Shareholder services fee-
Class A Shares 2,038
Shareholder services fee-
Class B Shares 4,908
Shareholder services fee-
Class C Shares 1,304
Share registration costs 19,234
Printing and postage 7,500
Miscellaneous 35
TOTAL EXPENSES 128,737
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment
advisory fee $ (24,748)
Reimbursement of other
operating expenses (45,612)
TOTAL WAIVERS AND
REIMBURSEMENTS (70,360)
Net expenses 58,377
Net operating loss (46,720)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 90,448
Net change in unrealized
appreciation of
investments 8,103,045
Net realized and
unrealized gain on
investments 8,193,493
Change in net assets
resulting from operations $ 8,146,773

</TABLE>

1 For the period from September 21, 1999 (date of initial public investment) to
October 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (46,720)
Net realized gain on
investments ($527,937 as
computed for federal tax
purposes) 90,448
Net change in unrealized
appreciation 8,103,045
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 8,146,773
SHARE TRANSACTIONS:
Proceeds from sale of
shares 51,645,713
Cost of shares redeemed (3,863,344)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 47,782,369
Change in net assets 55,929,142
NET ASSETS:
Beginning of period -
End of period $ 55,929,142

</TABLE>

1 For the period from September 21, 1999 (date of initial public investment) to
October 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net operating loss (0.01) 2
Net realized and unrealized gain on investments 2.43
TOTAL FROM INVESTMENT OPERATIONS 2.42
NET ASSET VALUE, END OF PERIOD $12.42
TOTAL RETURN 3 24.20%

RATIOS TO AVERAGE NET ASSETS:
Expenses 4 3.34% 5
Net operating loss 4 (2.99%) 5
Expenses (after waivers and reimbursements) 1.20% 5
Net operating loss (after waivers and reimbursements) (0.85%) 5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $13,893
Portfolio turnover 36%

</TABLE>

1 For the period from September 21, 1999 (date of initial public investment) to
October 31, 1999.

2 Per share numbers have been calculated using the average shares method, which
more appropriately represents the per share data for the period since the use of
the undistributed income method did not accord with the results of operations.

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

4 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net operating loss (0.02) 2
Net realized and unrealized gain on investments 2.44
TOTAL FROM INVESTMENT OPERATIONS 2.42
NET ASSET VALUE, END OF PERIOD $12.42
TOTAL RETURN 3 24.20%

RATIOS TO AVERAGE NET ASSETS:
Expenses 4 4.09% 5
Net operating loss 4 (3.74%) 5
Expenses (after waivers and reimbursements) 1.95% 5
Net operating loss (after waivers and reimbursements) (1.60%) 5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $34,771
Portfolio turnover 36%

</TABLE>

1 For the period from September 21, 1999 (date of initial public investment) to
October 31, 1999.

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

4 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

</TABLE>

1 For the period September 21, 1999 (date of initial public investment) to
October 31, 1999.

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

4 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

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 six portfolios. The financial statements included
herein are only those of Federated Communications Technology 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

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 tax treatments for net
operating losses. The following reclassifications have been made to the
financial statements.

<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED
UNDISTRIBUTED NET NET REALIZED
INVESTMENT INCOME GAIN (LOSS)
<S> <C>
$46,720 ($46,720)

</TABLE>

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

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>
PERIOD ENDED OCTOBER 31 1999 1
CLASS A SHARES: SHARES AMOUNT
<S> <C> <C>
Shares sold 1,427,902 $ 14,968,937
Shares redeemed (309,428) (3,100,338)
NET CHANGE RESULTING FROM
CLASS A SHARE
TRANSACTIONS 1,118,474 $ 11,868,599

<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
CLASS B SHARES: SHARES AMOUNT
<S> <C> <C>
Shares sold 2,827,718 $ 30,112,440
Shares redeemed (28,372) (304,825)
NET CHANGE RESULTING FROM
CLASS B SHARE
TRANSACTIONS 2,799,346 $ 29,807,615

<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
CLASS C SHARES: SHARES AMOUNT
<S> <C> <C>
Shares sold 626,101 $ 6,564,336
Shares redeemed (41,228) (458,181)
NET CHANGE RESULTING FROM
CLASS C SHARE
TRANSACTIONS 584,873 $ 6,106,155
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 4,502,693 $ 47,782,369

</TABLE>

1 For the period from September 21, 1999 (date of initial public investment) to
October 31, 1999.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 Adviser may voluntarily choose
to waive any portion of its fee and/or reimburse certain operating expenses of
the Fund. The Adviser can modify or terminate this voluntary waiver and/or
reimbursement at any time at its sole discretion.

ADMINISTRATIVE FEE

DISTRIBUTION SERVICES FEE

<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%

</TABLE>

For the period ended October 31, 1999, Class A Shares did not incur a
distribution services fee.

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1999, were as follows:

<TABLE>
<CAPTION>
<S> <C>
Purchases $ 56,813,384
Sales $ 13,026,103

</TABLE>

YEAR 2000 (UNAUDITED)

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.

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS AND SHAREHOLDERS OF

FEDERATED COMMUNICATIONS TECHNOLOGY FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Communications Technology Fund (the
"Fund") as of October 31, 1999, and the related statement of operations,
statement of changes in net assets and the financial highlights for the period
from September 21, 1999 (the date of initial public investment) to October 31,
1999. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated
Communications Technology Fund as of October 31, 1999, the results of its
operations, the changes in its net assets and its financial highlights for the
period from September 21, 1999 (the date of initial public investment) to
October 31, 1999 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

December 17, 1999

Trustees

JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
WILLIAM J. COPELAND
JOHN F. CUNNINGHAM
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH

Officers

JOHN F. DONAHUE
Chairman

GLEN R. JOHNSON
President

J. THOMAS MADDEN
Chief Investment Officer

J. CHRISTOPHER DONAHUE
Executive Vice President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

ANNUAL REPORT
AS OF OCTOBER 31, 1999

Federated Communications Technology Fund

Established 1999

1ST ANNUAL REPORT

[Graphic]
Federated
Federated Communications Technology Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172818
Cusip 314172792
Cusip 314172784
G02681-04 (12/99)

[Graphic]

ANNUAL REPORT

[Graphic]

GLEN R. JOHNSON

President

Federated Growth Strategies Fund

President's Message

Dear Valued Shareholder:

Federated Growth Strategies Fund was created in 1984, and I am pleased to
present its 15th Annual Report. As of October 31, 1999, the fund's total net
assets of $984 million were invested in 112 common stocks of mid-cap to
large-cap corporations. The fund has a median market cap of approximately $10.5
billion.

This report covers the 12-month reporting period from November 1, 1998 through
October 31, 1999. It begins with an interview with the fund's portfolio manager,
James E. Grefenstette, Vice President of Federated Investment Management
Company. 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 stock holdings, and
third is the publication of the fund's financial statements.

Federated Growth Strategies Fund is managed to pursue long-term growth through a
highly diversified portfolio of mid-cap and large-cap stocks selected for their
strong price and earnings momentum. The fund's portfolio included common stocks
and convertible securities representing 11 industry sectors with names that
investors recognize immediately-America Online, American Express, Best Buy,
Bristol-Myers Squibb, General Electric, Home Depot, Keebler Foods, MCI Worldcom,
Procter & Gamble, Sprint, and Wal-Mart, to name a few.

During the reporting period, the stock market's upward momentum-and daily
volatility-continued, led by large-cap growth stocks and Internet stocks. Thanks
to both sector weightings and security selection, it was a truly outstanding
year for shareholders of Federated Growth Strategies Fund. The fund's returns
were far superior to the 43.90% return of the fund's peer group, the Lipper
Growth Funds Average, as well as the 25.68% return of the Standard and Poor's
("S&P") 500 Index. 1

1 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category indicated. Lipper returns do not take sales charges into account.
The S&P 500 Index is an unmanaged index comprised of common stocks in industry,
transportation, finance and public utility companies. Investments cannot be made
in an index.

Individual share class total return performance for the 12-month reporting
period follows. 2

<TABLE>

TOTAL RETURN NET ASSET VALUE INCREASE <S> <C> <C> Class A
Shares 60.22% $23.53 to $37.70 = 60% Class B Shares 59.00% $22.88 to $36.38 =
59% Class C Shares 59.08% $23.02 to $36.62 = 59%

</TABLE>

Of course, we see significant day-to-day volatility in the stock market. I
strongly urge you to consider taking advantage of share price fluctuations in
volatile markets by adding to your account on a regular basis. One way to add to
your account is through a systematic investment program, whereby a specific
amount is withdrawn 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. 3 Please contact your investment representative for more information,
and please note that the fund's share price has been volatile and that may make
it suitable for regular investments.

Thank you for participating in the growth and earnings opportunities of over
100 dynamic U.S. companies. As always, we welcome your comments and
suggestions.

Sincerely,

[Graphic]

Glen Johnson

President

December 15, 1999

[Graphic]

JAMES E. GREFENSTETTE, CFA

Vice President

Federated Investment Management Company

Investment Review

WHAT IS YOUR REVIEW OF THE PAST FISCAL YEAR, WHICH HAS BEEN PARTICULARLY
VOLATILE FOR INVESTORS IN THE MID-CAP TO LARGE-CAP AREAS OF THE STOCK MARKET?

The first half of the fund's fiscal year was a particularly positive period for
large-cap stocks. For the first half of the fund's fiscal year, which was the
six-month reporting period ended April 30, 1999, the S&P 500 Index produced a
return of 22.32%, while mid-cap stocks, as represented by the S&P 400 Index,
returned 18.86%. 1 Although positive, stocks were very volatile in the first
half of the year. As a credit crisis loomed-sparked by the troubles in the third
quarter of 1998 and the collapse of Long Term Capital Management-the first six
trading days of the fourth quarter of 1998 saw the S&P 500 Index decline almost
6% and the S&P 600 Small Cap Index trade off nearly 15%.1 The Federal Reserve
Board (the "Fed") then lowered rates for the second time in a month. This proved
to be a pivot point as the market took the lower rates, added liquidity, and
rallied higher into the end of the fourth quarter of 1998. Stocks staged a
narrow rally, led by growth stocks in general and technology stocks in
particular. Despite malaise outside of the U.S., however, domestic consumer
demand remained healthy, propelling the U.S. economy to continued growth.

1 The S&P 400 Index is an unmanaged index of 400 U.S. stocks selected to
represent the market size, liquidity and industry group representation of the
mid-cap market. The S&P 600 Small Cap Index consists of 600 domestic stocks that
represent the small-cap stock market. These indexes are unmanaged and
investments cannot be made in an index.

The second half of the fund's fiscal year began with quite a shakeup in
leadership for the equity markets as the Consumer Price Index for April 1999
came in higher than expected. From that point onward, inflation fears reemerged,
and investors began to focus on the continued strength of the U.S. economy as
well as signs of economic stabilization and growth worldwide. Leadership within
the equity markets rotated rapidly from large-cap "growth" stocks to small-cap
"value" stocks. Globally, equity markets generally traded up, with the emerging
markets, hit hardest in late 1997, rallying the most.

More recently, we have seen a mixture of divergent signs with regard to the
status of economic health. Global economies appeared to have bottomed, and the
U.S. economy has looked strong with employment at record levels. As a result,
the Fed has hiked interest rates twice. Concurrently, however, inflation indexes
have remained tepid, and various other economic indicators have shown some signs
of weakness. Stock markets around the world, including in the U.S., moved
generally lower as major central banks ended the monetary easing programs
started last year. With the belief that further rate hikes would not be
necessary near term, domestic equity investors returned to favoring growth
stocks over cyclicals, but did not return to their fixation with only the
largest capitalization stocks.

Overall, the 12-month reporting period ended October 31, 1999 was a strong
period for stocks, particularly large-cap stocks. The S&P 500 Index produced a
return of 25.68%, while mid-cap stocks, as represented by the S&P 400 Index,
returned 21.07%.

FEDERATED GROWTH STRATEGIES FUND RECORDED EXTREMELY STRONG TOTAL RETURNS
DURING THE REPORTING PERIOD. HOW DID THE FUND'S TOTAL RETURN COMPARE TO THAT
OF ITS PEERS?

For the fiscal year ended October 31, 1999, the fund's Class A, B, and C Shares
produced total returns of 60.22%, 59.00%, and 59.08%, respectively, based on net
asset value. 2 These returns were more than double the 25.68% return of the S&P
500 Index and far above the 43.90% total return of the fund's peer group, the
Lipper Growth Funds Average.3

WHAT ACCOUNTED FOR THE FUND'S HIGH RETURNS?

A combination of relative sector weightings and stock selection accounted for
the fund's significant outperformance.

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

Strong performing overweighted sectors at different periods included technology,
consumer cyclicals (mainly retail stocks) and health care (mainly biotech
stocks). We also avoided some troubled sectors at various periods by
underweighting pharmaceuticals within health care, consumer staples (mainly food
and household products stocks), capital goods and financials.

Exceptionally strong individual holdings were primarily in the technology sector
and included BROADCOM (0.98% of net assets), SUN MICROSYSTEMS (2.55% of net
assets), EMC (2.62% of net assets), ECHOSTAR (2.73% of net assets), QLOGIC
(0.58% of net assets), and QUALCOMM (1.83% of net assets).

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

Our recent purchases included the following:

ALTERA CORP. (0.32% of net assets): This company designs, manufactures, and
markets programmable logic devices and associated tools. It is a good value
in programmable logic devices (PLDs) with accelerating growth.

CALPINE CORP. (0.75% of net assets): This firm acquires, develops, owns, and
operates power-generation facilities. Calpine is a fast-growing independent
power producer with a domestic focus. The company is building gas turbine
plants and has 65 turbines on order. Earnings are projected to quadruple over
the next five years.

CORNING INC. (0.55% of net assets): Corning produces optical fiber, cable,
and photonic components for the telecommunications industry, as well as
producing communications-related industries. Strong growth in the
telecommunications and Internet sectors is driving demand for their
products.

ORACLE CORP. (0.92% of net assets): Oracle offers databases and relational
servers, application development and decision support tools, and enterprise
business applications. Oracle has a strong new product cycle that is just
getting underway. Execution has improved, margins are increasing, and growth
is re-accelerating.

WHAT WERE THE FUND'S TOP 10 HOLDINGS, AND WHAT WERE THE INDUSTRY WEIGHTINGS AS
OF OCTOBER 31, 1999?

<TABLE>

PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Echostar Communications Corp., Class A 2.7%
EMC Corp. Mass 2.6%
Sun Microsystems, Inc. 2.6%
Johnson & Johnson 2.2%
Cisco Systems, Inc. 2.1%
Microsoft Corp. 2.1%
MCI Worldcom, Inc. 2.0%
Qualcomm, Inc. 1.8%
Gemstar International Group Ltd. 1.7%
America Online, Inc. 1.7%
TOTAL 21.5%

</TABLE>

<TABLE>

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Technology 34.0% 23.4%
Consumer Staples 13.6% 11.9%
Communication Services 10.4% 8.5%
Health Care 9.5% 10.7%
Consumer Cyclicals 8.8% 9.0%
Financials 6.8% 15.5%
Capital Goods 5.5% 8.5%
Energy 5.3% 5.9%
Basic Materials 1.7% 3.0%
Utilities 1.2% 2.8%
Transportation 0.8% 0.8%
Other 2.1% -

</TABLE>

IT HAS BEEN AN OUTSTANDING FISCAL YEAR FOR SHAREHOLDERS OF FEDERATED GROWTH
STRATEGIES FUND. AT THIS POINT IN THE ECONOMIC CYCLE, WHAT IS YOUR OUTLOOK
FOR GROWTH STOCKS?

The fund's strategy is to provide shareholders with diversified exposure to
growth equity securities. Growth stocks tend to do well in environments where
economic growth is decelerating, and interest rates are declining. While the
current domestic economy appears strong, we believe that there are several
indications that growth may be poised to slow down. These factors include a
decline in construction spending, moderating car sales and retail spending, and
the widespread lack of pricing power at the consumer level. We believe that
these factors and other conditions make a good case for slower economic growth
over the next several quarters, and should provide a favorable backdrop for
growth stocks.

Last Meeting of Shareholders

AGENDA ITEM 1

Election of Trustees: 1

<TABLE>

</TABLE>

AGENDA ITEM 2

To make changes to the Fund's fundamental investment policies:

(a) To amend the Fund's fundamental investment policy regarding diversification.

<TABLE>

</TABLE>

(b) To amend the Fund's fundamental investment policy regarding borrowing money
and issuing senior securities.

<TABLE>

</TABLE>

<TABLE>

</TABLE>

(d) To amend the Fund's fundamental investment policy regarding investments in
commodities.

<TABLE>

</TABLE>

(e) To amend the Fund's fundamental investment policy regarding underwriting
securities.

<TABLE>

</TABLE>

(f) To amend the Fund's fundamental investment policy regarding lending by the
Fund.

<TABLE>

</TABLE>

(g) To amend the Fund's fundamental investment policy regarding concentration of
the Fund's investments in the securities of companies in the same industry.

<TABLE>

</TABLE>

(h) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding buying securities on margin.

<TABLE>

</TABLE>

(i) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding pledging assets.

<TABLE>

</TABLE>

AGENDA ITEM 3

To remove certain of the Fund's fundamental investment policies:

(a) To remove the Fund's fundamental investment policy regarding selling
securities short.

<TABLE>

</TABLE>

(b) To remove the Fund's fundamental investment policy regarding investing in
oil, gas and minerals.

<TABLE>

</TABLE>

Two Ways You May Seek to Invest for Success:

INITIAL INVESTMENT

IF YOU HAD MADE AN INITIAL INVESTMENT OF $16,000 IN THE CLASS A SHARES OF
FEDERATED GROWTH STRATEGIES FUND ON 8/23/84, REINVESTED DIVIDENDS AND CAPITAL
GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$183,368 ON 10/31/99. YOU WOULD HAVE EARNED A 17.41% 1 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 9/30/99, the Class A Shares' average annual 1-year, 5-year, and 10-year
total returns were 44.64%, 23.36%, and 13.92%, respectively. Class B Shares'
1-year and since-inception (8/16/95) total returns were 46.41% and 22.29%,
respectively. Class C Shares' 1-year and since-inception (8/16/95) total returns
were 51.03% and 22.69%, respectively. 2

[Graphic] - See Appendix

1 Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50% sales
charge applicable to an initial investment in Class A Shares. Data quoted
represents past performance and is no guarantee of 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.

ONE STEP AT A TIME

$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 15
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $67,826.

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 $16,000 but your
account would have reached a total value of $67,826 1 by 10/31/99. You would
have earned an average annual total return of 16.90%.

[Graphic] - See Appendix

1 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.

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 children. On
October 31, 1989, 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 $99,858.
This represents a 17.59% average annual total return. 1 For the Rices, a
dedicated program of monthly investments really paid off.

[Graphic] - See Appendix

1 This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance is no guarantee of future results.

Federated Growth Strategies Fund-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Growth Strategies Fund (Class A Shares) (the "Fund") from October 31,
1989 to October 31, 1999 compared to the Standard and Poor's 500 Index (S&P
500)2 and the Lipper Growth Fund Index (LGFI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 51.41%
5 Years 25.23%
10 Years 15.64%
Start of Performance (8/23/84) 17.41%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund with no sales
charge. As of August 15, 1995, the maximum sales charge was 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500 and the LGFI have
been adjusted to reflect reinvestment of dividends on securities in the indexes.

2 The S&P 500 and the LGFI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indexes are unmanaged.

3 Total return quoted reflects all applicable sales charges.

Federated Growth Strategies Fund-Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Growth Strategies Fund (Class B Shares) (the "Fund") from August 16,
1995 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Growth Fund Index (LGFI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 53.50%
Start of Performance (8/16/95) 24.24%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 2.00% contingent deferred sales charge on any redemption
less than five years from the purchase date. The maximum contingent deferred
sales charge is 5.50% on any redemption less than one year from the purchase
date. The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGFI have been adjusted to reflect
reinvestment of dividends on securities in the indexes.

2 The S&P 500 and LGFI are not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The indexes are unmanaged.

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

Federated Growth Strategies Fund-Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Growth Strategies Fund (Class C Shares) (the "Fund") from August 16,
1995 (start of performance) to October 31, 1999 compared to the Standard and
Poor's 500 Index (S&P 500)2 and the Lipper Growth Fund Index (LGFI).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 58.08%
Start of Performance (8/16/95) 24.63%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied to any redemption less than
one year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The S&P 500 and the LGFI have been adjusted
to reflect reinvestment of dividends on securities in the indexes.

3 Total return quoted reflects all applicable sales charges and contingent
deferred sales charges

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>

SHARES VALUE
<S> <C> <C>
COMMON STOCKS-97.6%
BASIC MATERIALS-1.7%
167,700 De Beers Cons Mines, ADR $ 4,538,381
112,600 Ecolab, Inc. 3,807,287
204,000 1 Smurfit-Stone Container
Corp. 4,411,500
62,300 Weyerhaeuser Co. 3,718,531
TOTAL 16,475,699
CAPITAL GOODS-5.5%
68,600 Corning, Inc. 5,393,675
129,900 General Dynamics Corp. 7,201,331
71,900 General Electric Co. 9,746,944
83,500 1 Sanmina Corp. 7,520,219
90,900 1 Solectron Corp. 6,840,225
333,800 Tyco International Ltd. 13,331,137
60,000 United Technologies Corp. 3,630,000
TOTAL 53,663,531
COMMUNICATION SERVICES-
10.4%
277,400 1 AT&T Canada, Inc., Class B 8,946,150
331,500 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 13,156,406
85,100 Alltel Corp. 7,084,575
108,500 1 Global Crossing Ltd. 3,756,812
20,200 1 Internap Network Services
Corp. 1,865,975
228,226 1 MCI Worldcom, Inc. 19,584,644
292,800 1 McLeod, Inc., Class A 13,066,200
111,300 1 Nextel Communications,
Inc., Class A 9,592,669
68,700 Sprint PCS Group 5,697,806
88,500 Telephone and Data System,
Inc. 10,199,625
100,300 1 VoiceStream Wireless Corp. 9,904,625
TOTAL 102,855,487
CONSUMER CYCLICALS-8.8%
56,000 1 Amazon.com, Inc. 3,955,000
181,500 1 BJ's Wholesale Club, Inc. 5,592,469
82,000 1 Best Buy Co., Inc. 4,556,125
179,200 Circuit City Stores, Inc. 7,649,600
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-
CONTINUED
43,800 1 DoubleClick, Inc. $ 6,132,000
197,600 1 Gemstar International
Group Ltd. 17,166,500
163,000 Home Depot, Inc. 12,306,500
154,200 1 MIPS Technologies, Inc.,
Class A 4,452,525
116,700 Omnicom Group, Inc. 10,269,600
51,750 1 Rambus, Inc. 3,499,594
189,500 Wal-Mart Stores, Inc. 10,742,281
TOTAL 86,322,194
CONSUMER STAPLES-13.6%
79,400 Anheuser-Busch Cos., Inc. 5,701,912
246,200 1 Brinker International,
Inc. 5,739,537
109,900 1 Cablevision Systems
Corporation, Class A 7,425,119
75,400 1 Clear Channel
Communications, Inc. 6,060,275
201,000 Comcast Corp., Class A 8,467,125
434,800 1 Echostar Communications
Corp., Class A 26,903,250
194,800 1 Keebler Foods Co. 6,221,425
122,100 Kimberly-Clark Corp. 7,707,562
109,600 Procter & Gamble Co. 11,494,300
102,000 Quaker Oats Co. 7,140,000
161,000 1 RCN Corp. 7,707,875
62,600 1 Spanish Broadcasting
System, Inc., Class A 1,666,725
77,200 1 UnitedGlobalCom, Inc.,
Class A 6,716,400
100,000 1 Univision Communications,
Inc., Class A 8,506,250
141,800 Valassis Communications,
Inc. 6,097,400
128,100 1 Viacom, Inc., Class A 5,836,556
92,700 1 Westwood One, Inc. 4,275,787
TOTAL 133,667,498
ENERGY-5.3%
128,000 1 Calpine Corp. 7,376,000
271,100 Diamond Offshore Drilling,
Inc. 8,607,425
400,800 ENSCO International, Inc. 7,765,500
126,700 Halliburton Co. 4,775,006
334,800 1 Nabors Industries, Inc. 7,595,775
125,500 Schlumberger Ltd. 7,600,594
296,900 Transocean Offshore, Inc. 8,071,969
TOTAL 51,792,269
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
FINANCIALS-6.8%
154,300 Aflac, Inc. $ 7,888,587
54,300 American Express Co. 8,362,200
193,800 Citigroup, Inc. 10,489,425
94,400 Federal Home Loan Mortgage
Corp. 5,103,500
448,030 MBNA Corp. 12,376,829
73,900 Morgan Stanley, Dean
Witter & Co. 8,152,094
135,600 Providian Financial Corp. 14,780,400
TOTAL 67,153,035
HEALTH CARE-9.5%
103,200 Allergan, Inc. 11,081,100
117,200 1 Biogen, Inc. 8,687,450
134,200 Bristol-Myers Squibb Co. 10,308,237
119,400 1 Forest Laboratories, Inc. 5,477,475
47,200 1 Genentech, Inc. 6,879,400
98,800 Guidant Corp. 4,878,250
206,064 Johnson & Johnson 21,585,204
117,500 Schering Plough Corp. 5,816,250
50,000 1 VISX, Inc. 3,128,125
146,648 Warner-Lambert Co. 11,704,343
74,200 1 Wellpoint Health Networks,
Inc. 4,303,600
TOTAL 93,849,434
TECHNOLOGY-34.0%
55,100 1 Alteon Websystems, Inc. 3,953,425
63,900 1 Altera Corp. 3,107,137
127,500 1 America Online, Inc. 16,535,156
75,800 1 Broadcom Corp., Class A 9,688,188
285,000 1 Cisco Systems, Inc. 21,090,000
162,000 1 Citrix Systems, Inc. 10,388,250
100,400 1 Conexant Systems, Inc. 9,374,850
108,200 1 Cree Research, Inc. 4,618,788
353,600 1 EMC Corp. Mass 25,812,800
92,200 1 Electronics for Imaging,
Inc. 3,716,813
91,800 1 Etec Systems, Inc. 3,505,613
103,400 1 Exodus Communications,
Inc. 8,892,400
2,500 1 Foundry Networks, Inc. 473,750
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
42,500 1 Inktomi Corp. $ 4,311,094
41,000 1 JDS Uniphase Corp. 6,841,875
18,100 1 Juniper Networks, Inc. 4,988,813
54,800 1 Lexmark Intl. Group, Class
A 4,277,825
84,984 Lucent Technologies, Inc. 5,460,222
169,700 1 MMC Networks, Inc. 5,409,188
437,000 1 Mastech Corp. 7,483,625
222,100 1 Microsoft Corp. 20,558,131
105,000 1 Nokia Oyj, ADR 12,134,063
190,600 1 Oracle Corp. 9,065,413
75,800 1 PMC-Sierra, Inc. 7,144,150
254,400 1 PSINet, Inc. 9,158,400
55,200 1 Qlogic Corp. 5,747,700
80,800 1 Qualcomm, Inc. 17,998,200
250,100 1 RF Micro Devices, Inc. 12,911,413
87,000 1 Siebel Systems, Inc. 9,553,688
237,300 1 Sun Microsystems, Inc. 25,109,306
205,800 1 Tellabs, Inc. 13,016,850
40,500 1 VeriSign, Inc. 5,001,750
52,200 1 VerticalNet, Inc. 2,923,200
272,800 1 Vitesse Semiconductor
Corp. 12,514,700
152,400 1 Xilinx, Inc. 11,982,450
TOTAL 334,749,226
TRANSPORTATION-0.8%
201,600 Expeditors International
Washington, Inc. 7,534,800
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS-continued
UTILITIES-1.2%
306,200 Enron Corp. $ 12,228,863
TOTAL COMMON STOCKS
(IDENTIFIED COST
$636,535,137) 960,292,036
REPURCHASE AGREEMENT-2.1%
2
$ 20,925,000 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (AT AMORTIZED
COST) 20,925,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$657,460,137) 3 $ 981,217,036

</TABLE>

1 Non-income producing security.

3 The cost of investments for federal tax purposes amounts to $659,113,789. The
net unrealized appreciation of investments on a federal tax basis amounts to
$322,103,247 which is comprised of $336,301,215 appreciation and $14,197,968
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($984,014,383) at October 31, 1999.

The following acronym is used throughout this portfolio:

ADR -American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$657,460,137 and tax
cost $659,113,789) $ 981,217,036
Income receivable 295,350
Receivable for investments
sold 15,335,233
Receivable for shares sold 3,043,119
TOTAL ASSETS 999,890,738
LIABILITIES:
Payable for investments
purchased $ 13,741,812
Payable for shares
redeemed 1,424,847
Payable to Bank 301,304
Accrued expenses 408,392
TOTAL LIABILITIES 15,876,355
Net assets for 26,295,968
shares outstanding $ 984,014,383
NET ASSETS CONSIST OF:
Paid in capital $ 546,102,825
Net unrealized
appreciation of
investments 1 323,756,899
Accumulated net realized
gain on investments 114,154,659
TOTAL NET ASSETS $ 984,014,383
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
CLASS A SHARES:
Net asset Value Per Share
($776,827,552 / 20,606,831
shares outstanding) $37.70
Offering Price Per Share
(100/94.50 of $37.70) 2 $39.89
Redemption Proceeds Per
Share $37.70
CLASS B SHARES:
Net Asset Value Per Share
($177,090,602 / 4,867,245
shares outstanding) $36.38
Offering Price Per Share $36.38
Redemption Proceeds Per
Share (94.50/100 of
$36.38) 2 $34.38
CLASS C SHARES:
Net Asset Value Per Share
($30,096,229 / 821,892
shares outstanding) $36.62
Offering Price Per Share $36.62
Redemption Proceeds Per
Share (99.00/100 of
$36.62) 2 $36.25

</TABLE>

1 Includes $2,494,749 of unrealized appreciation at July 19, 1999, related to
the tax-free transfer of assets from a Common Trust Fund.

2 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $30,313) $ 2,713,692
Interest 790,619
TOTAL INCOME 3,504,311
EXPENSES:
Investment advisory fee $ 5,935,062
Administrative personnel
and services fee 596,672
Custodian fees 52,930
Transfer and dividend
disbursing agent fees and
expenses 779,798
Directors'/Trustees' fees 9,332
Auditing fees 17,121
Legal fees 4,448
Portfolio accounting fees 148,524
Distribution services fee-
Class B Shares 926,942
Distribution services fee-
Class C Shares 147,984
Shareholder services fee-
Class A Shares 1,620,046
Shareholder services fee-
Class B Shares 308,980
Shareholder services fee-
Class C Shares 49,328
Share registration costs 137,601
Printing and postage 120,490
Insurance premiums 1,728
Miscellaneous 24,527
TOTAL EXPENSES 10,881,513
WAIVERS AND EXPENSE
REDUCTION:
Waiver of shareholder
services fee-Class C
Shares (3,946)
Fees paid indirectly from
directed broker
arrangements (11,193)
TOTAL WAIVER AND EXPENSE
REDUCTION (15,139)
Net expenses 10,866,374
Net operating loss (7,362,063)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 133,571,596
Net change in unrealized
appreciation of
investments 226,084,937
Net realized and
unrealized gain on
investments 359,656,533
Change in net assets
resulting from operations $ 352,294,470

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED OCTOBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (7,362,063) $ (3,851,714)
Net realized gain (loss) on
investments ($132,898,358
and ($9,726,866),
respectively, as computed
for federal tax purposes) 133,571,596 (10,057,424)
Net change in unrealized
appreciation
(depreciation) of
investments 226,084,937 (26,112,888)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 352,294,470 (40,022,026)
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
realized gains
Class A Shares - (103,524,864)
Class B Shares - (8,434,003)
Class C Shares - (1,228,553)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS - (113,187,420)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 867,487,600 718,975,850
Proceeds from shares
issued in connection with
the tax-free transfer of
assets from a Common Trust
Fund 3,284,745 -
Net asset value of shares
issued to shareholders in
payment of
distributions declared - 85,299,452
Cost of shares redeemed (840,233,139) (605,010,967)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 30,539,206 199,264,335
Change in net assets 382,833,676 46,054,889
NET ASSETS:
Beginning of period 601,180,707 555,125,818
End of period $ 984,014,383 $ 601,180,707

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $23.53 $31.54 $25.84
$26.22 $21.28
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (net
operating loss) (0.25) 2 (0.14) 2 (0.04)
0.04 0.24
Net realized and
unrealized gain (loss)
on investments 14.42 (1.48) 8.56
5.01 5.64
TOTAL FROM INVESTMENT
OPERATIONS 14.17 (1.62) 8.52
5.05 5.88
LESS DISTRIBUTIONS:
Distributions from net
investment income - - (0.00) 3
(0.04) (0.26)
Distributions from net
realized gain
on investments - (6.39) (2.82)
(5.39) (0.68)
TOTAL DISTRIBUTIONS - (6.39) (2.82)
(5.43) (0.94)
NET ASSET VALUE, END OF
PERIOD $37.70 $23.53 $31.54
$25.84 $26.22
TOTAL RETURN 4 60.22% (6.12%) 36.37%
23.16% 29.03%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 5 1.24% 1.20% 1.24%
1.28% 1.26%
Net investment income (net
operating loss) 5 (0.80%) (0.54%) (0.24%)
0.00% 0.89%
Expenses (after waivers) 1.24% 1.20% 1.14%
1.13% 1.10%
Net investment income (net
operating loss)
(after waivers) (0.80%) (0.54%) (0.14%)
0.15% 1.05%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $776,828 $510,552 $509,678
$307,382 $249,110
Portfolio turnover 125% 119% 146%
89% 125%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

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

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

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997
1996 1995 2
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $22.88 $31.02 $25.65
$26.23 $25.51
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.47) 3 (0.34) 3 (0.10)
(0.10) (0.02)
Net realized and
unrealized gain (loss)
on investments 13.97 (1.41) 8.29
4.91 0.74
TOTAL FROM INVESTMENT
OPERATIONS 13.50 (1.75) 8.19
4.81 0.72
LESS DISTRIBUTIONS:
Distributions from net
realized gain
on investments - (6.39) (2.82)
(5.39) -
NET ASSET VALUE, END OF
PERIOD $36.38 $22.88 $31.02
$25.65 $26.23
TOTAL RETURN 4 59.00% (6.78%) 35.23%
22.03% 2.82 %

RATIOS TO AVERAGE NET
ASSETS:
Expenses 5 1.99% 1.96% 1.99% 2.03%
3 2.04% 6
Net operating loss 5 (1.55%) (1.34%) (1.04%)
(0.79%) (0.66%) 6
Expenses (after waivers) 1.99% 1.96% 1.99%
2.03% 2.04% 6
Net operating loss (after
waivers) (1.55%) (1.34%) (1.04%)
(0.79%) (0.66%) 6
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $177,091 $77,975 $39,588
$10,858 $1,345
Portfolio turnover 125% 119% 146%
89% 125%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the period from August 16, 1995 (date of initial
public investment) to October 31, 1995.

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

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

6 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 1996
1995 2
<S> <C> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING
OF PERIOD $23.02 $31.16 $25.68 $26.22
$25.51
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.47) 3 (0.34) 3 (0.20) (0.05)
(0.02)
Net realized and
unrealized gain (loss)
on investments 14.07 (1.41) 8.50 4.90
0.73
TOTAL FROM INVESTMENT
OPERATIONS 13.60 (1.75) 8.30 4.85
0.71
LESS DISTRIBUTIONS:
Distributions from net
realized gain
on investments - (6.39) (2.82)
(5.39) -
NET ASSET VALUE, END OF
PERIOD $36.62 $23.02 $31.16 $25.68
$26.22
TOTAL RETURN 4 59.08% (6.74%) 35.66% 22.12%
2.78%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 5 1.99% 1.96% 1.99% 2.04%
2.05% 6
Net operating loss 5 (1.55%) (1.36%) (1.00%) (0.84%)
(0.71%) 6
Expenses (after waivers) 1.97% 1.94% 1.90% 1.92%
2.05% 6
Net operating loss (after
waivers) (1.53%) (1.34%) (0.91%) (0.72%)
(0.71%) 6
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $30,096 $12,654 $5,860 $3,667
$57
Portfolio turnover 125% 119% 146% 89%
125%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the period from August 16, 1995 (date of initial
public investment) to October 31, 1995.

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

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

6 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as a diversified, open-end management
investment company. The Trust consists of six 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 three classes of shares: Class A Shares, Class B Shares
and Class C Shares. The investment objective of the Fund is appreciation of
capital.

On July 19, 1999, the Fund received a tax-free transfer of assets from a Common
Trust Fund as follows:

<TABLE>

<S> <C>
Fund Shares Issued 89,455
Common Trust Fund Net Assets Received $ 3,284,745
Unrealized Appreciation 1 $ 2,494,749

</TABLE>

1 Unrealized appreciation is included in the Common Trust Fund net assets
acquired above.

SIGNIFICANT ACCOUNTING POLICIES

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 60 days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

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. The following reclassifications have been made to the financial
statements.

<TABLE>

INCREASE (DECREASE)
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME GAIN (LOSS) PAID-IN CAPITAL
<S> <C> <C>
$7,362,063 $(7,363,181) $1,118

</TABLE>

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

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>

YEAR ENDED OCTOBER 31 1999 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 21,770,130 $ 691,471,420 25,071,328 $ 645,857,373
Shares issued in
connection with the tax-
free transfer of assets
from Vermont National Bank 89,455 3,284,745 - -
Shares issued to
shareholders in payment of
distributions declared - - 3,075,195 76,080,478
Shares redeemed (22,951,587) (721,971,631) (22,609,750) (586,682,842)
NET CHANGE RESULTING FROM
CLASS A SHARE
TRANSACTIONS (1,092,002) $ (27,215,466) 5,536,773 $ 135,255,009

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,047,082 $ 96,020,910 2,280,389 $ 58,695,285
Shares issued to
shareholders in payment of
distributions declared - - 336,440 8,148,608
Shares redeemed (1,587,720) (49,602,318) (485,257) (11,921,023)
NET CHANGE RESULTING FROM
CLASS B SHARE
TRANSACTIONS 1,459,362 $ 46,418,592 2,131,572 $ 54,922,870

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,396,438 $ 77,500,521 589,924 $ 14,423,192
Shares issued to
shareholders in payment of
distributions declared - - 43,940 1,070,366
Shares redeemed (2,124,350) (68,659,190) (272,103) (6,407,102)
NET CHANGE RESULTING FROM
CLASS C SHARE
TRANSACTIONS 272,088 $ 8,841,331 361,761 $ 9,086,456
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 639,448 $ 28,044,457 8,030,106 $ 199,264,335

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

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 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>

PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

EXPENSE REDUCTION

The Fund directs certain portfolio trades to a broker that in turn pays a
portion of the Fund's operating expenses. For the year ended October 31, 1999,
the Fund's expenses were reduced by $11,193 under these arrangements.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 988,161,474
Sales $ 970,354,803

</TABLE>

YEAR 2000 (UNAUDITED)

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.

CHANGE OF INDEPENDENT AUDITORS (UNAUDITED)

On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit
Committee, requested and subsequently accepted the resignation of Ernst & Young
LLP ("E&Y") as the Fund's independent auditors. E&Y's reports on the Fund's
financial statements for the fiscal years ended October 31, 1997 and October 31,
1998 contained no adverse opinion or disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i)
there were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of E&Y, would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports on the financial statements for such years; and (ii) there were no
reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS

AND THE SHAREHOLDERS OF FEDERATED GROWTH STRATEGIES FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Growth Strategies Fund (the "Fund")
as of October 31, 1999, and the related statement of operations, the statement
of changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended October 31, 1998, and the financial
highlights for each of the four years in the period ended October 31, 1998 were
audited by other auditors whose report, dated December 21, 1998, expressed an
unqualified opinion on those statements.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Growth
Strategies Fund as of October 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the year then ended
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

December 17, 1999

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

JOHN F. CUNNINGHAM

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

GLEN R. JOHNSON

President

J. THOMAS MADDEN

Chief Investment Officer

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

GRANT C. ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT

AS OF OCTOBER 31, 1999

Federated Growth Strategies Fund

Established 1984

15TH ANNUAL REPORT

[Graphic]
Federated
Federated Growth Strategies Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172107

Cusip 314172206

Cusip 314172305

G01228-08 (12/99)

[Graphic]

ANNUAL REPORT

[Graphic]

GLEN R. JOHNSON
President
Federated Large Cap Growth Fund

President's Message

Dear Fellow Shareholder:

Federated Large Cap Growth Fund was created on December 29, 1998 and I am
pleased to present its first Annual Report. This fund invests in approximately
100 major corporations each of which has a market capitalization of over $60
billion on average. I believe most of the fund's holdings are easily recognized
by fund shareholders. The fund's stocks are selected for their capital growth
potential and are very attractive securities in the current market environment.
The fund's net assets totaled $265.5 million on October 31, 1999.

This report covers the 10-month period from December 29, 1998 (date of initial
public investment) through October 31, 1999. It begins with an interview with
the fund's portfolio manager, James E. Grefenstette, Vice President of Federated
Investment Management Company. Following his discussion are two additional items
of shareholder interest. First is a complete listing of the fund's highly
diversified stock holdings, and second is the publication of the fund's
financial statements.

This stock fund gives investors the opportunity to pursue capital appreciation
and attractive after-tax total returns by owning shares of approximately 100 of
the largest domestic companies in the growth stock universe-high-quality,
well-established companies that have helped to power the stock market's growth
in the past five to ten years. These companies are typically world-class leaders
with long histories of earnings and growth- vintage firms that have stood the
test of time. They employ tens of thousands of people, have large domestic
presences, and are expanding their markets around the globe. Their products are
known and used worldwide, and their extensive distribution networks allow them
to compete successfully in many countries and in many industries. As the world
continues to move toward a free market economy, we believe these companies are
well positioned to benefit from growing overseas markets. At the end of the
reporting period, the fund's portfolio held easily recognizable names such as
America Online, American Express, Bristol-Myers Squibb, CBS, Coca-Cola, Disney,
General Motors, Home Depot, Intel, Merck, Microsoft, and Xerox.

Another fund advantage, as James explains, is that Federated Large Cap Growth
Fund is managed to enhance after-tax returns by reducing taxable capital gains
that are the nemesis of growth-oriented investors.

During the fund's initial period of operation, the stock market's upward
momentum-as well as daily volatility-continued. Large-cap growth technology
stocks and Internet stocks led the performers. In this environment, the fund
produced a strong total return through appreciation in the value of its
holdings. Individual share class total return performance for the period from
December 29, 1998 to October 31, 1999, including income distributions follows. 1

<TABLE>
<CAPTION>
TOTAL RETURN INCOME NET ASSET VALUE INCREASE <S> <C> <C> <C>
Class A Shares 27.83% $0.002 $10.00 to $12.78 = 27.83% Class B Shares 27.53% -
$10.00 to $12.75 = 27.53% Class C Shares 27.53% - $10.00 to $12.75 = 27.53%
</TABLE>

Of course, the fund is a long-term investment, and will always be subject to
day-to-day volatility in the stock market. Regardless of the market's
fluctuations, over time 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 distributions automatically in additional shares to help
your shares increase in number through the benefit of 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. 2 Please
contact your investment representative for more information.

I urge you to take a few minutes and review the fund's holdings, and thank you
for entrusting a portion of your wealth to Federated Large Cap Growth Fund. We
welcome your comments and suggestions.

Sincerely,

[Graphic]

Glen R. Johnson
President
December 15, 1999

2 Systematic investing does not assure a profit or protect against loss in
declining markets. Because dollar-cost averaging involves continuous investment
regardless of fluctuating price levels, investors should consider their
financial ability to continue purchasing during periods of low price levels.

[Graphic]

JAMES E. GREFENSTETTE, CFA
Vice President
Federated Investment Management Company

Investment Review

WHAT IS YOUR REVIEW OF THE STOCK MARKET OVER THE PAST YEAR?

The fourth quarter of 1998 and the first quarter of 1999 were particularly
positive periods for large-cap stocks. For the six-month period ended April 30,
1999, the Standard & Poor's ("S&P") 500 Index 1 produced a return of 22.32%.
Although recording positive returns, stocks were very volatile during this time.
As a credit crisis loomed-sparked by the troubles in the third quarter of 1998
and the collapse of Long Term Capital Management-the first six trading days of
the fourth quarter of 1998 saw the S&P 500 Index decline almost 6% and the S&P
600 Small Cap Index1 trade off nearly 15%. The Federal Reserve Board (the "Fed")
then lowered rates for the second time in a month. This proved to be a pivot
point as the market took the lower rates, added liquidity, and rallied higher
into the end of the fourth quarter of 1998. Stocks staged a narrow rally, led by
growth stocks in general and technology stocks in particular. Despite malaise
outside of the U.S., domestic consumer demand remained healthy, propelling the
U.S. economy to continued growth.

1 The S&P 500 Index is an index of common stocks in industry, transportation,
finance, and public utilities, denoting general market performance as monitored
by Standard & Poor's. The S&P 600 Small Cap Index consists of 600 domestic
stocks that represent the small cap stock market. These indexes are unmanaged
and investments cannot be made in an index.

The most recent six-month period began with a shakeup in leadership for the
equity markets as the Consumer Price Index for April came in higher than
expected. From there, inflation fears re-emerged, and investors began to focus
on the continued strength in the U.S. economy as well as signs of economic
stabilization and growth worldwide. Leadership within the equity markets rotated
rapidly from large-cap "growth" stocks to small-cap "value" stocks. Globally,
equity markets generally traded up, with the emerging markets that were hit
hardest in late 1997, rallying the most.

More recently, we have seen a mixture of divergent signs with regard to the
status of economic health. Global economies appeared to have bottomed, and the
U.S. economy has looked strong with employment at record levels. As a result,
the Fed has hiked interest rates twice. Concurrently, however, inflation indexes
have remained tepid, and various other economic indicators have shown some signs
of weakness. With the belief that further rate hikes would not be necessary
near-term, domestic equity investors returned to favoring growth stocks over
cyclicals, but did not return to their fixation with just the largest
capitalization stocks.

Overall, the 12-month period ended October 31, 1999 was a strong one for
stocks-particularly large-cap stocks-as the S&P 500 Index produced a return of
25.68%.

HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?

For the period from December 29, 1998 (the fund's inception date) through
October 31, 1999, the fund's total returns for Class A, B, and C Shares were
27.83%, 27.53% and 27.53%, respectively, based on net asset value. 2 For the
year-to-date period from January 1, 1999 through October 31, 1999, the fund's
total returns for Class A, B, and C Shares were 26.04%, 25.74% and 25.74%,
respectively, based on net asset value.2 The year-to-date returns were
considerably higher than the 16.65% total return of the Lipper Large-Cap Growth
Funds Average, and more than doubled the 12.03% return of the S&P 500 Index for
the same period.3

WHILE THE FUND HAS PRODUCED STRONG TOTAL RETURNS, SHAREHOLDERS WILL BE PLEASED
TO HEAR THAT THIS FUND IS ALSO MANAGED TO TRY TO REDUCE THE BURDEN OF CAPITAL
GAINS. WHAT STRATEGIES ARE INVOLVED IN BRINGING THIS BENEFIT TO SHAREHOLDERS?

When possible, Federated Large Cap Growth Fund strives to maximize after-tax
returns by reducing capital gains through several strategies. The first is
modest portfolio turnover. We use a "buy and hold" strategy, buying securities
with the intent of holding them for a long time and avoiding short-term trading.
Second, we sell the highest cost shares first in order to minimize capital gains
distributions. Finally, we strive to match gains with losses by using realized
capital losses to offset realized capital gains.

2 Performance quoted is based on net asset value, reflects past performance and
is no guarantee 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 December 29, 1998
(the fund's inception date) through October 31, 1999, based on offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares were
20.82%, 22.03% and 26.53%, respectively. Total returns for the year-to-date
period from January 1, 1999 through October 31, 1999, based on offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares were
19.11%, 20.24% and 24.74%, respectively.

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

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

Our recent purchases included the following:

SUN MICROSYSTEMS, INC. (3.18% of net assets): Sun Microsystems sells scaleable
computer systems, high-speed microprocessors, and a complete line of
high-performance software for operating network computing equipment and storage
products. The leader in dot-com enterprises and e-businesses, their vision is
the best in the business.

WAL-MART STORES, INC. (3.55% of net assets): This household name operates
discount stores and supercenters that offer merchandise such as apparel,
housewares, small appliances, electronics, and hardware. Wal-Mart is a
consistent market and cost leader in mass merchandising, growing domestically
through initiatives in grocery and leading retailing's international expansion.

BEST BUY CO., INC. (2.39% of net assets): Best Buy retails consumer electronics,
home office equipment, entertainment software, and appliances. This firm is
poised to take advantage of the huge analog-to-digital product replacement cycle
which includes Digital Video Disc ("DVD") technology, digital cameras and
camcorders, DBS, and digital televisions.

COMCAST CORP. (2.54% of net assets): Comcast develops, manages, and operates
hybrid fiber-coaxial broadband cable communications networks. Comcast will
aggressively roll out numerous advanced services to both residential and
business customers in the year 2000. In addition, the company will buy cable
subscribers from Media One on favorable terms.

WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF OCTOBER 31, 1999, AND WHAT WERE THE
INDUSTRY SECTOR WEIGHTINGS?

<TABLE>
<CAPTION>
MARKET
PERCENTAGE OF CAPITALIZATION
NAME NET ASSETS ($BILLIONS)
<S> <C> <C>
Nokia Oyj, ADR 4.0% $136.6
Microsoft Corp. 3.9% $416.6
Cisco Systems, Inc. 3.6% $240.6
Wal-Mart Stores, Inc. 3.6% $250.2
Home Depot, Inc. 3.3% $117.1
Vodafone AirTouch PLC, ADR 3.3% $148.2
Sun Microsystems, Inc. 3.2% $163.5
Lexmark International Group 3.2% $ 10.0
Lucent Technologies, Inc. 2.9% $203.3
Viacom, Inc. 2.8% $ 24.5
TOTAL 33.8%

<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
<S> <C> <C>
Technology 44.3% 23.4%
Consumer Staples 12.0% 11.9%
Consumer Cyclicals 11.5% 9.0%
Health Care 10.1% 10.7%
Capital Goods 8.8% 8.5%
Communication Services 7.0% 8.5%
Financials 4.3% 15.5%
Utilities 0.5% 2.8%
Basic Materials 0.2% 3.0%
Other 1.3% -
</TABLE>

1999 HAS BEEN AN EXCELLENT FIRST YEAR FOR THE FUND, HOWEVER, AS WE ENTER THE
YEAR 2000, WHAT IS YOUR OUTLOOK FOR LARGE-CAP GROWTH STOCKS?

Federated Large Cap Growth Fund invests exclusively in the largest growth
stocks. As large-cap stocks have done exceedingly well over the last few years,
their valuations relative to smaller stocks, even given this recent quarter, are
near historic highs. Nonetheless, they still represent the highest quality and
most liquid way to participate in growth stocks. We expect the strong
performance of growth stocks to continue for the next several quarters, and we
believe the market will be disappointed with the rate of economic growth
generated through the end of 1999. As this happens, investors should continue to
buy stocks that are less sensitive to the strength of the economy. As a result,
we continue to favor sectors that offer the potential for strong secular growth,
such as technology, health care and certain consumer services.

Last Meeting of Shareholders

AGENDA ITEM 1

Election of Trustees: 1

<TABLE>
<CAPTION>
WITHHELD
AUTHORITY
FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 48,710,653 1,327,455
Nicholas P. Constantakis 48,707,894 1,330,214
John F. Cunningham 48,714,704 1,323,404
J. Christopher Donahue 48,665,494 1,372,614
Charles F. Mansfield, Jr. 48,713,783 1,324,325
John S. Walsh 48,705,907 1,332,201
</TABLE>

AGENDA ITEM 2

To make changes to the Fund's fundamental investment policies:

(a) To amend the Fund's fundamental investment policy regarding diversification.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,185,550 18,223 420,907
Federated Capital Appreciation Fund 6,727,977 686,959 1,352,171
Federated Growth Strategies Fund 14,180,323 325,629 3,211,302
Federated Large Cap Growth Fund 6,082,834 154,234 2,436,647
Federated Small Cap Strategies Fund 9,454,825 141,464 3,659,065
</TABLE>

(b) To amend the Fund's fundamental investment policy regarding borrowing money
and issuing senior securities.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,165,993 35,779 422,908
Federated Capital Appreciation Fund 6,579,806 829,682 1,357,619
Federated Growth Strategies Fund 14,024,566 484,842 3,207,846
Federated Large Cap Growth Fund 5,961,263 238,186 2,474,266
Federated Small Cap Strategies Fund 9,349,533 213,072 3,692,749
</TABLE>

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,175,105 30,541 419,034
Federated Capital Appreciation Fund 6,946,523 463,423 1,357,161
Federated Growth Strategies Fund 14,115,683 349,459 3,252,112
Federated Large Cap Growth Fund 6,017,898 200,527 2,455,290
Federated Small Cap Strategies Fund 9,392,209 195,646 3,667,499
</TABLE>

(d) To amend the Fund's fundamental investment policy regarding investments in
commodities.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,169,209 37,811 417,660
Federated Growth Strategies Fund 14,034,192 510,830 3,172,232
Federated Large Cap Growth Fund 5,923,742 296,977 2,452,996
Federated Small Cap Strategies Fund 9,321,384 262,628 3,671,342
</TABLE>

(e) To amend the Fund's fundamental investment policy regarding underwriting
securities.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,176,983 25,615 422,082
Federated Capital Appreciation Fund 6,935,034 473,821 1,358,252
Federated Growth Strategies Fund 14,039,862 446,742 3,230,650
Federated Large Cap Growth Fund 6,005,617 198,132 2,469,966
Federated Small Cap Strategies Fund 9,394,956 192,822 3,667,576
</TABLE>

(f) To amend the Fund's fundamental investment policy regarding lending by the
Fund.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,157,719 48,737 418,224
Federated Capital Appreciation Fund 6,751,451 632,303 1,383,353
Federated Growth Strategies Fund 14,006,658 511,958 3,198,638
Federated Large Cap Growth Fund 5,950,205 258,510 2,465,000
Federated Small Cap Strategies Fund 9,322,094 255,799 3,667,461
</TABLE>

(g) To amend the Fund's fundamental investment policy regarding concentration of
the Fund's investments in the securities of companies in the same industry.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,181,313 22,969 420,398
Federated Growth Strategies Fund 14,112,938 346,045 3,258,271
Federated Large Cap Growth Fund 6,017,558 194,699 2,461,458
Federated Small Cap Strategies Fund 9,398,399 180,973 3,675,982
</TABLE>

(h) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding buying securities on margin.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,164,210 40,601 419,869
Federated Growth Strategies Fund 13,838,738 597,953 2,280,563
Federated Large Cap Growth Fund 5,896,937 275,029 2,501,749
Federated Small Cap Strategies Fund 9,227,979 289,005 3,738,360
</TABLE>

(i) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding pledging assets.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Capital Appreciation Fund 6,452,981 950,846 1,363,280
Federated Large Cap Growth Fund 5,936,846 256,888 2,479,981
Federated Small Cap Strategies Fund 9,278,674 277,707 3,698,973
</TABLE>

AGENDA ITEM 3

To remove certain of the Fund's fundamental investment policies.

(a) To remove the Fund's fundamental investment policy regarding selling
securities short.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,154,766 45,338 424,576
Federated Capital Appreciation Fund 6,659,157 698,089 1,409,861
Federated Growth Strategies Fund 13,968,464 544,502 3,204,288
Federated Large Cap Growth Fund 5,927,807 284,012 2,461,896
Federated Small Cap Strategies Fund 9,305,910 253,583 3,695,861
</TABLE>

(b) To remove the Fund's fundamental investment policy regarding investing in
oil, gas and minerals.

<TABLE>
<CAPTION>
ABSTENTIONS
AND BROKER
FUND FOR AGAINST NON-VOTES
<S> <C> <C> <C>
Federated Aggressive Growth Fund 1,169,721 36,916 418,043
Federated Growth Strategies Fund 13,997,610 475,650 3,243,994
Federated Large Cap Growth Fund 5,927,807 284,012 2,461,896
</TABLE>

Federated Large Cap Growth Fund-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Large Cap Growth Fund (Class A Shares) (the "Fund") from December 29,
1998 (start of performance) to October 31, 1999 compared to the S&P 500 Index
(S&P 500)2 and Russell 2000 Index (RUS2).2

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
Start of Performance (12/29/98) 20.82%

[Graphic - SEE APPENDIX]

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

1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and RUS2 have been adjusted to reflect reinvestment
of dividends on securities in the indexes.

2 The S&P 500 and the RUS2 are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. These indexes are unmanaged.

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

Federated Large Cap Growth Fund-Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Large Cap Growth Fund (Class B Shares) (the "Fund") from December 29,
1998 (start of performance) to October 31, 1999 compared to the S&P 500 Index
(S&P 500)2 and Russell 2000 Index (RUS2).2

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
Start of Performance (12/29/98) 22.03%

[Graphic - SEE APPENDIX]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects the maximum 5.50% contingent deferred sales charge on any
redemption less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500 and
RUS2 have been adjusted to reflect reinvestment of dividends on securities in
the indexes.

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

Federated Large Cap Growth Fund-Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Large Cap Growth Fund (Class C Shares) (the "Fund") from December 29,
1998 (start of performance) to October 31, 1999 compared to the S&P 500 Index
(S&P 500)2 and Russell 2000 Index (RUS2).2

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
Start of Performance (12/29/98) 26.53%

[Graphic - SEE APPENDIX]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
reflects the maximum contingent deferred sales charge of 1.00% on any redemption
less than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500 and RUS2 have been
adjusted to reflect reinvestment of dividends on securities in the indexes.

2 The S&P 500 and RUS2 are not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. Theses indexes are unmanaged.

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

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-98.3%
AEROSPACE/DEFENSE-0.0%
200 Boeing Co. $ 9,212
AUTOMOBILES-0.8%
27,600 General Motors Corp.,
Class H 2,009,625
BEVERAGES (NON-ALCOHOLIC)-
0.1%
100 Coca-Cola Co. 5,900
6,200 PepsiCo, Inc. 215,063
TOTAL 220,963
BEVERAGES (ALCOHOLIC)-0.5%
28,200 Seagram Co. Ltd. 1,392,375
BIOTECHNOLOGY-2.8%
33,000 1 Amgen, Inc. 2,631,750
65,400 1 Biogen, Inc. 4,847,775
TOTAL 7,479,525
BROADCASTING-6.2%
112,000 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 4,445,000
51,300 CBS Corp. 2,504,081
26,700 1 Clear Channel
Communications, Inc. 2,146,012
160,100 Comcast Corp., Class A 6,744,212
12,500 1 Cox Communications, Inc.,
Class A 567,969
TOTAL 16,407,274
CELLULAR/WIRELESS
TELECOMMUNICATIONS-4.9%
43,000 1 NEXTEL Communications,
Inc., Class A 3,706,063
7,900 1 Sprint PCS Group 655,206
181,250 Vodafone AirTouch PLC, ADR 8,688,672
TOTAL 13,049,941
CHEMICALS (DIVERSIFIED)-
0.0%
200 Monsanto Co. 7,700
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
COMMUNICATIONS EQUIPMENT-
15.5%
120,700 Lucent Technologies, Inc. $ 7,754,975
30,100 Motorola, Inc. 2,932,869
91,300 Nokia Oyj, Class A, ADR 10,550,856
116,200 Nortel Networks Corp. 7,197,138
32,600 1 Qualcomm, Inc. 7,261,650
13,100 Telefonaktiebolaget LM
Ericsson, Class B, ADR 560,025
79,100 1 Tellabs, Inc. 5,003,075
TOTAL 41,260,588
COMPUTERS (HARDWARE)-4.2%
200 Compaq Computer Corp. 3,800
36,000 1 Dell Computer Corp. 1,444,500
400 1 Gateway, Inc. 26,425
12,900 International Business
Machines Corp. 1,269,038
79,700 1 Sun Microsystems, Inc. 8,433,256
TOTAL 11,177,019
COMPUTERS (NETWORKING)-
3.6%
127,900 1 Cisco Systems, Inc. 9,464,600
COMPUTERS (PERIPHERALS)-
5.8%
97,500 1 EMC Corp. Mass 7,117,500
106,800 1 Lexmark International
Group, Class A 8,337,075
TOTAL 15,454,575
COMPUTERS
SOFTWARE/SERVICES-8.6%
33,800 1 America Online, Inc. 4,383,437
200 Computer Associates
International, Inc. 11,300
1,600 1 Compuware Corp. 44,500
112,800 1 Microsoft Corp. 10,441,050
57,000 1 Oracle Corp. 2,711,063
12,900 Systeme, Anwendungen,
Produkte in der
Datevnerarbeitung, ADR 471,656
24,600 1 Yahoo, Inc. 4,404,938
2,900 1 eBay, Inc. 391,862
TOTAL 22,859,806
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER FINANCE-2.5%
200 Household International,
Inc. $ 8,925
74,900 MBNA Corp. 2,069,113
41,100 Providian Financial Corp. 4,479,900
TOTAL 6,557,938
DISTRIBUTORS (FOOD &
HEALTH)-0.3%
20,600 Cardinal Health, Inc. 888,375
ELECTRICAL EQUIPMENT-5.1%
47,900 General Electric Co. 6,493,444
83,900 1 Solectron Corp. 6,313,475
4,100 Sony Corp., ADR 654,975
TOTAL 13,461,894
ELECTRONICS
(SEMICONDUCTORS)-4.8%
73,500 Intel Corp. 5,691,656
50,600 Linear Technology Corp. 3,538,838
40,400 Texas Instruments, Inc. 3,625,900
TOTAL 12,856,394
ENTERTAINMENT-2.9%
2,300 Disney (Walt) Co. 60,662
17,100 Fox Entertainment Group,
Inc., Class A 369,787
164,400 1 Viacom, Inc., Class B 7,356,900
TOTAL 7,787,349
EQUIPMENT
(SEMICONDUCTORS)-0.5%
16,000 1 Applied Materials, Inc. 1,437,000
FINANCIAL (DIVERSIFIED)-
0.7%
3,500 American Express Co. 539,000
10,800 Associates First Capital
Corp., Class A 394,200
9,500 Citigroup, Inc. 514,187
4,500 Morgan Stanley, Dean
Witter & Co. 496,406
TOTAL 1,943,793
HEALTH CARE
(DRUGS/PHARMACEUTICALS)-
3.3%
4,600 Genentech, Inc. 670,450
15,100 Lilly (Eli) & Co. 1,040,013
600 Merck & Co., Inc. 47,738
68,700 Pfizer, Inc. 2,713,650
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
HEALTH CARE
(DRUGS/PHARMACEUTICALS)-
CONTINUED
31,800 Pharmacia & Upjohn, Inc. $ 1,715,212
43,900 Schering Plough Corp. 2,173,050
6,400 Smithkline Beecham Corp.,
ADR 409,600
TOTAL 8,769,713
HEALTH CARE (MEDICAL
PRODUCTS/SUPPLIES)-0.2%
300 1 Boston Scientific Corp. 6,037
12,800 Medtronic, Inc. 443,200
TOTAL 449,237
HEALTH CARE DIVERSIFIED-
3.8%
25,500 American Home Products
Corp. 1,332,375
19,100 Bristol-Myers Squibb Co. 1,467,119
55,900 Johnson & Johnson 5,855,525
16,800 Warner-Lambert Co. 1,340,850
TOTAL 9,995,869
HOUSEHOLD PRODUCTS (NON-
DURABLE)-1.3%
37,800 Colgate-Palmolive Co. 2,286,900
12,300 Procter & Gamble Co. 1,289,963
TOTAL 3,576,863
INSURANCE (MULTI-LINE)-
0.5%
13,250 American International
Group, Inc. 1,363,922
INVESTMENT
BANKING/BROKERAGE-0.6%
39,000 Schwab (Charles) Corp. 1,518,563
MANUFACTURING
(DIVERSIFIED)-3.7%
43,500 Corning, Inc. 3,420,187
157,900 Tyco International Ltd. 6,306,131
TOTAL 9,726,318
METALS & MINING -0.2%
6,000 1 Level 3 Communications,
Inc. 410,250
NATURAL GAS - DISTRIBUTOR -
PIPE LINE-0.5%
32,500 Enron Corp. 1,297,969
200 Williams Cos., Inc. (The) 7,500
TOTAL 1,305,469
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
OIL & GAS (DRILLING &
EQUIPMENT)-0.0%
200 Halliburton Co. $ 7,537
200 Schlumberger Ltd. 12,113
TOTAL 19,650
PERSONAL CARE-0.0%
2,200 Gillette Co. 79,612
PHOTOGRAPHY/IMAGING-0.0%
200 Xerox Corp. 5,600
RETAIL (BUILDING
SUPPLIES)- 4.7%
115,300 Home Depot, Inc. 8,705,150
67,900 Lowe's Cos., Inc. 3,734,500
TOTAL 12,439,650
RETAIL (COMPUTERS &
ELECTRONICS)-2.4%
114,400 1 Best Buy Co., Inc. 6,356,350
RETAIL (HOME SHOPPING)-
0.2%
7,200 1 Amazon.com, Inc. 508,500
RETAIL (GENERAL
MERCHANDISING CHAIN)-3.5%
166,100 Wal-Mart Stores, Inc. 9,415,794
RETAIL (SPECIALITY)-0.1%
14,800 1 Staples, Inc. 328,375
RETAIL SPECIALITY
(APPAREL)-0.5%
36,000 Gap (The), Inc. 1,336,500
RETAIL STORES (DRUG
STORE)-0.5%
1,100 CVS Corp. 47,781
48,500 Walgreen Co. 1,221,594
TOTAL 1,269,375
RETAIL STORES (FOOD
CHAINS)-0.1%
9,000 1 Safeway, Inc. 317,813
SERVICES (COMMERCIAL &
CONSUMER)-0.0%
400 1 Cendant Corp. 6,600
SERVICES (DATA
PROCESSING)-0.2%
10,700 Automatic Data Processing,
Inc. 515,606
TELEPHONE-0.2%
8,100 SBC Communications, Inc. 412,594
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-continued
TELEPHONE (LONG DISTANCE)-
2.0%
9,400 1 Global Crossing Ltd. $ 325,475
31,900 1 MCI Worldcom, Inc. 2,737,419
61,600 1 Qwest Communications
International, Inc. 2,217,600
TOTAL 5,280,494
TOBACCO-0.0%
700 Philip Morris Cos., Inc. 17,631
TOTAL COMMON STOCKS
(IDENTIFIED COST
$230,881,593) 261,152,294
REPURCHASE AGREEMENTS-1.6%
2
$ 4,210,000 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (at amortized
cost) 4,210,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$235,091,593) 3 $ 265,362,294
</TABLE>

1 Non-income producing security.

2 The repurchase agreement is fully collateralized by U.S. Treasury and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repuchase agreement is through participation in a joint
account with other Federated Funds.

3 The cost of investments for federal tax purposes amounts to $235,221,003. The
net unrealized appreciation of investments on a federal tax basis amounts to
$30,141,291 which is comprised of $32,893,458 appreciation and $2,752,167
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($265,539,968) at October 31, 1999.

The following acronym is used throughout this portfolio:

ADR -American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$235,091,593 and tax
cost $235,221,003) $ 265,362,294
Cash 91
Income receivable 29,303
Receivable for investments
sold 20,199,350
Receivable for shares sold 5,748,602
TOTAL ASSETS 291,339,640
LIABILITIES:
Payable for investments
purchased $ 25,204,041
Payable for shares
redeemed 351,102
Accrued expenses 244,529
TOTAL LIABILITIES 25,799,672
Net assets for 20,802,862
shares outstanding $ 265,539,968
NET ASSETS CONSIST OF:
Paid in capital $ 240,466,831
Net unrealized
appreciation of
investments 1 30,270,701
Accumulated net realized
loss on investments (5,197,564)
TOTAL NET ASSETS $ 265,539,968
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share
($105,337,992 / 8,241,512
shares outstanding) $12.78
Offering Price Per Share
(100/94.50 of $12.78) 2 $13.52
Redemption Proceeds Per
Share $12.78
CLASS B SHARES:
Net Asset Value Per Share
($145,309,797 / 11,393,626
shares outstanding) $12.75
Offering Price Per Share $12.75
Redemption Proceeds Per
Share (94.50/100 of
$12.75) 2 $12.05
CLASS C SHARES:
Net Asset Value Per Share
($14,892,179 / 1,167,724
shares outstanding) $12.75
Offering Price Per Share $12.75
Redemption Proceeds Per
Share (99.00/100 of
$12.75) 2 $12.62
</TABLE>

1 Includes $941,973 of unrealized appreciation at July 19, 1999, related to the
tax-free transfer of assets from Vermont National Bank, a Common Trust Fund.

2 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED OCTOBER 31, 1999 1

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $3,036) $ 205,392
Interest 119,523
TOTAL INCOME 324,915
EXPENSES:
Investment advisory fee $ 640,616
Administrative personnel
and services fee 158,333
Custodian fees 12,414
Transfer and dividend
disbursing agent fees and
expenses 150,359
Directors'/Trustees' fees 3,125
Auditing fees 16,383
Legal fees 6,335
Portfolio accounting fees 61,163
Distribution services fee-
Class B Shares 350,001
Distribution services fee-
Class C Shares 31,203
Shareholder services fee-
Class A Shares 86,471
Shareholder services fee-
Class B Shares 116,667
Shareholder services fee-
Class C Shares 10,401
Share registration costs 87,131
Printing and postage 15,474
Insurance premiums 1,568
Miscellaneous 2,606
TOTAL EXPENSES 1,750,250
WAIVER:
Waiver of investment
advisory fee (340,302)
Net expenses 1,409,948
Net operating loss (1,085,033)
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on
investments (5,197,564)
Net change in unrealized
appreciation
(depreciation) of
investments 29,328,728
NET REALIZED AND
UNREALIZED GAIN (LOSS) ON
INVESTMENTS 24,131,164
Change in net assets
resulting from operations $ 23,046,131
</TABLE>

1 For the period from December 29, 1998 (date of initial public investment) to
October 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (1,085,033)
Net realized gain (loss) on
investments (($5,068,154),
as computed for federal tax
purposes) (5,197,164)
Net change in unrealized
appreciation/depreciation
on investments 29,328,728
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 23,046,131
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Class A Shares (960)
Class B Shares -
Class C Shares -
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS TO
SHAREHOLDERS (960)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 260,725,123
Proceeds from shares
issued in connection with
the tax-free transfer of
assets of Vermont
National Bank, a Common
Trust Fund 2,000,500
Cost of shares redeemed (20,230,826)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 242,494,797
Change in net assets 265,539,968
NET ASSETS:
Beginning of period -
End of period $ 265,539,968
</TABLE>

1 For the period from December 29, 1998 (date of initial public investment) to
October 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net operating loss (0.08) 2
Net realized and unrealized gain on investments 2.86
TOTAL FROM INVESTMENT OPERATIONS 2.78
LESS DISTRIBUTIONS:
Distributions from net investment income (0.00)3
NET ASSET VALUE, END OF PERIOD $12.78
TOTAL RETURN 4 27.83 %

RATIOS TO AVERAGE NET ASSETS:
Expenses 5 1.59% 6
Net operating loss 5 (1.21%) 6
Expenses (after waivers) 1.20% 6
Net operating loss (after waivers) (0.82%) 6
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $105,338
Portfolio turnover 36%
</TABLE>

1 Reflects operations for the period from December 29, 1998 (date of initial
public investment) to October 31, 1999.

2 Per share numbers have been calculated using the average shares method, when
more appropriately represents the per share data for the period since the use of
undistributed income did not accord with the results of operations.

3 Amount represents less than $0.01 per share.

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

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

6 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net operating loss (0.15) 2
Net realized and unrealized gain on investments 2.90
TOTAL FROM INVESTMENT OPERATIONS 2.75
LESS DISTRIBUTIONS:
Distributions from net investment income -
NET ASSET VALUE, END OF PERIOD $12.75
TOTAL RETURN 3 27.53%

RATIOS TO AVERAGE NET ASSETS:
Expenses 4 2.34% 5
Net operating loss 4 (1.96%) 5
Expenses (after waivers) 1.95% 5
Net operating loss (after waivers) (1.57%) 5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $145,310
Portfolio turnover 36%
</TABLE>

1 Reflects operations for the period from December 29, 1998 (date of initial
public investment) to October 31, 1999.

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

4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

1 Reflects operations for the period from December 29, 1998 (date of initial
public investment) to October 31, 1999.

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

4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

ORGANIZATION

Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as a diversified, open-end, management
investment company. The Trust consists of five portfolios. The financial
statements included herein are only those of Federated Large Cap Growth 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 appreciation of
capital.

On July 19, 1999, the Fund received a tax-free transfer of assets from Vermont
National Bank, a Common Trust Fund as follows:

Fund Shares Issued 159,784
Common Trust Fund Net Assets Received $ 2,000,500
Unrealized Appreciation 1 $ 941,973

1 Unrealized appreciation is included in the Common Trust Fund net assets
acquired above.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

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. The following reclassifications have been made to the financial
statements.

<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF NET
INVESTMENT INCOME PAID IN CAPITAL
<S> <C>
$1,085,993 ($1,085,993)
</TABLE>

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

FEDERAL TAXES

At October 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $5,068,154 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire in
2007.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C> <C>
CLASS A SHARES: SHARES AMOUNT
Shares sold 8,912,362 $ 104,202,867
Shares issued in
connection with the tax-
free transfer of assets
from Vermont
National Bank, a Common
Trust Fund 159,784 2,000,500
Shares redeemed (830,634) (9,305,178)
NET CHANGE RESULTING FROM
CLASS A SHARE
TRANSACTIONS 8,241,512 $ 96,898,189

<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C> <C>
CLASS B SHARES: SHARES AMOUNT
Shares sold 12,262,520 $ 142,135,740
Shares redeemed (868,894) (10,282,121)
NET CHANGE RESULTING FROM
CLASS B SHARE
TRANSACTIONS 11,393,626 $ 131,853,619

<CAPTION>
PERIOD ENDED OCTOBER 31 1999 1
<S> <C> <C>
CLASS C SHARES: SHARES AMOUNT
Shares sold 1,224,134 $ 14,386,516
Shares redeemed (56,410) (643,527)
NET CHANGE RESULTING FROM
CLASS C SHARE
TRANSACTIONS 1,167,724 $ 13,742,989
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 20,802,862 $ 242,494,797
</TABLE>

1 Reflects operations for the period from December 29, 1998 (date of initial
public investment) to October 31, 1999.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

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

<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

For the period ended October 31, 1999, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSSC may voluntarily choose to waive any portion of its fee. FSSC 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, 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.

INTERFUND TRANSACTIONS

During the period ended October 31, 1999, the Trust engaged in purchase and
sales transactions with funds that have a common investment adviser (or
affiliated advisers), common Directors/Trustees, and/or common officers. These
purchase and sales transactions were made at current market value pursuant to
Rule 17a-7 under the Act amounting to $9,075 and $1,745,388, respectively.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1999, were as follows:

Purchases $ 273,463,667
Sales $ 37,119,110

YEAR 2000 (UNAUDITED)

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS AND THE SHAREHOLDERS OF FEDERATED
LARGE CAP GROWTH FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Large Cap Growth Fund (the "Fund") as
of October 31, 1999, and the related statement of operations, statement of
changes in net assets and the financial highlights for the period from December
29, 1998 (date of initial public investment) to October 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Large Cap
Growth Fund as of October 31, 1999, the results of its operations, the changes
in its net assets and its financial highlights for the period from December 29,
1998 (date of initial public investment) to October 31, 1999 in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP
Boston, Massachusetts
December 17, 1999

Trustees

Officers

JOHN F. DONAHUE
Chairman

GLEN R. JOHNSON
President

J. THOMAS MADDEN
Chief Investment Officer

J. CHRISTOPHER DONAHUE
Executive Vice President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT
AS OF OCTOBER 31, 1999

Federated Large Cap Growth Fund

Established 1998

1ST ANNUAL REPORT

[Graphic]
Federated
Federated Large Cap Growth Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172842
Cusip 314172834
Cusip 314172826

G02516-01 (12/99)

[Graphic]

ANNUAL REPORT

[Graphic]

GLEN R. JOHNSON

President

Federated Small Cap Strategies Fund

President's Message

Dear Valued Shareholder:

Federated Small Cap Strategies Fund was created in 1995, and I am pleased to
present its fourth Annual Report. The fund's assets totaled $378.6 million as of
October 31, 1999 with ownership of 152 U.S. small-cap companies across 11
economic sectors. These corporations, on average, have price-to-earnings ratios
of under 20% and average earnings per share growth rates of 27%.

This report covers the 12-month reporting period from November 1, 1998 through
October 31, 1999. It begins with an interview with Aash M. Shah, Vice President,
who co-manages the fund with Grant K. McKay, Assistant Vice President, both of
Federated Investment Management Company. Following their discussions are three
additional items of shareholder interest. First is a series of graphs showing
the fund's investment performance. Second is a complete listing of the fund's
stock holdings in small capitalized companies, and third is the publication of
the fund's financial statements.

Federated Small Cap Strategies Fund is managed to offer shareholders significant
opportunities for long-term capital appreciation by investing in a highly
diversified portfolio of small-cap stocks. 1 These stocks, issued by companies
with a typical market capitalization within the range of the Standard and Poor's
("S&P") 600 Small Cap Index,2 offer the potential for high returns over time in
exchange for a higher level of risk as compared to stocks issued by larger,
well-established companies. To help reduce risk and seek opportunities in this
dynamic market, the fund's portfolio is carefully selected and broadly
diversified.

During the 12-month reporting period, the small-cap market rebounded while
experiencing a few bumps along the way. In this environment, Federated Small Cap
Strategies Fund recorded very positive total returns across all share classes.
Still, the portfolio managers note that valuation levels of small- cap stocks
are at 22-year lows versus large-caps, which suggests a significant buying
opportunity.

1 Small-cap stocks have historically experienced greater volatility than
average.

2 The S&P 600 Small Cap Index is an unmanaged, market capitalization-weighted
index of stocks representing all major industries in the small-cap range of the
U.S. stock market. Investments cannot be made in an index.

Individual share class total return performance for the 12-month reporting
period follows. 2

<TABLE>

TOTAL RETURN NET ASSET VALUE INCREASE <S> <C> <C> Class A
Shares 22.67% $15.26 to $18.72 = 22.67% Class B Shares 21.86% $14.96 to $18.23 =
21.86% Class C Shares 21.74% $14.95 to $18.20 = 21.74%

</TABLE>

We continue to see significant day-to-day volatility across the stock market.
However, regardless of the market's fluctuations, over time, you may increase
your investment by reinvesting your dividends and capital gains automatically in
additional fund shares.

Thank you for participating in the growth and earnings opportunities of over
150 dynamic U.S. companies. As always, we welcome your comments and
suggestions.

Sincerely,

[Graphic]

Glen R. Johnson

President

December 15, 1999

[Graphic]

AASH M. SHAH, CFA

Vice President

Federated Investment Management Company

[Graphic]

GRANT K. MCKAY

Assistant Vice President

Federated Investment Management Company

Investment Review

THE FUND'S FISCAL YEAR WAS A VOLATILE PERIOD FOR SMALL-CAP STOCKS BUT,
OVERALL, THIS SECTOR REVERSED COURSE AND TURNED IN A STRONG 12-MONTH
PERFORMANCE. WHAT ARE YOUR COMMENTS?

Early in the fund's fiscal year, during the fourth quarter of 1998, the
small-cap stock market rebounded significantly off the bottom of a severe bear
market and experienced only slight underperformance versus large-cap stocks. As
a result, for the fourth quarter of 1998 alone, the Lipper Small Cap Funds
Average was up 19.10%, the S&P 600 Small Cap Index was up 17.60%, the Russell
2000 Small Cap Index was up 16.50%, while the S&P 500 Index was up 21.30%, and
the Dow Jones Industrial Average was up 17.60%. 1

1 Lipper figures represent the average of the total returns reported by the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category indicated. Lipper returns do not take sales charges into account. The
S&P 600 Small Cap Index is an unmanaged, market capitalization-weighted index of
stocks representing all major industries in the small-cap range of the U.S.
stock market. The Russell 2000 Small Cap Index is a broadly diversified,
unmanaged index consisting of approximately 2,000 small capitalization common
stocks that can be used to compare the total returns of funds whose portfolios
are invested primarily in small capitalization common stocks. The S&P 500 Index
is an unmanaged index of common stocks in industry, transportation, finance, and
public utilities. The Dow Jones Industrial Average is an unmanaged index
representing share prices of major industrial corporations, public utilities,
and transportation companies. Investments cannot be made in an index.

We enjoyed this increase in share price briefly, however. In the first quarter
of 1999, small-cap stocks experienced severe underperformance versus large-cap
stocks. For example, the Lipper Small Cap Funds Average was down 6.00%, the S&P
600 Small Cap Index was down 9.20%, the Russell 2000 Small Cap Index was down
5.80%, while the S&P 500 Index was up 5.00% and the Dow Jones Industrial Average
was up 7.00%.

Then, in the second quarter of 1999, small-cap stocks reversed course and
significantly outperformed large-cap stocks, with the small-cap indexes doubling
the 7.04% return of the S&P 500 Index. During the third quarter of 1999, the
overall equity market was weak, with small-cap stocks turning in a less negative
performance than the (6.24%) return of the S&P 500 Index.

Ultimately, for the 12-month period ended October 31, 1999, small-cap stocks did
very well. The Lipper Small Cap Funds Average's median return was 12.51%,
compared to the 12.05% return of the S&P 600 Small Cap Index, and the 14.87%
return of the Russell 2000 Small Cap Index.

HOW DID FEDERATED SMALL CAP STRATEGIES FUND PERFORM OVER THE 12-MONTH REPORTING
PERIOD COMPARED TO THE LIPPER SMALL CAP FUNDS AVERAGE?

For the fiscal year ended October 31, 1999, the fund's total returns were 22.67%
for Class A Shares, 21.86% for Class B Shares, and 21.74% for Class C Shares,
based on net asset value. 2 These returns significantly exceeded the 12.51%
median return of the Lipper Small Cap Funds Average.

WHILE THE FUND'S HOLDINGS ARE DIVERSIFIED ACROSS ALL SECTORS, ON WHAT SECTORS
ARE YOU FOCUSING?

We currently have overweighted positions in the technology and energy sectors
and underweighted positions in the finance, health care, and utilities sectors
as compared to the S&P 600 Small Cap Index. Our objective is to remain fully
invested in the best 3% of small companies that we can find across a universe of
over 5,000 small companies across the U.S. We are currently maintaining our cash
position below 4%, which effectively means that the fund is fully invested.

2 Performance quoted is based on net asset value, reflects past performance, and
is no guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Total returns for the reporting period, based on
offering price (i.e., less any applicable sales charge), for Class A, B, and C
Shares were 15.91%, 16.36% and 20.74%, respectively.

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

Our recent purchases included the following:

VALUEVISION INTERNATIONAL, INC. (0.79% of net assets): Valuevision is a fast-
growing home shopping network in alliance with General Electric. This
retailer sells a wide variety of products and services directly to consumers
via a home shopping network and an Internet web site.

APPLIED MICRO CIRCUITS CORP. (0.69% of net assets): This firm designs,
develops, manufactures and markets high-performance, high bandwidth silicon
solutions for the world's communications infrastructure. This company has
strong fundamentals in the communications semiconductor market.

PEREGRINE SYSTEMS CORP. (0.48% of net assets): This company offers business
organizations an integrated suite of package infrastructure management
application software. These software applications help manage the fiscal and
physical aspects of organizational infrastructure. Peregrine has strong business
momentum and the potential for multiple expansion from new e- procurement
products.

WHAT WERE THE FUND'S TOP 10 HOLDINGS AND WHAT WERE THE SECTOR WEIGHTINGS AS OF
OCTOBER 31, 1999?

<TABLE>

PERCENTAGE OF
NAME NET ASSETS
<S> <C>
Accrue Software, Inc. 1.2%
Cambex Corp. 1.1%
Macromedia, Inc. 1.1%
FactSet Research Systems 1.1%
Liberate Technologies, Inc. 1.1%
Micrel, Inc. 1.0%
Spartech Corp. 1.0%
North Fork Bancorp, Inc. 1.0%
Comverse Technology, Inc. 1.0%
Zale Corp. 0.9%
TOTAL 10.5%

</TABLE>

<TABLE>

PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 600 INDEX
<S> <C> <C>
Technology 28.1% 22.1%
Consumer Cyclicals 16.3% 18.9%
Financials 9.5% 13.2%
Consumer Staples 9.1% 8.3%
Capital Goods 8.2% 12.6%
Health Care 5.3% 9.6%
Basic Materials 5.3% 4.2%
Energy 3.5% 3.2%
Utilities 3.4% 4.2%
Communication Services 1.9% 0.8%
Transportation 1.4% 3.3%
Other 12.7% -

</TABLE>

AFTER A WELCOME YEAR OF POSITIVE PERFORMANCE, WHAT DO YOU SEE AHEAD FOR
SMALL-CAP STOCKS AS WE ENTER THE YEAR 2000?

Small-cap stocks are very attractively valued going into the year 2000.
Currently, the small-cap stock market trades at valuation levels relative to
large-cap stocks not seen since 1977. In other words, small-cap stocks are
trading at 22-year lows versus large-cap stocks. Earnings growth is expected to
remain strong in the small-cap sector. These two factors should bode well for
small-cap investors in the coming year.

Of course, investing in small-cap stocks involves volatility. The chart below
indicates how volatile investing in small-cap stocks can be by showing the total
returns produced by the Class A Shares of the fund over various time periods
since inception.

<TABLE>

BOOM BUST
<S> <C> <C> <C>
11/1/1995-12/29/1995 17.6% 2 months
12/29/1995-1/16/1996 (7.7%) 1/2 month
1/16/1996-5/24/1996 39.5% 4 months
5/24/1996-7/24/1996 (14.8%) 2 months
7/24/1996-1/22/1997 27.5% 6 months
1/22/1997-4/25/1997 (17.6%) 3 months
4/25/1997-10/10/1997 54.7% 6 months
10/10/1997-1/12/1998 (20.2%) 3 months
1/12/1998-4/21/1998 26.1% 3 months
4/21/1998-10/8/1998 (41.7%) 5-1/2 months
10/8/1998-1/11/1999 50.9% 3 months
1/11/1999-3/23/1999 (15.9%) 2-1/2 months
3/23/1999-7/15/1999 25.4% 4 months
7/15/1999-10/18/1999 (11.8%) 3 months
10/18/1999-10/31/1999 10.2% 13 days

</TABLE>

Past performance is no guarantee of future results. These figures do not take
into account the maximum 5.50% sales charge applicable to an initial investment
in Class A Shares.

According to Ibbotson Associates, there have been significant historical periods
of small-cap outperformance as well as significant periods of underperformance.
After the past six years of the latter, we expect the next three to seven years
will probably be a period of strong small-cap performance.

Last Meeting of Shareholders

AGENDA ITEM 1

Election of Trustees: 1

<TABLE>

</TABLE>

AGENDA ITEM 2

To make changes to the Fund's fundamental investment policies:

(a) To amend the Fund's fundamental investment policy regarding diversification.

<TABLE>

</TABLE>

(b) To amend the Fund's fundamental investment policy regarding borrowing money
and issuing senior securities.

<TABLE>

</TABLE>

<TABLE>

</TABLE>

(d) To amend the Fund's fundamental investment policy regarding investments in
commodities.

<TABLE>

</TABLE>

(e) To amend the Fund's fundamental investment policy regarding underwriting
securities.

<TABLE>

</TABLE>

(f) To amend the Fund's fundamental investment policy regarding lending by the
Fund.

<TABLE>

</TABLE>

(g) To amend the Fund's fundamental investment policy regarding concentration of
the Fund's investments in the securities of companies in the same industry.

<TABLE>

</TABLE>

(h) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding buying securities on margin.

<TABLE>

</TABLE>

(i) To amend, and to make non-fundamental, the Fund's fundamental investment
policy regarding pledging assets.

<TABLE>

</TABLE>

AGENDA ITEM 3

To remove certain of the Fund's fundamental investment policies:

(a) To remove the Fund's fundamental investment policy regarding selling
securities short.

<TABLE>

</TABLE>

(b) To remove the Fund's fundamental investment policy regarding investing in
oil, gas and minerals.

<TABLE>

</TABLE>

How You May Seek to Invest for Success:

INITIAL INVESTMENT:

IF YOU MADE AN INITIAL INVESTMENT OF $4,000 IN THE CLASS A SHARES OF FEDERATED
SMALL CAP STRATEGIES FUND ON 11/1/95, REINVESTED DIVIDENDS AND CAPITAL GAINS,
AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH $7,191 ON
10/31/99. YOU WOULD HAVE EARNED A 15.80% 1 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 9/30/99, the Class A Shares' average annual 1-year and since inception
(11/1/95) total returns were 14.79% and 14.38%, respectively. Class B Shares'
average annual 1-year and since inception (11/1/95) total returns were 15.08%
and 14.72%, respectively. Class C Shares' average annual 1-year and since
inception (11/1/95) total returns were 19.45% and 15.18%, respectively. 2

[Graphic] - See Appendix

1 Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50% sales
charge applicable to an initial investment in Class A Shares. Data quoted
represents past performance and does not guarantee future results. Investment
return and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

Hypothetical Investor Profile

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

On November 1, 1995, they invested $50,000 in the Class A Shares of Federated
Small Cap Strategies Fund. They held that investment for 3 years and then
decided to begin taking an annual 7% withdrawal as income.

As this chart shows, even with the original $50,000 investment and annual
withdrawals, their investment grew to $89,175 and they were still able to
receive income totaling $5,561 over the past year. This represents a 17.44%
average annual total return. 1

[Graphic] - See Appendix

1 This hypothetical scenario is provided for illustrative purposes only and
does not represent the result obtained by any particular shareholder. Past
performance is no guarantee of future results.

Federated Small Cap Strategies Fund-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Small Cap Strategies Fund (Class A Shares) (the "Fund") from November
1, 1995 (start of performance) to October 31, 1999 compared to the Russell 2000
Index (RUS2) and the Standard and Poor's 600 Small Cap Index (S&P 600).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 15.91%
Start of Performance (11/1/95) 15.80%

</TABLE>

[Graphic] - See Appendix

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The RUS2 and the S&P 600 have been adjusted to reflect
reinvestment of dividends on securities in the indexes.

2 The RUS2 and the S&P 600 are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires in the Fund's
performance. The indexes are unmanaged.

3 Total return quoted reflects all applicable sales charges.

Federated Small Cap Strategies Fund-Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Small Cap Strategies Fund (Class B Shares) (the "Fund") from November
1, 1995 (start of performance) to October 31, 1999 compared to the Russell 2000
Index (RUS2) and the Standard and Poor's 600 Small Cap Index (S&P 600).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 16.36%
Start of Performance (11/1/95) 16.14%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 3.00% contingent deferred sales charge on any redemption
less than four years from the purchase date. The maximum contingent deferred
sales charge is 5.50% on any redemption less than one year from the purchase
date. The Fund's performance assumes the reinvestment of all dividends and
distributions. The RUS2 and the S&P 600 have been adjusted to reflect
reinvestment of dividends on securities in the indexes.

2 The RUS2 and the S&P 600 are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indexes are unmanaged.

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

Federated Small Cap Strategies Fund-Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Small Cap Strategies Fund (Class C Shares) (the "Fund") from November
1, 1995 (start of performance) to October 31, 1999 compared to the Russell 2000
Index (RUS2) and the Standard and Poor's 600 Small Cap Index (S&P 600).2

<TABLE>

AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED OCTOBER 31, 1999
<S> <C>
1 Year 20.74%
Start of Performance (11/1/95) 16.57%

</TABLE>

[Graphic] - See Appendix

1 Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less than
one year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The RUS2 and the S&P 600 have been adjusted
to reflect reinvestment of dividends on securities in the indexes.

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

Portfolio of Investments

OCTOBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS-92.9%
BASIC MATERIALS-5.3%
156,800 AK Steel Holding Corp. $ 2,714,600
123,700 1 ATMI, Inc. 3,332,169
143,100 Cambrex Corp. 4,328,775
83,300 Corn Products
International, Inc. 2,712,456
214,900 1 Daisytek International Corp. 3,572,712
284,300 RPM, Inc. 3,393,831
TOTAL 20,054,543
CAPITAL GOODS-8.2%
108,900 Applied Power, Inc., Class A 3,164,906
83,600 Aptargroup, Inc. 2,246,750
100,500 C&D Technologies, Inc. 3,228,562
102,200 Carlisle Cos., Inc. 3,398,150
109,900 1 Ducommun, Inc. 1,153,950
64,000 1 Dycom Industries, Inc. 2,084,000
75,100 Harman International
Industries, Inc. 3,069,712
85,400 1 Mueller Industries, Inc. 2,727,462
38,100 1 Sanmina Corp. 3,431,381
133,900 Spartech Corp. 3,832,887
97,300 1 Terex Corp. 2,572,369
TOTAL 30,910,129
COMMUNICATION SERVICES-1.9%
94,800 1 Adelphia Business
Solutions, Inc. 2,689,950
83,800 1 MGC Communications, Inc. 2,304,500
32,300 1 Powertel, Inc. 1,901,662
12,400 1 Triton PCS, Inc. 437,100
TOTAL 7,333,212
CONSUMER CYCLICALS-16.3%
88,700 1 Action Performance Cos., Inc. 1,804,491
119,500 1 Acxiom Corp. 1,971,750
58,300 1 American Eagle Outfitters,
Inc. 2,495,969
98,500 1 Apollo Group, Inc., Class A 2,591,781
15,900 1 CMG Information Services, Inc. 1,740,056
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-CONTINUED
178,800 Casey's General Stores, Inc. $ 2,302,050
30,200 1 Catalina Marketing Corp. 2,827,475
98,300 1 DeVRY, Inc. 2,070,444
69,200 1 Dura Automotive Systems, Inc. 1,297,500
126,900 1 Gentex Corp. 2,181,094
61,000 Hughes Supply, Inc. 1,322,937
139,800 1 ITT Educational Services, Inc. 2,761,050
74,200 1 Insight Enterprises, Inc. 2,773,225
61,800 1 JAKKS Pacific, Inc. 2,533,800
74,100 1 Linens 'N Things, Inc. 2,945,475
66,300 1 O'Reilly Automotive, Inc. 2,892,337
246,900 Pier 1 Imports, Inc. 1,465,969
64,300 1 Profit Recovery Group
International, Inc. 2,648,356
71,500 1 Rent-A-Center, Inc. 1,309,344
27,700 Ryland Group, Inc. 571,312
66,000 Shopko Stores, Inc. 1,654,125
36,900 1 Stamps.com, Inc. 2,121,750
90,700 1 Stanley Furniture Co., Inc. 1,848,012
104,100 1 Sylvan Learning Systems, Inc. 1,346,794
35,000 1 Timberland Co., Class A 1,728,125
92,500 1 Toll Brothers, Inc. 1,618,750
35,600 Unifirst Corp. 436,100
91,500 1 Valuevision International,
Inc., Class A 2,990,906
176,900 Wolverine World Wide, Inc. 1,813,225
85,700 1 Zale Corp. 3,588,687
TOTAL 61,652,889
CONSUMER STAPLES-9.1%
179,000 1 Building One Services Corp. 1,991,375
44,500 1 Emmis Communications,
Corp., Class A 3,209,562
12,000 1 J&J Snack Foods Corp. 231,000
102,600 1 Jack in the Box, Inc. 2,468,812
146,100 1 Metamor Worldwide, Inc. 2,757,637
87,100 1 Mondavi Robert Corp., Class A 3,146,487
57,900 1 Patterson Dental Co. 2,609,119
121,900 Ruby Tuesday, Inc. 2,323,719
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER STAPLES-CONTINUED
123,000 Ruddick Corp. $ 2,098,687
24,400 1 Spanish Broadcasting
System, Inc. 649,650
157,481 1 Tetra Tech, Inc. 2,500,011
53,100 1 TiVo, Inc. 2,276,662
156,000 1 U.S. Foodservice, Inc. 2,993,250
77,300 1 Valassis Communications, Inc. 3,323,900
53,900 1 Whole Foods Market, Inc. 1,832,600
TOTAL 34,412,471
ENERGY-3.5%
79,700 Cross Timbers Oil Co. 886,662
62,100 Devon Energy Corp. 2,414,137
92,100 1 Newfield Exploration Co. 2,711,194
127,000 1 Pride International, Inc. 1,746,250
124,100 Santa Fe International Corp. 2,613,856
103,100 1 Tuboscope, Inc. 1,146,987
173,400 Vintage Petroleum, Inc. 1,885,725
TOTAL 13,404,811
FINANCIALS-9.5%
131,500 1 Affiliated Managers Group 3,517,625
95,300 Chittenden Corp. 2,942,388
51,900 City National Corp. 2,011,125
164,700 Community First
Bankshares, Inc. 3,134,447
109,189 1 Delphi Financial Group,
Inc., Class A 3,494,048
122,400 Enhance Financial Services
Group, Inc. 2,233,800
200,300 1 FirstFed Financial Corp. 3,204,800
77,209 Heller Financial, Inc. 1,833,714
85,000 Jefferies Group, Inc. 1,811,563
80,000 1 Mede America Corp. 1,780,000
180,100 North Fork Bancorp, Inc. 3,725,819
195,200 Republic Bancorp, Inc. 2,562,000
103,200 Sterling Bancorp 1,947,900
62,700 Texas Regional Bancshares,
Inc., Class A 1,751,681
TOTAL 35,950,910
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
HEALTH CARE-5.3%
62,700 Alpharma, Inc., Class A $ 2,206,256
97,700 1 Cephalon, Inc. 1,587,625
104,600 1 Eclipse Surgical
Technologies, Inc. 974,088
37,000 1 Express Scripts, Inc., Class A 1,817,625
94,500 Hooper Holmes, Inc. 2,539,688
103,500 1 Medicis Pharmaceutical
Corp., Class A 3,156,750
25,200 1 Medimmune, Inc. 2,822,400
19,000 1 MiniMed, Inc. 1,440,438
140,000 1 Sybron International Corp. 3,333,750
TOTAL 19,878,620
MISCELLANEOUS-0.9%
12,500 1 Nasdaq-100 Shares 1,643,750
13,000 S & P 500 Depository
Receipt 1,781,000
TOTAL 3,424,750
TECHNOLOGY-28.1%
94,000 1 AVT Corp. 3,149,000
81,200 1 Accrue Software, Inc. 4,364,500
92,300 1 Advantage Learning
Systems, Inc. 2,549,788
35,700 1 Aether Systems, Inc. 2,483,381
6,100 1 Akamai Technologies, Inc. 885,644
33,700 1 Applied Micro Circuits Corp. 2,622,281
43,100 1 Business Objects SA, ADR 3,103,200
102,200 1 CSG Systems International,
Inc. 3,506,738
35,800 1 Carrier Access Corp. 1,769,863
2,400 1 Chartered Semiconductor, ADR 79,650
37,000 1 Clarent Corp. 3,510,375
63,800 1 CommScope, Inc. 2,544,025
85,600 1 Complete Business
Solutions, Inc. 1,241,200
32,200 1 Comverse Technology, Inc. 3,654,700
81,300 1 Concentric Network Corp. 2,083,313
31,300 1 Conexant Systems, Inc. 2,922,638
52,500 1 Cree Research, Inc. 2,241,094
43,700 1 Etec Systems, Inc. 1,668,794
60,750 FactSet Research Systems 4,036,078
34,800 Gadzoox Networks, Inc. 1,657,350
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
17,700 1 Intertrust Technologies Corp. $ 964,650
7,700 1 Interwoven, Inc. 603,488
19,000 1 JNI Corp. 1,015,313
35,600 1 Keynote Systems, Inc. 1,615,350
56,500 1 Legato Systems, Inc. 3,036,875
59,000 1 Liberate Technologies, Inc. 4,019,375
65,500 1 Macromedia, Inc. 4,220,656
172,300 1 Mastech Corp. 2,950,638
67,000 1 Medquist, Inc. 2,144,000
73,000 1 Micrel, Inc. 3,969,375
38,300 1 Orbotech Ltd. 2,992,188
60,000 1 Packeteer, Inc. 2,040,000
56,800 1 Paradyne Networks, Inc. 1,725,300
41,000 1 Peregrine Systems, Inc. 1,798,875
14,100 1 Phone.com, Inc. 2,897,550
100,000 1 Photon Dynamics, Inc. 3,025,000
30,000 1 Qlogic Corp. 3,123,750
6,300 1 QuickLogic Corp. 115,763
73,100 1 Semtech Corp. 2,800,644
25,500 1 Software.com, Inc. 1,716,469
4,800 1 Sycamore Networks, Inc. 1,032,000
70,700 1 Tibco Software, Inc. 2,757,300
91,000 1 Varian Semiconductor
Equipment Associates, Inc. 2,058,875
76,000 1 Vitesse Semiconductor Corp. 3,486,500
6,700 1 Vixel Corp. 214,400
TOTAL 106,397,946
TRANSPORTATION-1.4%
64,800 Airborne Freight Corp. 1,393,200
79,800 1 Pierce Leahy Corp. 2,349,113
5,000 USFreightways Corp. 226,563
93,425 Werner Enterprises, Inc. 1,488,961
TOTAL 5,457,837
UTILITIES-3.4%
55,200 1 Calpine Corp. 3,180,900
49,200 Central Hudson Gas &
Electric Corp. 1,841,925
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS-continued
UTILITIES-CONTINUED
67,200 New Jersey Resources Corp. $ 2,734,200
75,300 Piedmont Natural Gas, Inc. 2,409,600
79,500 United Water Resources, Inc. 2,683,125
TOTAL 12,849,750
TOTAL COMMON STOCKS
(IDENTIFIED COST $298,420,293) 351,727,868
U.S. TREASURY OBLIGATION-5.3%
$ 20,000,000 2 United States Treasury
Bill, 12/16/1999
(identified cost $19,887,700) 19,897,400
REPURCHASE AGREEMENT-6.5%
24,640,000 3 ABN AMRO, Inc., 5.34%,
dated 10/29/1999, due
11/1/1999 (at amortized
cost) 24,640,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$342,947,993) 4 $ 396,265,268

</TABLE>

1 Non-income producing security.

2 Represents a security held as collateral which is used to ensure the Fund is
able to satisfy the obligations of its outstanding long futures contracts. The
underlying face amount, at value, of open index futures is $20,987,050 at
October 31, 1999, which represents 5.5% of net assets.

4 The cost of investments for federal tax purposes amounts to $343,063,898. The
net unrealized appreciation of investments on a federal tax basis amounts to
$53,201,370 which is comprised of $77,476,775 appreciation and $24,275,405
depreciation at October 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($378,567,175) at October 31, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
PCS -Participation Certificates
SA -Support Agreement

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$342,947,993 and tax
cost $343,063,898) $ 396,265,268
Cash 151,566
Income receivable 117,811
Receivable for investments
sold 4,615,111
Receivable for shares sold 1,149,943
Receivable for daily
variation margin 396,500
Deferred organizational
costs 28,038
TOTAL ASSETS 402,724,237
LIABILITIES:
Payable for investments
purchased $ 22,974,780
Payable for shares
redeemed 881,775
Accrued expenses 300,507
TOTAL LIABILITIES 24,157,062
Net assets for 20,556,017
shares outstanding $ 378,567,175
NET ASSETS CONSIST OF:
Paid in capital $ 328,191,775
Net unrealized
appreciation of
investments and futures
contracts 54,411,250
Accumulated net realized
loss on investments and
futures contracts (4,035,850)
TOTAL NET ASSETS $ 378,567,175
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
CLASS A SHARES:
Net Asset Value Per Share
($148,982,499 / 7,958,153
shares outstanding) $18.72
Offering Price Per Share
(100/94.50 of $18.72) 1 $19.81
Redemption Proceeds Per
Share $18.72
CLASS B SHARES:
Net Asset Value Per Share
($197,509,387 / 10,835,954
shares outstanding) $18.23
Offering Price Per Share $18.23
Redemption Proceeds Per
Share (94.50/100 of
$18.23) 1 $17.23
CLASS C SHARES:
Net Asset Value Per Share
($32,075,289 / 1,761,910
shares outstanding) $18.20
Offering Price Per Share $18.20
Redemption Proceeds Per
Share (99.00/100 of
$18.20) 1 $18.02

</TABLE>

1 See "What Do Shares Cost?" in the prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED OCTOBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,729,138
Interest 564,087
TOTAL INCOME 2,293,225
EXPENSES:
Investment advisory fee $ 2,903,193
Administrative personnel
and services fee 291,868
Custodian fees 26,402
Transfer and dividend
disbursing agent fees and
expenses 847,729
Directors'/Trustees' fees 6,342
Auditing fees 15,654
Legal fees 2,893
Portfolio accounting fees 108,753
Distribution services fee-
Class B Shares 1,519,607
Distribution services fee-
Class C Shares 262,706
Shareholder services fee-
Class A Shares 373,626
Shareholder services fee-
Class B Shares 506,536
Shareholder services fee-
Class C Shares 87,569
Share registration costs 91,124
Printing and postage 155,416
Insurance premiums 1,942
Miscellaneous 9,047
TOTAL EXPENSES 7,210,407
WAIVER:
Waiver of investment
advisory fee (353,345)
Net expenses 6,857,062
Net operating loss (4,563,837)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FUTURES CONTRACTS:
Net realized gain on
investments and futures
contracts 38,258,310
Net change in unrealized
appreciation of
investments and futures
contracts 43,090,432
Net realized and
unrealized gain on
investments and
futures contracts 81,348,742
Change in net assets
resulting from operations $ 76,784,905

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED OCTOBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (4,563,837) $ (4,997,810)
Net realized gain/(loss)
on investments and futures
contracts ($38,974,309 and
($41,800,279),
respectively, as computed
for federal tax purposes) 38,258,310 (42,268,177)
Net change in unrealized
appreciation/(depreciation
) on investments and
futures contracts 43,090,432 (35,042,376)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 76,784,905 (82,308,363)
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
realized gain on
investments and futures
contracts
Class A Shares - (20,318)
Class B Shares - (28,368)
Class C Shares - (4,031)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS - (52,717)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 470,298,177 810,112,441
Net asset value of shares
issued to shareholders in
payment of
distributions declared - 58,240
Cost of shares redeemed (539,271,539) (701,511,227)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (68,973,362) 108,659,454
Change in net assets 7,811,543 26,298,374
NET ASSETS:
Beginning of period 370,755,632 344,457,258
End of period $ 378,567,175 $ 370,755,632

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.26 $18.75 $14.68 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.13) (0.14) 2 (0.04) (0.05) 3
Net realized and
unrealized gain (loss) on
investments and futures
contracts 3.59 (3.35) 4.33 4.75
TOTAL FROM INVESTMENT
OPERATIONS 3.46 (3.49) 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 - (0.00) 4 (0.22) -
TOTAL DISTRIBUTIONS - (0.00) (0.22) (0.02)
NET ASSET VALUE, END OF
PERIOD $18.72 $15.26 $18.75 $14.68
TOTAL RETURN 5 22.67% (18.60%) 29.55% 47.06%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 1.40% 1.35% 1.44% 3.05%
Net operating loss 6 (0.81%) (0.89%) (0.65%) (2.09%)
Expenses (after waivers) 1.31% 1.28% 1.44% 1.35%
Net operating loss (after
waivers) (0.72% ) (0.82%) (0.65%) (0.39%)
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $148,983 $142,250 $134,903 $23,242
Portfolio turnover 83% 59% 118% 83%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

3 Per share information present is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.96 $18.53 $14.62 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.27) (0.28) 2 (0.09) (0.16) 3
Net realized and
unrealized gain (loss) on
investments and futures
contracts 3.54 (3.29) 4.22 4.78
TOTAL FROM INVESTMENT
OPERATIONS 3.27 (3.57) 4.13 4.62
LESS DISTRIBUTIONS:
Distributions from net
realized gain on
investments and futures
contracts - (0.00) 4 (0.22) -
NET ASSET VALUE, END OF
PERIOD $18.23 $14.96 $18.53 $14.62
TOTAL RETURN 5 21.86% (19.25% ) 28.56% 46.20%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 2.15% 2.10% 2.19% 3.80%
Net operating loss 6 (1.56% ) (1.64% ) (1.40%) (2.97%)
Expenses (after waivers) 2.06% 2.03% 2.19% 2.10%
Net operating loss (after
waivers) (1.47% ) (1.57% ) (1.40% ) (1.27%)
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $197,509 $195,188 $183,180 $32,112
Portfolio turnover 83% 59% 118% 83%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

3 Per share information present is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED OCTOBER 31 1999 1 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.95 $18.51 $14.60 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.29) (0.27) 2 (0.10) (0.16) 3
Net realized and
unrealized gain (loss) on
investments and futures
contracts 3.54 (3.29) 4.23 4.76
TOTAL FROM INVESTMENT
OPERATIONS 3.25 (3.56) 4.13 4.60
LESS DISTRIBUTIONS:
Distributions from net
realized gain on
investments and
futures contracts - (0.00) 4 (0.22) -
NET ASSET VALUE, END OF
PERIOD $18.20 $14.95 $18.51 $14.60
TOTAL RETURN 5 21.74% (19.22%) 28.60% 46.00%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 6 2.15% 2.10% 2.19% 3.80%
Net operating loss 6 (1.56%) (1.64%) (1.40%) (2.98%)
Expenses (after waivers) 2.06% 2.03% 2.19% 2.10%
Net operating loss (after
waivers) (1.47%) (1.57%) (1.40%) (1.28%)
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $32,075 $33,318 $26,375 $5,496
Portfolio turnover 83% 59% 118% 83%

</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte & Touche
LLP. Each of the previous years was audited by other auditors.

3 Per share information present is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.

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

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

6 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

OCTOBER 31, 1999

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 six 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principals.
These differences are primarily due to differing treatments for net operating
losses. The following reclassifications have been made to the financial
statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED
ACCUMULATED DISTRIBUTIONS IN
NET REALIZED EXCESS OF NET
LOSS INVESTMENT INCOME PAID IN CAPITAL
<S> <C> <C>
$4,563,837 $20,960 ($4,584,797)

</TABLE>

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

FEDERAL TAXES

At October 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $2,825,970, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire in
expire in 2006.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

DEFERRED EXPENSES

FUTURES CONTRACTS

The Fund purchases stock index futures contracts to hedge against the effects of
changes in the value of portfolio securities due to anticipated changes in
interest rates and market conditions. 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. When a contract is
closed, the Fund recognizes a realized gain or loss. For the period ended
October 31, 1999, the Fund had realized gains/losses of $497,761 on futures
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 October 31, 1999, the Fund had outstanding futures contracts as set forth
below:

<TABLE>

EXPIRATION CONTRACTS TO UNREALIZED
DATE DELIVER/RECEIVE POSITION APPRECIATION
<S> <C> <C> <C>
December 1999 61 S&P 500 Futures Long $1,093,975

</TABLE>

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>

YEAR ENDED OCTOBER 31 1999 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 22,563,662 $ 386,446,755 37,888,409 $ 673,621,012
Shares issued to
shareholders in payment of
distributions declared - - 765 14,034
Shares redeemed (23,929,948) (410,809,125) (35,758,633) (637,209,629)
NET CHANGE RESULTING FROM
CLASS A SHARE
TRANSACTIONS (1,366,286) $ (24,362,370) 2,130,541 $36,425,417

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,562,644 $ 42,926,613 5,918,299 $ 105,138,404
Shares issued to
shareholders in payment of
distributions declared - - 2,507 40,446
Shares redeemed (4,770,027) (79,704,128) (2,761,407) (47,086,005)
NET CHANGE RESULTING FROM
CLASS B SHARE
TRANSACTIONS (2,207,383) $ (36,777,515) 3,159,399 $58,092,845

<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,442,114 $ 40,924,809 1,872,055 $ 31,353,025
Shares issued to
shareholders in payment of
distributions declared - - 208 3,760
Shares redeemed (2,909,559) (48,758,286) (1,068,067) (17,215,593)
NET CHANGE RESULTING FROM
CLASS C SHARE
TRANSACTIONS (467,445) $ (7,833,477) 804,196 $ 14,141,192
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (4,041,114) $ (68,973,362) 6,094,136 $ 108,659,454

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 Adviser may voluntarily choose
to waive any portion of its fee and/or reimbursement at any time at its sole
discretion. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.

ADMINISTRATIVE FEE

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.

<TABLE>

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

</TABLE>

For the year ended October 31, 1999, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSSC may voluntarily choose to waive any portion of its fee. FSSC 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, 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 and/or start-up administrative service expenses of $45,877 were
borne initially by FServ. The Fund has agreed to reimburse FServ for the
organizational and/or start-up administrative expenses during the five-year
period following effective date. For the period ended October 31, 1999, the Fund
expensed $9,152 of organizational expenses.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 317,018,020
Sales $ 380,809,823

</TABLE>

YEAR 2000 (UNAUDITED)

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.

CHANGE OF INDEPENDENT AUDITOR (UNAUDITED)

Independent Auditors' Report

TO THE TRUSTEES OF FEDERATED EQUITY FUNDS

AND THE SHAREHOLDERS OF FEDERATED SMALL CAP STRATEGIES FUND:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Small Cap Strategies Fund (the
"Fund") as of October 31, 1999, and the related statement of operations, the
statement of changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1998, and the financial highlights for each of the years in the three year
period ended October 31, 1998 were audited by other auditors whose report dated
December 21, 1998, expressed an unqualified opinion on those statements.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Small Cap
Strategies Fund as of October 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the year then ended
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

December 17, 1999

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

JOHN F. CUNNINGHAM

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

GLEN R. JOHNSON

President

J. THOMAS MADDEN

Chief Investment Officer

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT

AS OF OCTOBER 31, 1999

Federated Small Cap Strategies Fund

Established 1995

4TH ANNUAL REPORT

[Graphic]
Federated
Federated Small Cap Strategies Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 314172404

Cusip 314172503

Cusip 314172602

G01658-04 (12/99)

[Graphic]

APPENDIX

FEDERATED AGGRESSIVE GROWTH FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class A Shares of Federated Aggressive Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Small Growth Index (LSGI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
A Shares of the Federated Aggressive Growth Fund and the S&P 500, LSGI for the
period from November 25, 1996 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class A
Shares of Federated Aggressive Growth Fund as compared to the S&P 500 and the
LSGI, the ending values are $19,885, $18,819 and $14,114, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class A Shares of Federated Aggressive Growth Fund: total
return figures for the one year and start of performance average annual total
returns. The corresponding total return figures are as follows: 77.53% and
26.41%, respectively.

FEDERATED AGGRESSIVE GROWTH FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class B Shares of Federated Aggressive Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Small Growth Index (LSGI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
B Shares of the Federated Aggressive Growth Fund, the S&P 500 and LSGI for the
period from November 25, 1996 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class B
Shares of Federated Aggressive Growth Fund as compared to the S&P 500 and the
LSGI, the ending values are $19,183, $18,819 and $14,114, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class B Shares of Federated Aggressive Growth Fund: total
return figures for the one year and start of performance average annual total
returns. The corresponding total return figures are as follows: 80.95% and
27.19%, respectively.

FEDERATED AGGRESSIVE GROWTH FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class C Shares of Federated Aggressive Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Small Growth Index (LSGI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
C Shares of the Federated Aggressive Growth Fund, the S&P 500 and LSGI for the
period from November 25, 1996 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class C
Shares of Federated Aggressive Growth Fund as compared to the S&P 500 and the
LSGI; the ending values are $20,442, $18,819 and $14,114, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class C Shares of Federated Aggressive Growth Fund: total
return figures for the one year and start of performance average annual total
returns. The corresponding total return figures are as follows: 85.39% and
27.83%, respectively.

<PAGE>

FEDERATED CAPITAL APPRECIATION FUND - Two Ways You May Seek To Invest For
Success 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 the computation periods
from1/31/77 to 10/31/99. The "y" axis is measured in increments of $100,000
ranging from $0 to $700,000 and indicates that the ending value of a
hypothetical initial investment of $23,000 in Federated Capital Appreciation
Fund's Class A Shares, assuming the reinvestment of capital gains and dividends,
would have grown to $603,681 on 10/31/99.

FEDERATED CAPITAL APPRECIATION FUND - One Step At A Time
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 1/31/77to 10/31/99. The
"y" axis is measured in increments of $50,000 ranging from $0to $250,000 and
indicates that the ending value of a hypothetical initial investment of $1,000
and subsequent yearly investments of $1,000 over 22 years, assuming the
reinvestment of capital gains and dividends, in Federated Capital Appreciation
Fund's Class A Shares would have grown to $202,849 on 10/31/99.

FEDERATED CAPITAL APPRECIATION FUND - Hypothetical Investor Profile: Investing
For A College Education 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 10/31/89 to 10/31/99. The "y" axis is measured in increments of
$20,000 ranging from $0 to $120,000 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 $101,940 on 10/31/99.

FEDERATED CAPITAL APPRECIATION FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class A Shares of Federated Capital Appreciation Fund are
represented by a solid line, whereas the Standard & Poor's 500 Index (S&P 500)
is represented by a dotted line and the Lipper Growth and Income Funds Average
(LGIFA) is represented by a dashed line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class A Shares of the Federated Capital Appreciation Fund, the
S&P 500 and the LGIFA for the period from October 31, 1989 (Start of
Performance) to October 31, 1999. The "y" axis reflect the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Class A Shares of Federated Capital
Appreciation Fund as compared to the S&P 500 and the LGIFA; the ending values
are $46,538 $51,396 and $37,393, respectively. Following the list of components
that correspond to the line graph is the total return data for the Class A
Shares of Federated Capital Apreciation Fund: total return figures for the one
year, five years, ten years and start of performance average annual total
returns. The corresponding total return figures are as follows:
33.40%, 22.63%, 15.96% and 15.18%, respectively.

FEDERATED CAPITAL APPRECIATION FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class B Shares of Federated Capital Appreciation Fund are
represented by a solid line, whereas the Standard & Poor's 500 Index (S&P 500)
is represented by a dotted line and the Lipper Growth and Income Funds Average
(LGIFA) is represented by a dashed line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class B Shares of the Federated Capital Appreciation Fund, the
S&P 500 and the LGIFA for the period from January 4, 1996 (Start of Performance)
to October 31, 1999. The "y" axis reflect the cost of the investment. The "x"
axis reflects computation periods from the ending value of the hypothetical
investment in the Class B Shares of Federated Capital Appreciation Fund as
compared to the S&P 500 and the LGIFA; the ending values are $21,434 $23,533 and
$18,955, respectively. Following the list of components that correspond to the
line graph is the total return data for the Class B Shares of Federated Capital
Appreciation Fund: total return figures for the one year and start of
performance average annual total returns. The corresponding total return figures
are as follows: 34.62% and 22.05%, respectively.

FEDERATED CAPITAL APPRECIATION FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class C Shares of Federated Capital Appreciation Fund are
represented by a solid line, whereas the Standard & Poor's 500 Index (S&P 500)
is represented by a dotted line and the Lipper Growth and Income Funds Average
(LGIFA) is represented by a dashed line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class C Shares of the Federated Capital Appreciation Fund, the
S&P 500 and the LGIFA for the period from January 4, 1996 (Start of Performance)
to October 31, 1999. The "y" axis reflect the cost of the investment. The "x"
axis reflects computation periods from the ending value of the hypothetical
investment in the Class C Shares of Federated Capital Appreciation Fund as
compared to the S&P 500 and the LGIFA; the ending values are $21,713 $23,533 and
$18,955, respectively. Following the list of components that correspond to the
line graph is the total return data for the Class C Shares of Federated Capital
Appreciation Fund: total return figures for the one year and start of
performance average annual total returns. The corresponding total return figures
are as follows: 39.09% and 22.47%, respectively.

FEDERATED COMMUNIATIONS TECHNOLOGY FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class A Shares of Federated Communications Technology Fund are
represented by a solid line, whereas the Merrill Lynch 100 Technology Index
(ML100TI) is represented by a dotted line, the Lipper Science and Technology
Average (LSTA) is represented by a dashed line and the NASDAQ Telecommunications
Index (NASDAQTI) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class A Shares of the Federated Communications Technology
Fund, the ML100TI, LSTA and NASDAQTI for the period from September 21, 1999
(Start of Performance) to October 31, 1999. The "y" axis reflect the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Class A Shares of Federated Communications
Technology Fund as compared to the ML100TI, LSTA and NASDAQTI; the ending values
are $11,737, $10,985, $11,081 and $11,449, respectively. Following the list of
components that correspond to the line graph is the total return data for the
Class A Shares of Federated Communications Technology Fund: total return figure
for the start of performance average annual total return. The corresponding
total return figure is 17.39%.

FEDERATED COMMUNIATIONS TECHNOLOGY FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class B Shares of Federated Communications Technology Fund are
represented by a solid line, whereas the Merrill Lynch 100 Technology Index
(ML100TI) is represented by a dotted line, the Lipper Science and Technology
Average (LSTA) is represented by a dashed line and the NASDAQ Telecommunications
Index (NASDAQTI) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class B Shares of the Federated Communications Technology
Fund, the ML100TI, LSTA and NASDAQTI for the period from September 21, 1999
(Start of Performance) to October 31, 1999. The "y" axis reflect the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Class B Shares of Federated Communications
Technology Fund as compared to the ML100TI, LSTA and NASDAQTI; the ending values
are $11,870, $10,985, $11,081 and $11,449, respectively. Following the list of
components that correspond to the line graph is the total return data for the
Class B Shares of Federated Communications Technology Fund: total return figure
for the start of performance average annual total return. The corresponding
total return figure is 18.70%.

FEDERATED COMMUNIATIONS TECHNOLOGY FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class C Shares of Federated Communications Technology Fund are
represented by a solid line, whereas the Merrill Lynch 100 Technology Index
(ML100TI) is represented by a dotted line, the Lipper Science and Technology
Average (LSTA) is represented by a dashed line and the NASDAQ Telecommunications
Index (NASDAQTI) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $10,000
investment in the Class C Shares of the Federated Communications Technology
Fund, the ML100TI, LSTA and NASDAQTI for the period from September 21, 1999
(Start of Performance) to October 31, 1999. The "y" axis reflect the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Class C Shares of Federated Communications
Technology Fund as compared to the ML100TI, LSTA and NASDAQTI; the ending values
are $12,320, $10,985, $11,081 and $11,449, respectively. Following the list of
components that correspond to the line graph is the total return data for the
Class C Shares of Federated Communications Technology Fund: total return figure
for the start of performance average annual total return. The corresponding
total return figure is 23.20%.

FEDERATED GROWTH STRATEGIES FUND - Two Ways You May Seek To Invest For Success
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 the computation periods from 8/23/84 to
10/31/99. The "y" axis is measured in increments of $50,000 ranging from $0 to
$200,000 and indicates that the ending value of a hypothetical initial
investment of $16,000 in Federated Growth Strategies Fund's Class A Shares,
assuming the reinvestment of capital gains and dividends, would have grown to
$183,368 on 10/31/99.

FEDERATED GROWTH STRATEGIES FUND - One Step At A Time
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 8/23/84 to 10/31/99.
The "y" axis is measured in increments of $10,000 ranging from $0 to $80,000 and
indicates that the ending value of a hypothetical initial investment of $1,000
and subsequent yearly investments of $1,000 over 15 years, assuming the
reinvestment of capital gains and dividends, in Federated Growth Strategies
Fund's Class A Shares would have grown to $67,826 on 10/31/99.

FEDERATED GROWTH STRATEGIES FUND - Hypothetical Investor Profile: Investing For
A College Education 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 10/31/89
to 10/31/99. 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 $99,858 on
10/31/99.

FEDERATED GROWTH STRATEGIES FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class A Shares of Federated Growth Strategies Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Growth Fund Index (LGFI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
A Shares of the Federated Growth Strategies Fund, the S&P 500 and the LGFI for
the period from October 31, 1989 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class A
Shares of Federated Growth Strategies Fund as compared to the S&P 500 and the
LGFI; the ending values are $45,261, $51,396 and $42,297, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class A Shares of Federated Growth Strategies Fund: total
return figures for the one year, five years, ten years and start of performance
average annual total returns. The corresponding total return figures are as
follows: 51.41%, 25.23%, 15.64% and 17.41%, respectively.

FEDERATED GROWTH STRATEGIES FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class B Shares of Federated Growth Strategies Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Growth Fund Index (LGFI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
B Shares of the Federated Growth Strategies Fund, the S&P 500 and the LGFI for
the period from August 16, 1995 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class B
Shares of Federated Growth Strategies Fund as compared to the S&P 500 and the
LGFI; the ending values are $24,939, $26,306 and $21,511, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class B Shares of Federated Growth Strategies Fund: total
return figures for the one year and start of performance average annual total
returns. The corresponding total return figures are as follows: 53.50% and
24.24%, respectively.

FEDERATED GROWTH STRATEGIES FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class C Shares of Federated Growth Strategies Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Lipper Growth Fund Index (LGFI) is
represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 investment in the Class
C Shares of the Federated Growth Strategies Fund, the S&P 500 and the LGFI for
the period from August 16, 1995 (Start of Performance) to October 31, 1999. The
"y" axis reflect the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Class C
Shares of Federated Growth Strategies Fund as compared to the S&P 500 and the
LGFI; the ending values are $25,271, $26,306 and $21,511, respectively.
Following the list of components that correspond to the line graph is the total
return data for the Class C Shares of Federated Growth Strategies Fund: total
return figures for the one year and start of performance average annual total
returns. The corresponding total return figures are as follows: 58.08% and
24.63%, respectively.

FEDERATED LARGE CAP GROWTH FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class A Shares of Federated Large Cap Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Russell 200 Index (RUS2) is represented by
a dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 investment in the Class A Shares of
the Federated Large Cap Growth Fund, the S&P 500 and the RUS2 for the period
from December 29, 1998 (Start of Performance) to October 31, 1999. The "y" axis
reflect the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Class A Shares of
Federated Large Cap Growth Fund as compared to the S&P 500 and the RUS2; the
ending values are $12,080, $11,091 and $10,571, respectively. Following the list
of components that correspond to the line graph is the total return data for the
Class A Shares of Federated Large Cap Growth Fund: total return figure for the
start of performance average annual total return. The corresponding total return
figure is 20.82%.

FEDERATED LARGE CAP GROWTH FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class B Shares of Federated Large Cap Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Russell 200 Index (RUS2) is represented by
a dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 investment in the Class B Shares of
the Federated Large Cap Growth Fund, the S&P 500 and the RUS2 for the period
from December 29, 1998 (Start of Performance) to October 31, 1999. The "y" axis
reflect the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Class B Shares of
Federated Large Cap Growth Fund as compared to the S&P 500 and the RUS2; the
ending values are $12,203, $11,091 and $10,571, respectively. Following the list
of components that correspond to the line graph is the total return data for the
Class B Shares of Federated Large Cap Growth Fund: total return figure for the
start of performance average annual total return. The corresponding total return
figure is 22.03%.

FEDERATED LARGE CAP GROWTH FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Class C Shares of Federated Large Cap Growth Fund are represented
by a solid line, whereas the Standard & Poor's 500 Index (S&P 500) is
represented by a dotted line and the Russell 200 Index (RUS2) is represented by
a dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 investment in the Class C Shares of
the Federated Large Cap Growth Fund, the S&P 500 and the RUS2 for the period
from December 29, 1998 (Start of Performance) to October 31, 1999. The "y" axis
reflect the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Class C Shares of
Federated Large Cap Growth Fund as compared to the S&P 500 and the RUS2; the
ending values are $12,653, $11,091 and $10,571, respectively. Following the list
of components that correspond to the line graph is the total return data for the
Class C Shares of Federated Large Cap Growth Fund: total return figure for the
start of performance average annual total return. The corresponding total return
figure is 26.53%.

FEDERATED SMALL CAP STRATEGIES FUND - How You May Seek To Invest For Success
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 the computation periods from 11/1/95 to
10/31/99. The "y" axis is measured in increments of $1,000 ranging from $0 to
$8,000 and indicates that the ending value of a hypothetical initial investment
of $4,000 in Federated Small Cap Strategies Fund's Class A Shares, assuming the
reinvestment of capital gains and dividends, would have grown to $7,191 on
10/31/99.

FEDERATED SMALL CAP STRATEGIES FUND - Hypothetical Investor Profile
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 11/1/95 to 10/31/99.
The "y" axis is measured in increments of $30,000 ranging from $0 to $120,000
and indicates that the ending value of a hypothetical initial investment of
$50,000 in Federated Small Cap Strategies Fund's Class A Shares would have grown
to $89,175 on 10/31/99, taking into account annual 7% withdrawals as income
after the first three years.

FEDERATED SMALL CAP STRATEGIES FUND - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Small Cap Strategies Fund are represented by a solid line.
The Russell 2000 Index (the "RUS2") is represented by a dotted line. The
Standard & Poor's 600 Small Cap Index (the "S&P600") is represented by a broken
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class A Shares of the Fund,
the RUS2 and the S&P600. The "x" axis reflects computation periods from 11/1/95
to 10/31/99. The "y" axis reflects the cost of investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares as compared to the RUS2 and the S&P600. The ending values were $17,974,
$15,261 and $15,770, respectively. Following the list of components that
correspond to the line graph is the total return data for the Class A Shares of
Federated Small Cap Strategies Fund: total return figures for the one year and
start of performance average annual total returns. The corresponding total
return figures are as follows: 15.91% and 15.80%, respectively.

FEDERATED SMALL CAP STRATEGIES FUND - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Small Cap Strategies Fund are represented by a solid line.
The Russell 2000 Index (the "RUS2") is represented by a dotted line. The
Standard & Poor's 600 Small Cap Index (the "S&P600") is represented by a broken
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class B Shares of the Fund,
the RUS2 and the S&P600. The "x" axis reflects computation periods from 11/1/95
to 10/31/99. The "y" axis reflects the cost of investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class B
Shares as compared to the RUS2 and the S&P600. The ending values were $18,484,
$15,261 and $15,770, respectively. Following the list of components that
correspond to the line graph is the total return data for the Class B Shares of
Federated Small Cap Strategies Fund: total return figures for the one year and
start of performance average annual total returns. The corresponding total
return figures are as follows: 16.36% and 16.14%, respectively.

FEDERATED SMALL CAP STRATEGIES FUND - Class C Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Small Cap Strategies Fund are represented by a solid line.
The Russell 2000 Index (the "RUS2") is represented by a dotted line. The
Standard & Poor's 600 Small Cap Index (the "S&P600") is represented by a broken
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class C Shares of the Fund,
the RUS2 and the S&P600. The "x" axis reflects computation periods from 11/1/95
to 10/31/99. The "y" axis reflects the cost of investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class C
Shares as compared to the RUS2 and the S&P600. The ending values were $18,464,
$15,261 and $15,770, respectively. Following the list of components that
correspond to the line graph is the total return data for the Class C Shares of
Federated Small Cap Strategies Fund: total return figures for the one year and
start of performance average annual total returns. The corresponding total
return figures are as follows: 20.74% and 16.57%, respectively.