FEDERATED EQUITY FUNDS
N-30D, 2000-12-22

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Federated Investors
World-Class Investment Manager

Federated Aggressive Growth Fund

A Portfolio of Federated Equity Funds

4TH ANNUAL REPORT

October 31, 2000

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

President

Federated Aggressive Growth Fund

President's Message

Dear Shareholder:

Federated Aggressive Growth Fund was created in 1996, and I am pleased to present its fourth Annual Report. As of October 31, 2000, the fund's total net assets of $388.9 million were spread across approximately 130 stocks in a variety of small, mid, and large-cap companies. These are not necessarily household names, (i.e. QLogic Corp., Alexion and Pharmaceuticals Inc.), but the companies are selected for their growth potential. The fund's managers seek to buy companies you will learn of in the next year or so--these are stocks for aggressive stock owners, and they are volatile.

To best demonstrate the Fund's volatility, the Fund's Class A Shares total returns at net asset value in 1997 rose 33.21%, in 1998 declined 49.12%, in 1999 rose 103.76% and in 2000 declined 87.52% as of October 31, 2000.¹ This investment in aggressive stocks is certainly a long-term investment vehicle.

This report covers the fund's fiscal year which is the 12-month period from November 1, 1999 to October 31, 2000. This report 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 discussion 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.

Federated Aggressive Growth Fund's portfolio was diversified in 11 industry sectors. Its focus, however, was on technology (65.0% of net assets) and communication services (4.1% of net assets). The stocks in these two sectors experienced substantial volatility during 2000.

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.

1 Performance quoted reflects past performance and is not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns for the periods noted from 1997 through 2000 were: Class B: 32.75%, (49.31%), 103.01%, and (86.10%), respectively, and C Shares: 32.04%, (48.53%), 102.88%, and (86.79%), respectively. Returns do not reflect any sales charges.

Individual share class total return performance, including capital gains distributions were as follows.¹

	Total Return	Capital Gains	Net Asset Value Change
Class A Shares	0.33%	$0.199	$21.02 to $20.92 =(0.48%)
Class B Shares	(0.35%)	$0.199	$20.64 to $20.40 =(1.16%)
Class C Shares	(0.40%)	$0.199	$20.54 to $20.29 =(1.22%)

Of course, we continued to experience significant day-to-day volatility in the stock market. Regardless of the market's fluctuations, over time, you have two easy, convenient ways to increase your opportunity to participate in the growth of quality American companies. First, if you are not already doing so, you can reinvest your dividends and capital gains automatically in additional shares--help your shares increase in number--this increases the number of shares in your account through compounding. Second, you can "pay yourself first" by investing in the fund through a systematic investment program. This program withdraws a specific amount from your checking account on a regular basis to purchase more fund shares.² For more information, please contact your investment representative.

Thank you for entrusting a portion of your wealth to Federated Aggressive Growth Fund. As always, we welcome your comments and suggestions.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

1 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 (5.18%), (5.79%) and (1.39%) respectively.

2 Systematic investing does not assure a profit or protect against a 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. Current performance information is available at our website: www.federatedinvestors.com or by calling 1-800-341-7400.

Keith J. Sabol

Vice President

Federated Investment Management
Company

Aash M. Shah

Vice President

Federated Investment Management
Company

Investment Review

What is your appraisal of the fund's fiscal year, which saw a great deal of volatility?

It was one of the worst years for high growth stocks in some time, and the fund gave up about half of last year's total returns. Two factors contributed to the volatility of the fund's shares this year. First, the stocks owned in the fund have earnings growth rates substantially higher than the market (roughly 45% per year versus 25% per year in the S&P 600 Barra Small Cap Growth Index.¹ High growth stocks tend to be more volatile than lower growth rate stocks. Second, the fund concentrated a substantial amount of its holdings in the technology sector. Most technology stocks--large or small,--known or unknown, in semiconductors, software, Internet or communications-related issues declined in 2000.

Class A, B and C share returns were 0.33%, (0.35%) and (0.40%) respectively, based on net asset value for the 12-month reporting period ending October 31, 2000.

1 The S&P 600 Barra Growth Index is an unmanaged index comprising small cap companies with higher price-to-book ratios--a characteristic associated with growth stocks.

What have you bought in this market?

Varian Semiconductor (0.4% of net assets) is a leading provider of ion implantation equipment used in the manufacture of integrated circuits. The shares traded for roughly five times their forecasted earnings despite the company's 23% growth rate. We believe the company is a possible acquisition candidate.

Credence Systems (0.8% of net assets) designs and manufactures automatic test equipment used in testing semiconductor integrated circuits. Shares recently traded at seven times their forecasted earnings and roughly 1.5 times their book value--levels reminiscent of the floors reached during 1998.

Zomax (1.0% of net assets) is an outsource service provider to publishers of software and multimedia products. This is a high, fixed-cost business with tremendous operating leverage. Capacity utilization is down on the addition of capacity and on slowness in Europe, causing weak near-term earnings. The company has roughly 40% of its value in cash on the balance sheet, generates free cash flow, and is valued at only 6.6 times its earnings per share, despite growing earnings at 20% per year over the long run.

What were the fund's top ten holdings as of October 31, 2000, and what were the industry sector weightings?

Name		Percentage of Net Assets
CuraGen Corp.		1.9%

Qlogic Corp.		1.8%

NetIQ Corp.		1.6%

Alpha Industries, Inc.		1.4%

C-COR.NET Corp.		1.3%

Alexion Pharmaceuticals, Inc.		1.3%

Protein Design Laboratories, Inc.		1.3%

Hi/fn, Inc.		1.3%

Aurora Biosciences, Inc.		1.2%

PRI Automation, Inc.		1.2%

TOTAL		14.3%

Sector	Percentage of Net Assets	Percentage of S&P 600 Barra Growth Index

Technology	65.0%	37.3%

Health Care	10.4%	20.1%

Consumer Cyclicals	7.6%	5.2%

Capital Goods	4.6%	3.5%

Communications Services	4.1%	3.7%

Energy	3.2%	5.7%

Consumer Staples	2.2%	2.2%

Finance	1.4%	8.0%

Transportation	1.0%	3.9%

What is your outlook for growth stocks in 2001?

We continue to overweight the technology sector, though to a lesser extent than in the past. We believe technology has generally strong fundamentals and attractive valuations following the sharp correction during the last two quarters of 2000. Slowness in the economy will shift the Federal Reserve Board's focus from inflation prevention to recession prevention, and this will likely imply a rate cut early next year. Accordingly, we have increased our focus on software and communications stocks within the technology realm because we believe they will benefit from a more moderated interest rate regime and would be winners in the event of a post-election rate cut. Semiconductor stocks in particular have been good performers in circumstances like these. We believe such stocks have sold off to cyclical lows and represent attractive investments for those investors with longer horizons.

High duration assets, like growth stocks, are likely to perform well in anticipation of and following a rate cut. We have reduced our energy exposure to below market weight, believing that current valuations have priced in much of this cycle's upside potential.

We believe that in the long run, real earnings growth drives stock prices, and the securities in this portfolio are poised to grow their earnings above market rates. In addition to having higher growth rates than large-cap stocks, small-cap stocks currently appear relatively inexpensive.

Two Ways You May Seek To Invest For Success:

INITIAL INVESTMENT

If you had made an initial investment of $4,000 in the Class A Shares of Federated Aggressive Growth Fund on 11/25/96, reinvested dividends and capital gains, and did not redeem any shares, your account would have been worth $7,981 on 10/31/00. You would have earned a 19.19% 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 benefits of compounding.

[Graphic Representation Omitted - See Appendix]

As of 9/30/00, the Class A Shares' average annual 1-year and since-inception (11/25/96) total returns were 32.40% and 26.05%, respectively. Class B Shares' 1-year and since-inception (11/25/96) average annual total returns were 33.60% and 26.68%, respectively. Class C Shares' average annual 1-year and since-inception (11/25/96) total returns were 37.99% and 26.90%, respectively.

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.

ONE STEP AT A TIME

$1,000 initial investment and subsequent investments of $1,000 each year for three years (reinvesting all dividends and capital gains) grew to $5,992.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class A Shares of Federated Aggressive Growth Fund on 11/25/96, reinvested your dividends and capital gains, and did not redeem any shares, you would have invested only $4,000 but your account would have reached a total value of $5,992 by 10/31/00. You would have earned an average annual total return of 17.37%.

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 Representation Omitted - See Appendix]

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

Hypothetical Investor Profile--Investing For a College Education

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

David and Lisa are planning for the college education of their children. On November 25, 1996, they invested $5,000 in the Class A Shares of Federated Aggressive Growth Fund. Since then, David and Lisa have made additional investments of $250 every month.

As this chart shows, the original $5,000 investment along with their additional monthly $250 investments totaling $16,750 has grown to $25,708, on October 31, 2000. This represents a 17.55% average annual total return. For the Deans, a dedicated program of monthly investments really has paid off.

[Graphic Representation Omitted - See Appendix]

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

Federated Aggressive Growth Fund--Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Aggressive Growth Fund (Class A Shares) (the "Fund") from November 25, 1996 (start of performance) to October 31, 2000 compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Small Growth Index (LSGI).²

Average Annual Total Return³ for the Period Ended 10/31/2000

1 Year

(5.18%)

Start of Performance (11/25/1996)

19.19%

[Graphic Representation Omitted - See Appendix]

Past performance is no guarantee of future results. 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 $10,000¹ in the Federated Aggressive Growth Fund (Class B Shares) (the "Fund") from November 25, 1996 (start of performance) to October 31, 2000 compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Small Growth Index (LSGI).²

Average Annual Total Return³ for the Period Ended 10/31/2000

1 Year

(5.79%)

Start of Performance (11/25/1996)

19.69%

[Graphic Representation Omitted - 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 3.00% 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 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 $10,000¹ in the Federated Aggressive Growth Fund (Class C Shares) (the "Fund") from November 25, 1996 (start of performance) to October 31, 2000 compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Small Growth Index (LSGI).²

Average Annual Total Return³ for the Period Ended 10/31/2000

1 Year

(1.39%)

Start of Performance (11/25/1996)

19.97%

[Graphic Representation Omitted - 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, 2000

Shares

Value

COMMON STOCKS--99.5%

Capital Goods--4.6%

137,300

ACT Manufacturing, Inc.

4,513,737

331,000

C-COR.NET Corp.

5,171,875

124,450

Three-Five Systems, Inc.

4,293,525

643,000

Zomax Optical Media, Inc.

3,898,187

TOTAL

17,877,324

Communication Services--4.1%

456,000

Adelphia Business Solutions, Inc., Class A

2,850,000

171,500

Alamosa PCS Holdings, Inc.

2,604,656

77,500

Leap Wireless International, Inc.

3,855,625

487,850

Mpower Communications Corp.

3,171,025

378,400

Teligent AB, Class A

2,873,475

71,100

UbiquiTel, Inc.

493,256

TOTAL

15,848,037

Consumer Cyclicals--7.6%

130,000

Abercrombie & Fitch Co., Class A

3,063,125

85,000

American Eagle Outfitters, Inc.

2,927,187

331,100

Avenue A, Inc.

1,407,175

299,100

Braun Consulting, Inc.

2,252,597

56,000

Career Education Corp.

2,166,500

80,700

Diamond Technology Partners, Class A

3,601,237

114,675

Insight Enterprises, Inc.

3,726,937

75,600

MIPS Technologies, Inc.

3,033,450

619,200

Modem Media.Poppe Tyson, Inc.

3,637,800

178,500

Pacific Sunwear of California

3,659,250

TOTAL

29,475,258

Consumer Staples--2.2%

145,000

Charles River Laboratories International, Inc.

3,806,250

229,500

TiVo, Inc.

2,997,844

59,400

XM Satellite Radio Holdings, Inc., Class A

1,722,600

TOTAL

8,526,694

Shares

Value

COMMON STOCKS--continued

Energy--3.2%

362,500

Friede Goldman International, Inc.

2,084,375

225,500

Key Energy Group, Inc.

2,029,500

30,195

Nabors Industries, Inc.

1,536,926

60,500

Patterson Energy, Inc.

1,701,563

89,070

R&B Falcon Corp.

2,226,750

60,000

Tidewater, Inc.

2,771,250

TOTAL

12,350,364

Financials--1.4%

107,400

Intercept Group, Inc.

2,906,512

292,500

Net.Bank, Inc.

2,541,094

TOTAL

5,447,606

Health Care--10.4%

29,100

Albany Molecular Research, Inc.

1,691,437

49,000

Alexion Pharmaceuticals, Inc.

5,065,375

131,900

Applied Molecular Evolution

2,868,825

56,400

Celgene Corp.

3,630,750

112,000

CuraGen Corp.

7,238,000

56,200

Genaissance Pharmaceuticals, Inc.

1,341,775

94,000

INAMED Corp.

2,632,000

172,500

Lexicon Genetics, Inc.

3,493,125

88,400

Maxygen, Inc.

3,558,100

117,100

Microvision, Inc.

3,988,719

36,800

Protein Design Laboratories, Inc.

4,970,875

TOTAL

40,478,981

Technology--65.0%

461,000

24/7 Media, Inc.

2,391,437

117,000

724 Solutions, Inc.

3,180,938

314,000

ACTV, Inc.

3,090,938

100,500

AXT, Inc.

3,869,250

651,000

Accrue Software, Inc.

3,010,875

226,500

Adaptive Broadband Corp.

3,638,156

39,825

Aeroflex, Inc.

2,369,587

171,600

Airnet Communications Corp.

2,611,537

Shares

Value

COMMON STOCKS--continued

Technology--continued

132,500

Alpha Industries, Inc.

5,283,437

177,500

Anadigics, Inc.

3,971,562

306,600

ANTEC Corp.

3,736,687

50,758

Applied Micro Circuits Corp.

3,879,815

250,700

Ask Jeeves, Inc.

3,259,100

79,800

AudioCodes Ltd.

3,157,088

77,000

Aurora Biosciences, Inc.

4,692,187

22,100

Avanex Corp.

2,244,531

104,000

Aware, Inc.

3,217,500

354,000

Breakaway Solutions, Inc.

2,035,500

187,000

Chordiant Software, Inc.

1,139,531

110,000

Clarent Corp.

3,416,875

67,700

Cognizant Technology Solutions Corp.

2,775,700

175,000

Credence Systems Corp.

3,281,250

361,800

Cybersource Corp.

1,989,900

43,500

Cymer, Inc.

1,087,500

39,200

DMC Stratex Networks, Inc.

906,500

196,000

Data Return Corp.

2,254,000

63,100

Digital Lightwave, Inc.

3,198,381

511,000

E-Gain Communications Corp.

3,321,500

26,900

E.piphany, Inc.

2,424,362

227,400

EarthWeb, Inc.

2,870,925

494,100

Engage Technologies, Inc.

2,099,925

34,000

Exar Corp.

1,519,375

103,800

F5 Networks, Inc.

3,217,800

222,500

Firepond, Inc.

1,780,000

354,000

GRIC Communications, Inc.

1,770,000

38,100

GlobeSpan, Inc.

2,931,319

305,500

Harmonic, Inc.

4,429,750

79,300

Hi/fn, Inc.

4,896,775

1,200

Illumina, Inc.

39,000

391,000

InterWAVE Communications International Ltd.

1,417,375

172,700

Interlink Electronics, Inc.

3,864,163

Shares

Value

COMMON STOCKS--continued

Technology--continued

49,700

Internet Security Systems, Inc.

4,386,025

317,000

Intertrust Technologies Corp.

3,170,000

30,800

JDS Uniphase Corp.

2,508,275

100,300

Kana Communications, Inc.

2,357,050

145,000

Keynote Systems, Inc.

3,480,000

240,600

Kopin Corp.

3,398,475

141,000

Liberate Technologies, Inc.

2,687,813

110,600

Lightpath Technologies, Inc.

3,013,850

203,300

Marimba, Inc.

1,207,094

101,000

i Gate Capital Corp.

511,313

22,400

Micromuse, Inc.

3,801,000

18,500

Molecular Devices Corp.

1,264,938

71,700

NetIQ Corp.

6,175,163

182,500

Netro Corp.

3,980,781

158,000

ONYX Software Corp.

2,508,250

144,300

OTG Software, Inc.

4,545,450

207,000

PRI Automation, Inc.

4,683,375

148,300

Packeteer, Inc.

3,688,963

172,800

Pharmacopedia, Inc.

3,153,600

370,000

Pilot Network Services, Inc.

971,250

75,000

Pixelworks, Inc.

2,498,438

199,000

Puma Technology, Inc.

2,698,938

73,500

Qlogic Corp.

7,111,125

77,450

REMEC, Inc.

2,308,978

138,000

RF Micro Devices, Inc.

2,751,375

45,000

Research in Motion Ltd.

4,500,000

320,000

S1 Corp.

3,860,000

81,600

SCM Microsystems, Inc.

3,100,800

21,800

Sawtek, Inc.

1,109,075

140,600

SeaChange International, Inc.

3,093,200

77,800

Semtech Corp.

2,509,050

44,900

SmartForce PLC, ADR

2,259,733

97,400

Stanford Microdevices, Inc.

2,441,088

Shares

Value

COMMON STOCKS--continued

Technology--continued

43,000

Tollgrade Communications, Inc.

4,117,250

191,500

Trimble Navigation Ltd.

4,548,125

518,500

USinternetworking, Inc.

1,199,031

75,000

Varian Semiconductor Equipment Associates, Inc.

1,725,000

49,100

Veeco Instruments, Inc.

3,250,573

183,700

Virata Corp.

3,559,188

540,000

Visual Networks, Inc.

1,991,250

267,000

WebMD Corp.

3,037,125

37,944

webMethods, Inc.

3,372,273

107,200

WebTrends Corp.

3,445,475

127,700

Wink Communications, Inc.

1,308,925

181,600

Witness Systems, Inc.

3,268,800

TOTAL

252,829,511

Transportation--1.0%

49,200

Hotel Reservations Network, Inc., Class A

1,722,000

135,000

Trico Marine Services, Inc.

2,244,375

TOTAL

3,966,375

TOTAL COMMON STOCKS (IDENTIFIED COST $487,721,112)

386,800,150

MUTUAL FUND--0.2%

911,916

Prime Value Obligations Fund, Class IS (at net asset value)

911,916

TOTAL INVESTMENTS (IDENTIFIED COST $488,633,028)²

387,712,066

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $495,155,779. The net unrealized depreciation of investments on a federal tax basis amounts to $107,443,713 which is comprised of $56,623,567 appreciation and $164,067,280 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($388,926,411) at October 31, 2000.

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, 2000

Assets:

Total investments in securities, at value (identified cost $488,633,028 and tax cost $495,155,779)

387,712,066

Cash denominated in foreign currencies (identified cost $29)

Income receivable

10,265

Receivable for investments sold

12,577,140

Receivable for shares sold

4,203,673

Deferred organizational costs

2,965

TOTAL ASSETS

404,506,134

Liabilities:

Payable for investments purchased

$13,406,722

Payable for shares redeemed

1,932,569

Accrued expenses

240,432

TOTAL LIABILITIES

15,579,723

Net assets for 18,829,895 shares outstanding

388,926,411

Net Assets Consist of:

Paid in capital

491,767,089

Net unrealized depreciation of investments and translation of assets and liabilities in foreign currency

(100,920,966

)

Accumulated net realized loss on investments and foreign currency transactions

(1,919,712

)

TOTAL NET ASSETS

388,926,411

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($204,147,912 ÷ 9,759,925 shares outstanding)

$20.92

Offering price per share (100/94.50 of $20.92)¹

$22.14

Redemption proceeds per share

$20.92

Class B Shares:

Net asset value per share ($142,671,027 ÷ 6,994,460 shares outstanding)

$20.40

Offering price per share

$20.40

Redemption proceeds per share (94.50/100 of $20.40)¹

$19.28

Class C Shares:

Net asset value per share ($42,107,472 ÷ 2,075,510 shares outstanding)

$20.29

Offering price per share

$20.29

Redemption proceeds per share (99.00/100 of $20.29)¹

$20.09

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, 2000

Investment Income:

Dividends

38,620

Interest

142,687

TOTAL INCOME

181,307

Expenses:

Investment adviser fee

2,880,883

Administrative personnel and services fee

216,930

Custodian fees

27,908

Transfer and dividend disbursing agent fees and expenses

336,260

Directors'/Trustees' fees

3,140

Auditing fees

5,311

Legal fees

7,924

Portfolio accounting fees

99,711

Distribution services fee--Class A Shares

279,658

Distribution services fee--Class B Shares

963,600

Distribution services fee--Class C Shares

255,452

Shareholder services fee--Class A Shares

34,212

Shareholder services fee--Class B Shares

321,200

Shareholder services fee--Class C Shares

85,151

Share registration costs

216,155

Printing and postage

85,666

Insurance premiums

1,818

Miscellaneous

11,737

TOTAL EXPENSES

5,832,716

Waiver and Reimbursement:

Waiver of investment adviser fee

(57,684

)

Reimbursement of investment adviser fee

(47

)

TOTAL WAIVER AND REIMBURSEMENT

(57,731

)

Net expenses

5,774,985

Net operating loss

(5,593,678

)

Realized and Unrealized Loss on Investments and Foreign Currency:

Net realized loss on investments, foreign currency transactions and options

(1,027,005

)

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

(133,844,050

)

Net realized and unrealized loss on investments and foreign currency

(134,871,055

)

Change in net assets resulting from operations

(140,464,733

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31

2000

1999

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(5,593,678

)

(971,976

)

Net realized gain (loss) on investments, foreign currency transactions and options ($4,602,512 and $4,294,478, respectively, as computed for federal tax purposes)

(1,027,005

)

4,286,845

Net change in unrealized appreciation (depreciation) of investments and translation of assets and liabilities in foreign currency

(133,844,050

)

24,983,153

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(140,464,733

)

28,298,022

Distributions from net realized gain on investments, foreign currency transactions and options:

Class A Shares

(193,538

)

Class B Shares

(454,819

)

Class C Shares

(82,111

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(730,468

)

Share Transactions:

Proceeds from sale of shares

658,807,396

70,282,661

Proceeds from shares issued in connection with the tax-free acquisition of assets from:

IAI Emerging Growth Fund

44,869,639

IAI Long Term Growth Fund

6,064,460

IAI Capital Appreciation Fund

14,399,735

Net asset value of shares issued to shareholders in payment of distributions declared

622,226

Cost of shares redeemed

(265,061,780

)

(56,436,875

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

459,701,676

13,845,786

Change in net assets

318,506,475

42,143,808

Net Assets:

Beginning of period

70,419,936

28,276,128

End of period

388,926,411

70,419,936

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

Net Asset Value, Beginning of Period

$21.02

$11.19

$13.31

$10.00

Income From Investment Operations:

Net operating loss

(0.41

)³

(0.25

)³

(0.20

)³

(0.05

)

Net realized and unrealized gain (loss) on Investments, foreign currency transactions and options

0.51

10.08

(1.92

)

3.37

TOTAL FROM INVESTMENT OPERATIONS

0.10

9.83

(2.12

)

3.32

Less Distributions:

Distributions in excess of net investment income

(0.01

)

Distributions from net realized gain on investments, foreign currency transactions and options

(0.20

)

(0.00

)⁴

TOTAL DISTRIBUTIONS

(0.20

)

(0.00

)⁴

(0.01

)

Net Asset Value, End of Period

$20.92

$21.02

$11.19

$13.31

Total Return⁵

0.33

87.85

(15.91

33.21

Ratios to Average Net Assets:

Expenses

1.58

1.76

1.74

%⁶

Net operating loss

(1.53

(1.60

(1.56

(0.96

%)⁶

Expense waiver/reimbursement⁷

0.02

0.74

1.36

8.97

%⁶

Supplemental Data:

Net assets, end of period (000 omitted)

$204,148

$18,078

$7,549

$4,148

Portfolio turnover

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 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 Computed on an annualized basis.

7 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

Net Asset Value, Beginning of Period

$20.64

$11.07

$13.27

$10.00

Income From Investment Operations:

Net operating loss

(0.61

)³

(0.36)

(0.30

)³

(0.08

)

Net realized and unrealized gain (loss) on investments, foreign currency transactions and options

0.57

9.93

(1.90

)

3.35

TOTAL FROM INVESTMENT OPERATIONS

(0.04

)

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, foreign currency transactions and options

(0.20

)

(0.00

)⁴

TOTAL DISTRIBUTIONS

(0.20

)

(0.00

)⁴

(0.00

)⁴

Net Asset Value, End of Period

$20.40

$20.64

$11.07

$13.27

Total Return⁵

(0.35

86.45

(16.56

32.75

Ratios to Average Net Assets:

Expenses

2.33

2.51

%⁶

Net operating loss

(2.26

(2.34

(2.33

(1.96

%)⁶

Expense waiver/reimbursement⁷

0.02

0.74

1.32

7.25

%⁶

Supplemental Data:

Net assets, end of period (000 omitted)

$142,671

$44,091

$17,783

$7,184

Portfolio turnover

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 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 Computed on an annualized basis.

7 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

Net Asset Value, Beginning of Period

$20.54

$11.02

$13.20

$10.00

Income From Investment Operations:

Net operating loss

(0.60

)³

(0.36

)

(0.29

)³

(0.06

)

Net realized and unrealized gain (loss) on investments, foreign currency transactions and options

0.55

9.88

(1.89

)

3.26

TOTAL FROM INVESTMENT OPERATIONS

(0.05

)

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, foreign currency transactions and options

(0.20

)

(0.00

)⁴

TOTAL DISTRIBUTIONS

(0.20

)

(0.00

)⁴

(0.00

)⁴

Net Asset Value, End of Period:

$20.29

$20.54

$11.02

$13.20

Total Return⁵

(0.40

86.39

(16.49

32.04

Ratios to Average Net Assets:

Expenses

2.33

2.51

2.53

%⁶

Net operating loss

(2.27

(2.34

(2.32

(1.95

%)⁶

Expense waiver/reimbursement⁷

0.02

0.74

1.32

7.23

%⁶

Supplemental Data:

Net assets, end of period (000 omitted)

$42,107

$8,251

$2.944

$957

Portfolio turnover

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 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 Computed on an annualized basis.

7 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 2000

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 eight 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.

On September 15, 2000, the Fund acquired all the net assets of three Investment Advisers Inc. (IAI) funds (IAI Emerging Growth Fund, IAI Long Term Growth Fund and IAI Capital Appreciation Fund) in tax-free reorganizations as follows:

Class A Shares
of the Fund Issued

IAI Funds' Net
Assets Received

Unrealized
Appreciation¹

IAI Emerging Growth Fund

1,647,197

$44,869,639

$6,994,355

IAI Long Term Growth Fund

222,631

6,064,460

54,970

IAI Capital Appreciation Fund

528,624

14,399,735

2,290,762

TOTAL

2,398,452

$65,333,834

$9,340,087

Net Assets of
the Fund Prior
to Combination

Net Assets of
IAI Funds
Immediately Prior
to Combination

Net Assets
of the Fund
Immediately After
Combination

IAI Emerging Growth Fund

$44,869,639

IAI Long Term Growth Fund

6,064,460

IAI Capital Appreciation Fund

14,399,735

TOTAL

$425,802,661

$65,333,834

$491,136,495

1 Unrealized Appreciation is included in the IAI Funds' Net Assets Received amount shown above.

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. Investments in other open-ended regulated investment companies are valued at net asset 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.

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

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. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

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

Increase (Decrease)

Accumulated Net Realized Loss

Undistributed Net
Investment Income

Paid in Capital

$(720,189)

$5,593,678

$(4,873,489)

Net investment income, 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 provision for federal tax is 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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FC") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

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.

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 a trade date basis.

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:

Year Ended October 31

2000

1999

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

12,527,703

369,334,134

1,362,919

21,757,131

Shares issued in connection with the tax-free acquisition of assets from: IAI Emerging Growth Fund

1,647,197

44,869,639

IAI Long Term Growth Fund

222,631

6,064,460

IAI Capital Appreciation Fund

528,624

14,399,735

Shares issued to shareholders in payment of distributions declared

7,146

176,332

Shares redeemed

(6,033,518

)

(166,069,393

)

(1,177,472

)

(18,564,652

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

8,899,783

268,774,907

185,447

3,192,479

Year Ended October 31

2000

1999

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

6,558,169

187,937,494

2,013,691

32,485,681

Shares issued to shareholders in payment of distributions declared

15,308

370,988

Shares redeemed

(1,715,122

)

(46,173,508

)

(1,484,175

)

(24,012,690

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

4,858,355

142,134,974

529,516

8,472,991

Year Ended October 31

2000

1999

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

3,662,224

101,535,768

1,065,293

16,039,849

Shares issued to shareholders in payment of distributions declared

3,107

74,906

Shares redeemed

(1,991,504

)

(52,818,879

)

(930,835

)

(13,859,533

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

1,673,827

48,791,795

134,458

2,180,316

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

15,431,965

459,701,676

849,421

13,845,786

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser 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. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund may invest in Prime Value Obligations Fund which is managed by the Adviser. The Adviser has agreed to reimburse certain investment adviser fees as a result of these transactions.

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 a scale that ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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 shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC. Effective March 1, 2000, the Fund began to accrue and pay a distribution service fee on Class A Shares.

Share Class Name		Percentage of Average Daily Net Assets of Class
Class A Shares		0.25%

Class B Shares		0.75%

Class C Shares		0.75%

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. Effective March 1, 2000, the Fund no longer accrued or paid a shareholder services fee for Class A Shares.

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

Organization 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 year ended October 31, 2000, the Fund expensed $3,359 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 (and in-kind contributions), for the year ended October 31, 2000 were as follows:

Purchases		$ 666,627,507

Sales		$273,536,953

CONCENTRATION OF CREDIT RISK

The fund may invest a portion of its assets in securities of companies that are deemed by the Fund's management to be classified in similar business sectors. The economic developments within a particular sector may have an adverse effect on the ability of issuers to meet their obligations. Additionally, economic developments may have an effect on the liquidity and volatility of portfolio securities.

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 Federated Aggressive Growth Fund (the "Fund") as of October 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the years ended October 31, 2000 and 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 audits. The financial highlights for the periods presented ending prior to October 31, 1999 were audited by other auditors whose report dated December 21, 1998, expressed an unqualified opinion thereon.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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, 2000, 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 audits provide 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, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

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.

Federated
World-Class Investment Manager
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 (12/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

Federated Investors
World-Class Investment Manager

Federated Capital Appreciation Fund

A Portfolio of Federated Equity Funds

24TH ANNUAL REPORT

October 31, 2000

Established 1977

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

President

Federated Capital Appreciation Fund

President's Message

Dear Fellow Shareholder:

Federated Capital Appreciation Fund was created in 1977, and I am pleased to present its 24th Annual Report. As of October 31, 2000, the fund's total net assets of $945.5 million were spread across 118 issues of mid-cap and large-cap corporations. The fund is invested in equities, and its broad diversification in terms of number of issues and allocation to all industry sectors contributed to the positive total return in an environment experiencing volatility in all sectors. Many of the fund's holdings are household names such as Abbott Laboratories, America Online, and Exxon Mobil Corp. The fund's management team seeks out many of the fastest-growing companies in the United States, and these corporations generally have high price-to-earnings ratios along with high estimated growth rates.

This report covers the 12-month reporting period from November 1, 1999 through October 31, 2000. It begins with an interview with the fund's portfolio manager, Bernard J. Picchi, Senior Vice President of Federated Investment Management Company. Following his discussion on the U.S. equity market and recent activity in the fund's portfolio 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 holdings, and third is the publication of the fund's financial statements.

During the 12-month reporting period, the stock market experienced extreme volatility, especially in the technology sector. The fund's weighting in technology during the past 12-month reporting period was as high as 33% and as low as 18%; the fund's current allocation to technology is 24.3%. Additionally, the fund held overweight positions in comparison to the Standard & Poor's 500 (S&P 500) Index in the energy, financial services, and health care sectors.

Individual share class total return performance, including income distributions and realized gains, follows.¹

	Total Return	Income	Capital Gains	Net Asset Value Increase
Class A Shares	20.61%	$0.073	$1.310	$25.36 to $29.05 = 14.6%
Class B Shares	19.71%	$0.000	$1.310	$25.09 to $28.58 = 13.9%
Class C Shares	19.68%	$0.000	$1.310	$25.07 to $28.55 = 13.9%

Currently, we see significant 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 these high-quality U.S. corporations. First, you can reinvest your quarterly dividends and capital gains automatically in additional shares to help your shares increase in number through the benefits 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. Buying shares regularly (i.e., monthly additions of the same dollar amount) could give you the opportunity to accumulate more shares in your account at an average lower cost per share.² Please contact your investment representative for more information.

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

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

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 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 13.96%, 14.21%, and 18.68%, 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 purchasing during periods of low price levels.

Bernard J. Picchi, CFA

Senior Vice President

Federated Investment Management
Company

Investment Review

What is your view of the volatile stock market over the 12-month reporting period?

Actually, recent analyses have shown that the market's overall volatility has diminished in recent years. Rather, it is the volatility of individual stocks that has increased. This supports the case for well-diversified "core" equity funds like Federated Capital Appreciation Fund, whose many holdings across many industry sectors allow investors to participate in the expected growth of the equity market, while substantially reducing their exposure to the risk of owning any single security.

How do you see the growth potential for higher quality versus more speculative technology stocks?

There is always a place for relatively new and unseasoned technology stocks in a portfolio. Technology, by its very nature, involves the development and commercial implementation of new processes, new equipment and new ideas. Unfortunately, we are at a time in the stock market when investors are less warmly embracing of speculative technologies than they were in the last couple of years. As a result, we have sharply curtailed our commitment to the technology sector over the past year, especially emerging telecommunications companies.

Is it likely that the Federal Reserve Board will raise interest rates any more?

We believe that the Federal Reserve Board is unlikely to raise interest rates again during the current business cycle. As a result, we expect price/earnings ratios to rise in the next year or so, and we believe that interest rate sensitive equities (especially financial service stocks) should perform well over the next year.

How did Federated Capital Appreciation Fund perform for its shareholders during the fiscal year?

For the 12-month reporting period ended October 31, 2000, the fund's Class A Shares produced a very attractive total return of 20.61%, based on net asset value. The fund's Class B and C Shares delivered total returns of 19.71% and 19.68%, respectively, based on net asset value. The fund's returns were significantly above the 6.08% return of the S&P 500 Index over the same period.¹

What industries and companies were outstanding performers in the portfolio?

The top contributors to performance were certain technology companies such as data storage company EMC Corp. Mass (1.1% of net assets) and Sun Microsystems, Inc. (0.8% of net assets), as well as photonics companies such as SDL, Inc. (0.5% of net assets). Energy stocks such as Exxon Mobil Corp. (0.9% of net assets), Anadarko Petroleum Corp. (1.2% of net assets), and R&B Falcon Corp. (0.7% of net assets) were outstanding performers, as were financial services companies such as Metropolitan Life Insurance, Co. (1.7% of net assets) and Ace, Ltd. (1.6% of net assets).

Our health care analyst correctly predicted earlier this year that Abbott Laboratories (2.1% of net assets) would be a standout performer (it was), and this became our largest fund holding. A brand-name drug company lives and dies by the patented products it has the exclusive right to market, and our analyst correctly saw that Abbott had a relatively small exposure to patent expiration.

1 The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

What changes did you make in sector weightings?

We reduced the fund's exposure to technology and telecommunications sectors in the first quarter of this year, directing the proceeds into financial services and health care sectors. The sector allocation as of October 31, 2000 follows:

Sector	Percentage of Net Assets	Percentage of S&P 500 Index
Technology	24.3%	28.1%
Financials	17.4%	15.5%
Health Care	15.5%	12.2%
Consumer Staples	9.4%	10.9%
Energy	6.7%	5.9%
Capital Goods	6.5%	8.7%
Communication Services	6.4%	6.4%
Consumer Cyclicals	4.4%	6.5%
Utilities	3.4%	3.3%
Basic Materials	1.9%	1.9%
Transportation	0.3%	0.6%
Other	1.5%	--

What were some of the fund's recent stock purchases?

More recently, we have purchased certain business software stocks, such as BEA Systems, Inc. (0.7% of net assets) and Siebel Systems, Inc. (0.8% of net assets), believing that these companies' products offer some of the highest potential for accelerating users' productivity.

We have also recently established new holdings in defense (General Dynamics Corp., 0.6% of net assets), health care services (HEALTHSOUTH Corp., 1.2% of net assets) and energy (EOG Resources Inc., 0.7% of net assets). These companies tend to be less exposed to an economic slowdown and their valuations do not reflect improving industry fundamentals, i.e., government surplus spending, improved pricing, and gas supply shortages, respectively.

What were the fund's top ten holdings as of October 31, 2000?

Name		Percentage of Net Assets
Abbott Laboratories		2.1%
DST Systems, Inc.		1.9%
Met Life Convert. Units		1.7%
Alliance Capital Management Holdings		1.6%
Ace Ltd., PRIDES		1.6%
Baxter International, Inc.		1.5%
Sanmina Corp. Conv. Bonds		1.5%
State Street Corp.		1.4%
Allergen, Inc.		1.3%
Chase Manhattan Corp.		1.3%
TOTAL		15.9%

Of further interest to all shareholders is the fund's merger with IAI Regional Fund. What is the impact on the fund?

On September 18, 2000, the assets (securities and cash) of the IAI Regional Fund merged with the assets of Federated Capital Appreciation Fund. This increased the size of our fund by about $167 million. As a result, our fund held more than 13% cash immediately after the merger. We have deployed some of that cash in selective purchases, especially in health care and financial services.

It has been a good year for shareholders of Federated Capital Appreciation Fund. What is your outlook for the stock market as we approach the year 2001?

We are reasonably optimistic about the market's performance next year. We think that the "wretched excess" we saw in dot coms last year is gone from the equity markets. We think, though, that there may be greater-reaching impacts on the telephone and telecommunications equipment makers from the current indigestion in the high-yield debt market than most equity investors realized three to six months ago. Thus, we continue to be very cautious towards those sectors. Investors will come back to the technology sector, but their approach may have a different emphasis than it has had in the last year or so, with more emphasis on recurring revenue themes, "growth at a reasonable price," and less on start-up, highly leveraged companies. We look for continued good performances in the health care, financial services and consumer staples sectors.

Two Ways You May Seek to Invest for Success:

INITIAL INVESTMENT

If you made an initial investment of $24,000 in the Class A Shares of Federated Capital Appreciation Fund on 1/1/77, reinvested dividends and capital gains, and did not redeem any shares, your account would have been worth $729,559 on 10/31/00. You would have earned a 15.40%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.

[Graphic Representation Omitted - See Appendix]

As of 9/30/00, the Class A Shares' average annual 1-year, 5-year, and 10-year total returns were 27.04%, 23.03%, and 20.15%, respectively. Class B Shares' average annual 1-year and since inception (1/4/96) total returns were 27.87% and 23.08%, respectively. Class C Shares' average annual 1-year and since inception (1/4/96) total returns were 32.39% and 23.25%, respectively.²

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 23 years (reinvesting all dividends and capital gains) grew to $247,098.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class A Shares of Federated Capital Appreciation Fund on 1/1/77, reinvested your dividends and capital gains, and did not redeem any shares, you would have invested only $24,000, but your account would have reached a total value of $247,098¹ by 10/31/00. You would have earned an average annual total return of 16.13%.

[Graphic Representation Omitted - 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, 1990, 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 ten years, the original $5,000 investment along with their additional monthly $250 investments totaling $35,000 has grown to $114,015. This represents a 19.76% average annual total return.¹ For the Rices, a dedicated program of monthly investments really paid off.

[Graphic Representation Omitted - 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 $10,000 INVESTED IN FEDERATED CAPITAL APPRECIATION FUND

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Capital Appreciation Fund (Class A Shares) (the "Fund") from October 31, 1990 to October 31, 2000 compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Growth and Income Funds Average (LGIFA).³

Average Annual Total Return⁴ for the Period Ended 10/31/2000
1 Year		13.96%
5 Years		22.10%
10 Years		20.05%
Start of Performance (1/1/1977)		15.40%

[Graphic Representation Omitted - See Appendix]

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 $10,000 INVESTED IN FEDERATED CAPITAL APPRECIATION FUND

The graph below illustrates the hypothetical investment of $10,000¹ the Federated Capital Appreciation Fund (Class B Shares) (the "Fund") from January 4, 1996 (start of performance) to October 31, 2000 compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Growth and Income Funds Average (LGIFA).³

Average Annual Total Return⁴ for the Period Ended 10/31/2000

1 Year

14.21%

Start of Performance (1/4/1996)

21.72%

[Graphic Representation Omitted - 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 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 $10,000 INVESTED IN FEDERATED CAPITAL APPRECIATION FUND

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Capital Appreciation Fund (Class C Shares) (the "Fund") from January 4, 1996 (start of performance) to October 31, 2000, compared to the Standard and Poor's 500 Index (S&P 500)² and the Lipper Growth and Income Funds Average (LGIFA).³

Average Annual Total Return⁴ for the Period Ended 10/31/2000

1 Year

18.68%

Start of Performance (1/4/1996)

21.89%

[Graphic Representation Omitted - 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, 2000

Shares

Value

COMMON STOCKS--78.0%

Basic Materials--1.9%

313,600

Alcoa, Inc.

8,996,400

160,600

Bowater, Inc.

8,692,475

TOTAL

17,688,875

Capital Goods--5.1%

78,000

Corning, Inc.

5,967,000

162,000

Deere & Co.

5,963,625

81,000

General Dynamics Corp.

5,796,562

113,000

General Electric Co.

6,193,812

227,005

Koninklijke (Royal) Philips Electronics NV, ADR

9,066,012

67,500

Minnesota Mining & Manufacturing Co.

6,522,188

411,000

Waste Management, Inc.

8,220,000

TOTAL

47,729,199

Communication Services--3.5%

429,000

AT&T Corp. - Liberty Media Group, Inc., Class A

7,722,000

293,500

Broadwing, Inc.

8,291,375

167,700

Qwest Communications International, Inc.

8,154,413

82,200

Telephone and Data System, Inc.

8,672,100

TOTAL

32,839,888

Consumer Cyclicals--3.8%

100,000

Gemstar-TV Guide International, Inc.

6,856,250

128,100

Knight-Ridder, Inc.

6,437,025

196,500

Lowe's Cos., Inc.

8,977,594

14,000

Omnicom Group, Inc.

1,291,500

313,500

Ticketmaster Online-CitySearch, Inc.

5,016,000

398,500

Toys `R' Us, Inc.

6,849,219

TOTAL

35,427,588

Consumer Staples--6.8%

171,800

Anheuser-Busch Cos., Inc.

7,859,850

157,500

Avon Products, Inc.

7,638,750

384,700

Charter Communications, Inc.

7,501,650

206,400

News Corp. Ltd., ADR

7,469,100

93,000

PepsiCo, Inc.

4,504,688

108,100

Quaker Oats Co.

8,816,906

339,600

Ralston Purina Co.

8,235,300

Shares

Value

COMMON STOCKS--continued

Consumer Staples--continued

90,345

Viacom, Inc., Class B

5,138,372

162,000

Walgreen Co.

7,391,250

TOTAL

64,555,866

Energy--4.7%

91,000

Cooper Cameron Corp.

4,959,500

120,000

Diamond Offshore Drilling, Inc.

4,147,500

178,400

EOG Resources, Inc.

7,024,500

99,392

Exxon Mobil Corp.

8,864,524

294,800

Global Marine, Inc.

7,812,200

129,200

Halliburton Co.

4,788,475

272,700

R&B Falcon Corp.

6,817,500

TOTAL

44,414,199

Financials--13.3%

322,300

Alliance Capital Management Holding LP

15,470,400

206,000

Bank of New York Co., Inc.

11,857,875

108,200

Capital One Financial Corp.

6,830,125

274,200

Chase Manhattan Corp.

12,476,100

136,997

Citigroup, Inc.

7,209,467

209,600

Edwards(AG), Inc.

10,637,200

193,500

Gallagher (Arthur J.) & Co.

12,214,687

135,200

Legg Mason, Inc.

7,021,950

82,100

Lehman Brothers Holdings, Inc.

5,295,450

160,000

Mellon Financial Corp.

7,720,000

90,000

Morgan Stanley, Dean Witter & Co.

7,228,125

98,900

SEI Investments, Co.

8,975,175

104,900

State Street Corp.

13,085,226

TOTAL

126,021,780

Health Care--14.5%

383,500

Abbott Laboratories

20,253,594

151,000

Allergan, Inc.

12,693,437

129,200

American Home Products Corp.

8,204,200

86,500

Amgen, Inc.

5,011,594

169,800

Baxter International, Inc.

13,955,438

133,300

Bristol-Myers Squibb Co.

8,122,969

117,400

Dentsply International, Inc.

4,072,312

426,600

Diametrics Medical, Inc.

3,519,450

70,700

Genentech, Inc.

5,832,750

Shares

Value

COMMON STOCKS--continued

Health Care--continued

954,200

HEALTHSOUTH, Corp.

11,450,400

135,200

Medtronic, Inc.

7,343,050

68,700

Merck & Co., Inc.

6,178,706

57,800

Pfizer, Inc.

2,496,238

162,200

St. Jude Medical, Inc.

8,921,000

159,000

Teva Pharmaceutical Industries Ltd., ADR

9,400,875

83,800

Wellpoint Health Networks, Inc.

9,799,363

TOTAL

137,255,376

Technology--22.3%

211,100

ACTV, Inc.

2,078,016

151,500

ADC Telecommunications, Inc.

3,238,312

137,400

Adobe System, Inc.

10,450,987

128,400

Akamai Technologies, Inc.

6,548,400

192,000

America Online, Inc.

9,682,560

148,200

Analog Devices, Inc.

9,633,000

56,700

Ariba, Inc.

7,165,462

92,000

BEA Systems, Inc.

6,601,000

54,100

Check Point Software Technologies Ltd.

8,568,087

108,100

Commerce One, Inc.

6,938,669

291,000

DST Systems, Inc.

17,932,875

115,700

EMC Corp. Mass

10,304,531

140,700

FIserv, Inc.

7,377,956

41,100

I2 Technologies, Inc.

6,987,000

80,000

Inktomi Corp.

5,075,000

203,000

Intuit, Inc.

12,471,812

44,000

JDS Uniphase Corp.

3,583,250

64,500

Network Appliance, Inc.

7,675,500

96,000

Nortel Networks Corp.

4,368,000

213,000

Oracle Corp.

7,029,000

107,000

Qlogic Corp.

10,352,250

220,800

RF Micro Devices, Inc.

4,402,200

17,500

SDL, Inc.

4,536,875

119,000

Sandisk Corp.

6,394,391

75,700

Siebel Systems, Inc.

7,943,769

65,400

Sun Microsystems, Inc.

7,251,225

Shares

Value

COMMON STOCKS--continued

Technology--continued

216,400

SunGuard Data Systems, Inc.

11,063,450

41,500

Verisign, Inc.

5,478,000

TOTAL

211,131,577

Transportation--0.3%

54,100

C.H. Robinson Worldwide, Inc.

2,958,594

Utilities--1.8%

66,500

FPL Group, Inc.

4,389,000

130,700

Montana Power Co.

3,692,275

158,498

SCANA Corp.

4,200,197

115,700

Williams Cos., Inc. (The)

4,837,706

TOTAL

17,119,178

TOTAL COMMON STOCKS (IDENTIFIED COST $598,599,422)

737,142,120

CORPORATE BONDS--5.8%

Capital Goods--1.5%

5,250,000

Sanmina Corp., Conv. Bond, 4.25%, 5/1/2004

13,906,673

Communication Services--1.9%

10,000,000

Level 3 Communications, Inc., Conv. Bond, 6.00%, 3/15/2010

6,082,700

8,750,000

NEXTEL Communications, Inc., Conv. Bond, 5.25%, 1/15/2010

7,539,000

4,750,000

NEXTEL Communications, Inc., Conv. Sr. Note, 5.25%, 1/15/2010

4,092,600

TOTAL

17,714,300

Consumer Cyclicals--0.6%

1,060,000

Omnicom Group, Inc., Conv. Bond, 2.25%, 1/6/2013

2,015,367

2,000,000

Omnicom Group, Inc., Sub. Deb., 2.25%, 1/6/2013

3,802,580

TOTAL

5,817,947

Energy--1.1%

13,500,000

Anadarko Petroleum Corp., Conv. Bond, 3.50%, 3/7/2020

10,887,075

Technology--0.7%

7,250,000

International Rectifier Corp., Conv. Bond, 4.25%, 7/15/2007

6,197,880

1,160,000

RF Micro Devices, Inc., Conv. Bond, 3.75%, 8/15/2005

839,620

TOTAL

7,037,500

TOTAL CORPORATE BONDS (IDENTIFIED COST $52,546,294)

55,363,495

PREFERRED STOCKS--12.4%

Communication Services--1.1%

64,000

XO Communications, Inc., Conv. Pfd., $1.63

9,960,000

Shares

Value

PREFERRED STOCKS--continued

Consumer Staples--2.7%

165,000

Cox Communications, Inc., PRIDES, $3.50

9,652,500

92,000

Cox Communications, Inc., PRIDES, $6.59

7,153,000

174,500

XM Satellite Radio Holdings, Inc., Conv. Pfd., $1.12

8,666,543

TOTAL

25,472,043

Energy--0.8%

279,000

Valero Energy Corp., Conv. Pfd., $1.94

7,812,000

Financials--4.1%

191,000

Ace, Ltd., PRIDES, $2.20

15,423,250

165,500

Lehman Brothers Holdings, Inc., Conv. Pfd., $1.31

6,951,000

187,000

Metropolitan Life Insurance Co., Conv. Pfd., $5.68

16,385,875

TOTAL

38,760,125

Health Care--0.9%

180,500

Monsanto Co., Conv. Pfd., $2.60

8,697,844

Technology--1.2%

205,500

Amdocs Ltd., Conv. Pfd., $1.51

11,713,500

Utilities--1.6%

216,000

K N Energy, Inc., Conv. Pfd., $3.55

11,353,500

57,500

Southern Energy, Inc., Conv. Pfd., $0.44

3,496,719

TOTAL

14,850,219

TOTAL PREFERRED STOCKS (IDENTIFIED COST $100,455,993)

117,265,731

MUTUAL FUND--1.5%

13,975,291

Prime Value Obligations Fund, Class IS (at net asset value)

13,975,291

TOTAL INVESTMENTS (IDENTIFIED COST $765,577,000)³

923,746,637

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, 2000, these securities amounted to $2,015,367 which represents 0.2% of net assets.

3 The cost of investments for federal tax purposes amounts to $767,200,695. The net unrealized appreciation of investments on a federal tax basis amounts to $156,545,942 which is comprised of $180,982,796 appreciation and $24,436,854 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($945,492,944) at October 31, 2000.

The following acronyms are used throughout this portfolio:

ADR	--American Depositary Receipt
PRIDES	--Preferred Redeemable Increased Dividend Equity Securities

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

October 31, 2000

Assets:

Total investments in securities, at value (identified cost $765,577,000 and tax cost $767,200,695)

923,746,637

Income receivable

938,383

Receivable for investments sold

21,759,731

Receivable for shares sold

7,131,989

TOTAL ASSETS

953,576,740

Liabilities:

Payable for investments purchased

6,265,318

Payable for shares redeemed

1,345,411

Options written, at value (premium received $424,836)

17,688

Accrued expenses

455,379

TOTAL LIABILITIES

8,083,796

Net assets for 32,725,224 shares outstanding

945,492,944

Net Assets Consist of:

Paid in capital

732,091,552

Net unrealized appreciation of investments, options and translations of assets and liabilities in foreign currency

158,576,785

Accumulated net realized gain on investments and foreign currency transactions

54,824,310

Undistributed net investment income

297

TOTAL NET ASSETS

945,492,944

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($637,522,601 ÷ 21,946,642 shares outstanding)

$29.05

Offering price per share (100/94.50 of $29.05)¹

$30.74

Redemption proceeds per share

$29.05

Class B Shares:

Net asset value per share ($266,173,544 ÷ 9,314,786 shares outstanding)

$28.58

Offering price per share

$28.58

Redemption proceeds per share (94.50/100 of $28.58)¹

$27.01

Class C Shares:

Net asset value per share ($41,796,799 ÷ 1,463,796 shares outstanding)

$28.55

Offering price per share

$28.55

Redemption proceeds per share (99.00/100 of $28.55)¹

$28.26

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, 2000

Investment Income:

Dividends (net of foreign taxes withheld of $36,293)

6,809,166

Interest

3,569,473

TOTAL INCOME

10,378,639

Expenses:

Investment adviser fee

4,707,785

Administrative personnel and services fee

472,701

Custodian fees

44,470

Transfer and dividend disbursing agent fees and expenses

548,613

Directors'/Trustees' fees

5,852

Auditing fees

17,741

Legal fees

4,763

Portfolio accounting fees

126,466

Distribution services fee--Class B Shares

1,448,701

Distribution services fee--Class C Shares

201,617

Shareholder services fee--Class A Shares

1,018,713

Shareholder services fee--Class B Shares

482,900

Shareholder services fee--Class C Shares

67,206

Share registration costs

134,361

Printing and postage

102,898

Insurance premiums

2,046

Miscellaneous

20,882

TOTAL EXPENSES

9,407,715

Reimbursement and Expense Reductions:

Reimbursement of investment adviser fee

(2,230

)

Fees paid indirectly from directed broker arrangements

(17,592

)

TOTAL REIMBURSEMENT AND EXPENSE REDUCTIONS

(19,822

)

Net expenses

9,387,893

Net investment income

990,746

Realized and Unrealized Gain on Investment, Options, Futures and Foreign Currency:

Net realized gain on investments, options, futures and foreign currency transactions

55,127,569

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

15,417,901

Net realized and unrealized gain on investments, options, futures and foreign currency transactions

70,545,470

Change in net assets resulting from operations

71,536,216

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31

2000

1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

990,746

126,335

Net realized gain on investments, options, futures and foreign currency transactions ($56,100,373 and $22,008,654, respectively, as computed for federal tax purposes)

55,127,569

21,987,600

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

15,417,901

70,472,545

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

71,536,216

92,586,480

Distributions to Shareholders:

Distributions from net investment income

Class A Shares

(996,077

)

(589,166

)

Distributions from net realized gains on investments and foreign currency transactions

Class A Shares

(14,302,972

)

(6,933,488

)

Class B Shares

(5,803,301

)

(2,217,536

)

Class C Shares

(702,121

)

(250,672

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(21,804,471

)

(9,990,862

)

Share Transactions:

Proceeds from sale of shares

605,472,799

170,508,287

Proceeds from shares issued in connection with the tax-free acquisition of assets from the IAI Regional Fund

166,854,568

Proceeds from shares issued in connection with the tax-free transfer of assets from Suburban Bank Trust conversion

6,581,387

Net asset value of shares issued to shareholders in payment of distributions declared

15,520,690

5,791,068

Cost of shares redeemed

(280,146,081

)

(91,131,681

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

514,283,363

85,167,674

Change in net assets

564,015,108

167,763,292

Net Assets:

Beginning of period

381,477,836

213,714,544

End of period (including undistributed net investment income of $297 and $0, respectively)

945,492,944

381,477,836

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class A Shares

(For a Share Outstanding Throughout Each Period)¹

Year Ended October 31,

Period Ended

Year
Ended

2000

1999

1998

1997

10/31/1996

12/31/1995

⁴

Net Asset Value, Beginning of Period

$25.36

$18.73

$20.08

$16.17

$14.60

$11.47

Income From Investment Operations:

Net investment income

0.11

0.06

0.09

0.04

0.18

Net realized and unrealized gain on investments

4.96

7.46

1.01

4.85

1.89

4.07

TOTAL FROM INVESTMENT OPERATIONS

5.07

7.52

1.10

4.94

1.93

4.25

Less Distributions:

Distributions from net investment income

(0.07

)

(0.07

)

(0.12

)

(0.11

)

(0.03

)

(0.18

)

Distributions from net realized gain on investments

(1.31

)

(0.82

)

(2.33

)

(0.92

)

(0.33

)

(0.94

)

TOTAL DISTRIBUTIONS

(1.38

)

(0.89

)

(2.45

)

(1.03

)

(0.36

)

(1.12

)

Net Asset Value, End of Period

$29.05

$25.36

$18.73

$20.08

$16.17

$14.60

Total Return⁵

20.61

41.17

6.23

32.10

13.36

37.17

Ratios to Average Net Assets:

Expenses

1.24

1.27

1.29

1.23

%⁶

1.08

Net investment income

0.41

0.26

0.44

0.85

0.31

%⁶

1.29

Expense waiver/reimbursement⁷

0.00

%⁸

0.02

0.07

0.27

%⁶

0.15

Supplemental Data:

Net assets, end of period (000 omitted)

$637,523

$262,083

$158,587

$148,175

$108,804

$98,200

Portfolio turnover

126

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 1, 1996 (start of business) to October 31, 1996.

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

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

6 Computed on an annualized basis.

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

8 Amount is less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)¹

Year Ended October 31,

Period
Ended

2000

1999

1998

1997

10/31/1996

Net Asset Value, Beginning of Period

$25.09

$18.62

$20.04

$16.12

$14.70

Income From Investment Operations:

Net investment income (net operating loss)

0.01

(0.07

)

(0.03

)

0.12

(0.04

)⁴

Net realized and unrealized gain on investments

4.79

7.36

0.96

4.72

1.80

TOTAL FROM INVESTMENT OPERATIONS

4.80

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

(1.31

)

(0.82

)

(2.33

)

(0.92

)

(0.33

)

TOTAL DISTRIBUTIONS

(1.31

)

(0.82

)

(2.35

)

(0.92

)

(0.34

)

Net Asset Value, End of Period

$28.58

$25.09

$18.62

$20.04

$16.12

Total Return⁵

19.71

40.12

5.20

31.65

12.00

Ratios to Average Net Assets:

Expenses

1.99

2.02

2.04

1.98

%⁶

Net investment income (net operating loss)

(0.32

(0.49

(0.31

0.07

(0.36

%)⁶

Expense waiver/reimbursement⁷

0.00

%⁸

0.02

0.06

0.27

%⁶

Supplemental Data:

Net assets, end of period (000 omitted)

$266,173

$106,528

$49,242

$21,636

$6,369

Portfolio turnover

126

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 Computed on an annualized basis.

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

8 Amount is less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)¹

Year Ended October 31,

Period
Ended

2000

1999

1998

1997

10/31/1996

Net Asset Value, Beginning of Period

$25.07

$18.61

$19.95

$16.13

$14.70

Income From Investment Operations:

Net investment income (net operating loss)

0.03

(0.07

)

(0.04

)

0.13

(0.04

)⁴

Net realized and unrealized gain on investments

4.76

7.35

1.05

4.61

1.81

TOTAL FROM INVESTMENT OPERATIONS

4.79

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

(1.31

)

(0.82

)

(2.33

)

(0.92

)

(0.33

)

TOTAL DISTRIBUTIONS

(1.31

)

(0.82

)

(2.35

)

(0.92

)

(0.34

)

Net Asset Value, End of Period

$28.55

$25.07

$18.61

$19.95

$16.13

Total Return⁵

19.68

40.09

5.67

30.90

12.05

Ratios to Average Net Assets:

Expenses

1.99

2.02

2.04

1.98

%⁶

Net investment income (net operating loss)

(0.31

(0.49

(0.31

0.08

(0.37

%)⁶

Expense waiver/reimbursement⁷

0.00

%⁸

0.02

0.06

0.27

%⁶

Supplemental Data:

Net assets, end of period (000 omitted)

$41,797

$12,866

$5,885

$2,614

$710

Portfolio turnover

126

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 Computed on an annualized basis.

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

8 Amount is less than 0.01%.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 2000

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 eight 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.

On September 15, 2000, the Fund acquired all the net assets of Investment Advisers Inc. (IAI) Regional Fund in a tax-free reorganization as follows:

Class A Shares of the Fund Issued

IAI Regional
Fund Net
Assets Received

Unrealized
Appreciation

5,523,157

$166,854,568

$28,314,395

Net Assets of the Fund Prior to Combination

Net Assets of IAI
Regional Fund
Immediately Prior
to Combination

Net Assets
of the
Fund Immediately
After Combination

$772,382,119

$166,854,568

$939,236,687

1 Unrealized Appreciation is included in the IAI Regional Fund Net Assets Received amount shown above.

On June 16, 2000, the Fund received a tax-free transfer of assets from Suburban Bank Trust, a Common Trust Fund as follows:

Shares
of the
Fund Issued

Common
Trust Fund
Net Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund Prior
to Combination

Net Assets
of Common
Trust Fund
Immediately Prior
to Combination

Net Assets of
Fund Immediately
After Combination

222,570

$6,581,387

$126,525

$648,051,464

$6,581,387

$654,632,851

2 Unrealized appreciation is included in the Suburban Bank Trust Net Assets Received amount shown 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, listed corporate bonds, (other fixed income and asset backed securities), and unlisted securities and private placement 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. Investments in other open-ended regulated investment companies are valued at net asset 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 principals. These differences are primarily due to differing tax treatments for book and tax differences. The following reclassifications have been made to the financial statements:

Increase (Decrease)

Paid In Capital

Accumulated Net
Realized Loss

Accumulated Distributions
in Excess of Net
Investment Income

$1,088,018

$(1,469,909)

$381,891

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

Federal Taxes

When-Issued and Delayed Delivery Transactions

Written Options Contracts

The Fund may write option contracts. A written option obligates the Fund to deliver a call, or to receive a put, the contracted amount upon exercise by the holder of the option. The value of the option contract is recorded as a liability and unrealized gain or loss is measured by the difference between the current value and the premium received. For the year ended October 31, 2000, the Fund had a realized gain of $899,974 on written options.

Contracts	Number of Contracts	Premium
Outstanding at 10/31/1999	--	$ --

Options written	6,025	1,324,810

Options expired	(5,850)	(899,974	)

Options closed	--	--

Outstanding at 10/31/2000	175	$ 424,836

At October 31, 2000, the Fund had the following outstanding options:

Issuer

Type

Expiration
Date

Exercise
Price

Number of
Contracts

Unrealized
Appreciation

Market
Value

SDL, Inc.

Call

11/20/00

$360

120

$321,379

$14,250

SDL, Inc.

Call

11/20/00

400

85,769

3,438

TOTALS

175

$407,148

$17,688

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 a trade date basis.

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:

Year Ended October 31

2000

1999

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

13,258,058

384,679,859

3,965,271

89,316,033

Shares issued in connection with the tax-free acquisition of assets from the IAI Regional Fund

5,523,157

166,854,568

Shares issued in connection with the tax-free transfer of assets from Suburban Bank Trust conversion

222,570

6,581,387

Shares issued to shareholders in payment of distributions declared

359,714

9,434,358

167,223

3,486,237

Shares redeemed

(7,752,653

)

(225,067,643

)

(2,264,150

)

(48,870,735

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

11,610,846

342,482,529

1,868,344

43,931,535

Year Ended October 31

2000

1999

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

5,849,950

167,400,217

2,203,365

50,445,518

Shares issued to shareholders in payment of distributions declared

210,118

5,404,250

100,461

2,066,497

Shares redeemed

(991,926

)

(28,425,753

)

(702,195

)

(15,802,656

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

5,068,142

144,378,714

1,601,631

36,709,359

Year Ended October 31

2000

1999

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

1,872,943

53,392,723

1,323,919

30,746,736

Shares issued to shareholders in payment of distributions declared

26,530

682,082

11,597

238,334

Shares redeemed

(948,955

)

(26,652,685

)

(1,138,515

)

(26,458,290

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

950,518

27,422,120

197,001

4,526,780

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

17,629,506

514,283,363

3,666,976

85,167,674

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser 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 Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.

Share Class Name		Percentage of Average Daily Net Assets of Class
Class A Shares		0.25%
Class B Shares		0.75%
Class C Shares		0.75%

For the year ended October 31, 2000, 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

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, 2000, the Fund's expenses were reduced by $17,592 under these arrangements.

Interfund Transactions

During the year ended October 31, 2000, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $436,329,348 and $424,656,129 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 (and in-kind contributions), for the year ended October 31, 2000, were as follows:

Purchases		$1,067,973,808

Sales		$ 752,945,041

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, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the years ended October 31, 2000 and 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 audits. The financial highlights for the periods presented ending prior to October 31, 1999, were audited by other auditors whose report dated December 21, 1998, expressed an unqualified opinion therein.

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, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

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.

Federated
World-Class Investment Manager
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 (12/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

Federated Investors
World-Class Investment Manager

Federated Large Cap Growth Fund

A Portfolio of Federated Equity Funds

2ND ANNUAL REPORT

October 31, 2000

Established 1998

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

President

Federated Large Cap Growth Fund

President's Message

Dear Fellow Shareholder:

Federated Large Cap Growth Fund was created in December, 1998, and I am pleased to present its second Annual Report. This fund invests in approximately 100 major growth corporations with market capitalizations over $60 billion on average. You can easily recognize most of the fund's holdings. They are some of the largest U.S. companies, which are also the country's fastest-growing companies in 11 industry sectors. The fund's net assets totaled $885 million on October 31, 2000, and the fund served over 39,050 shareholders.

This report covers the 12-month period from November 1, 1999 through October 31, 2000. It begins with an interview with the fund's portfolio manager, James E. Grefenstette, Senior 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 diversified stock holdings, and second is the publication of the fund's financial statements.

This growth 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 companies in the growth stock universe--high-quality, well-established companies that have not only helped the stock market's growth in the past five to ten years, but also contributed to the growth of our country. These companies are typically successful world-class leaders with long histories of earnings and growth--seasoned firms that have stood the test of time. These corporations 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 globally and in many industries. As the world continues to move toward a free market economy, these companies are well positioned to benefit from growing overseas markets. At the end of the reporting period, the fund's portfolio held recognizable names like America Online, Inc., Bristol-Myers Squibb Co., Corning, Inc., Coca-Cola Co., Compaq Computer Corp., Dell Computer Corp., General Electric Co., General Motors Corp., Home Depot, Inc., Intel Corp., Johnson & Johnson, Merck & Co., Inc., Morgan Stanley, Dean Witter & Co., and Pfizer, Inc. I urge you to take a few minutes and review the fund's holdings and review the interview with Jim Grefenstette.

Another fund advantage, as Jim 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, i.e., losses are offset by capital gains within the portfolio.

During the reporting period, the market's daily volatility increased as leadership rotated from larger to smaller cap stocks and from the "growth" to "value" style of management. The S&P 500 Index rose 6.1%, with large-cap value stocks up 9.7%, while large cap growth rose only 2.1%. Mid-cap stocks, as represented by the S&P 400 Index, rose 31.6%, while small caps, as represented by the S&P 600 Index, rose 25.3%.¹ In this environment, your fund produced a positive total return through appreciation in the value of its holdings. Individual share class total return performance for the period from November 1, 1999 to October 31, 2000 follows.²

	Total Return	Net Asset Value Increase
Class A Shares	4.62%	$12.78 to $13.37 = 4.62%
Class B Shares	3.84%	$12.75 to $13.24 = 3.84%
Class C Shares	3.76%	$12.75 to $13.23 = 3.76%

1 Standard & Poor's Daily Stock Price Indexes of 500, 400, and 600 common stocks are unmanaged indexes of common stocks in industry, transportation, financial, and public utility companies that can be used to compare to the total returns of funds whose portfolios are invested primarily in common stocks.

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 (1.11%), (1.66%) and, 2.76%, respectively.

Of course, the fund is a long-term investment and is subject to the day-to-day volatility in the stock market. Regardless of the market's fluctuations, over time, you may increase your opportunity to participate in the growth and earnings of high-quality U.S. corporations by "paying yourself first"--adding to your account on a regular basis through a systematic investment program. You can arrange to withdraw a specific amount from your checking account on a regular basis and purchase 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 entrusting a portion of your wealth to Federated Large Cap Growth Fund. We welcome your comments and suggestions.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

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.

James E. Grefenstette, CFA

Senior Vice President

Federated Investment
Management Company

Investment Review

What is your view of the stock market over the past year?

The first half of the fund's fiscal year was a positive period for large-cap stocks. For the 12-month period ended October 31, 2000, the Standard & Poor's 500 Index produced a return of 6.07%.¹ Although recording positive returns, stocks were very volatile during this time. Market performance was led by growth stocks, in general, and technology stocks, in particular. Despite malaise outside of the United States, domestic consumer demand remained healthy propelling the U.S. economy to continued growth.

The most recent six-month period began with quite a shake-up in leadership for the equity markets. Leadership within the equity markets rotated rapidly from large-cap "growth" stocks to small- and mid-cap "value" stocks.

Overall, the 12-month reporting period ended October 31, 2000, was slightly positive for stocks--as the S&P 500 Index produced a return of 6.07%.¹

How did the fund perform during the reporting period?

For the 12-month reporting period from November 1, 1999, through October 31, 2000, the fund's total returns for Class A, B and C Shares were 4.62%, 3.84%, and 3.76%, respectively, based on net asset value.² Performance lagged the 15.25% total return of the Lipper Large-Cap Growth Funds Average,³ and the 6.07% return of the S&P 500 Index for the same period.

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 Ratings Group. This index is unmanaged and 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 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 (1.11%), (1.66%), and 2.76%, 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 does "tax managed" mean, how does it benefit the shareholder, and what strategies are involved?

When possible, the fund strives to maximize after-tax returns by reducing capital gains through several strategies. First, we strive to match gains with losses by using realized capital losses to offset realized capital gains. Second, we sell our highest cost shares first in order to minimize capital gains distributions.

What are some of the fund's recent portfolio additions?

Brocade Communications Systems, Inc. (0.5% of net assets) is the leading provider of fibre channel solutions that make the backbone for storage area networks (SANs), a new method for storing data. With the explosion of data driven primarily by the Internet, companies are looking for new ways to store data. In 1999, only 7% of the data was stored in an SAN environment. This is expected to grow to over 60% of storage configurations, a $40 billion opportunity in 2004. Brocade's solutions help companies simplify the implementation of SANs and reduce the total cost of ownership of data storage environments.

Lowe's Companies, Inc. (2.8% of net assets) is well-positioned in the growing "do-it-yourself" home retailing market segment, and plans to enter more attractive, large markets over the next few years. Its stock offers growth at a reasonable price, selling at just 15 times analysts' earnings estimates for the year ending January 2002. Meanwhile, its main competitor, Home Depot, sells at 26 times 2002 earnings forecasts. Both firms are well-run, but Home Depot's price-to-earnings ratio is nearly 50% higher.

Johnson & Johnson (0.4% of net assets) is one of the world's largest and most diversified health care companies. Its Pharmaceuticals (42% of sales) are tenth worldwide, and its Professional/Medical Supplies (35% of sales) are number one. Its strengths are in drugs for cancer (Procrit), women's health (Ortho-Tri-Cyclen and Ortho-Prefest), central nervous system disorders (Risperdal, Topamax and Reminyl), pain (Duragesic), and anti-infectives (Levaquin). The company has a strong brand name, solid management and has been a remarkably consistent grower, with double-digit sales and earnings growth for the last 50 years. It is also one of the most profitable companies in the world and generates strong cash flow.

What were the fund's top ten holdings as of October 31, 2000 and the industry sector weightings?

Name	Percentage of Net Assets	Market Capitalization ($ billion)
Target Corp.	3.9%	$ 27.9¹
Enron Corp.	3.5%	$ 57.9
General Electric Co.	3.4%	$493.6
Pharmacia Corp.	3.3%	$ 76.9
Pfizer, Inc.	3.3%	$286.7
Schlumberger Ltd.	3.3%	$ 41.2
Walgreen Co.	3.2%	$ 40.8
Merck & Co., Inc.	3.0%	$208.4
Sun Microsystems, Inc.	3.0%	$ 98.0
Cardinal Health, Inc.	3.0%	$ 26.4
TOTAL	32.9%	$ 32.9

Sector	Percentage of Net Assets	Percentage of S&P 500 Index
Technology	30.9%	28.0%
Health Care	21.1%	11.9%
Consumer Staples	12.0%	10.8%
Consumer Cyclicals	9.6%	6.7%
Financials	7.6%	15.7%
Capital Goods	6.4%	8.8%
Energy	3.6%	5.8%
Utilities	3.5%	3.2%
Communication Services	2.1%	6.5%
Other	3.0%	--

1 $ million.

The Year 2000 has seen a highly volatile stock market, with most of it on the downside with no signs of abating. How have you positioned the fund to deal with this environment?

We have gone over our investment process and made three changes in our investment approach to decrease the fund's volatility:

Use a better sentiment indicator within our stock selection process--one that is more dynamic and more sensitive to changes in the market. We seek to identify changes in investor sentiment and market leadership more rapidly, and thus put the fund on a modestly shorter cycle.
Change our benchmark for sector weights to the S&P 500 Index instead of the S&P 500 Barra Growth Index.¹ The latter index is very highly concentrated in the technology, health care and consumer staples sectors, while having no exposure to four sectors (basic materials, energy, transportation, utilities), a 1% weighting in financials and 2% weighting in communication services. Instead of helping the fund to diversify, the S&P Barra Growth Index concentrated the fund's holdings.² Because the S&P 500 Index represents 11 industry sectors, using it as a weighting benchmark should help us reduce our volatility through broader diversification.
Increase the number of holdings where we concentrate investable dollars from 30 names to 50 issues. Concentrating a large part of our assets in only 30 names increased the fund's vulnerability to market downdrafts and raised its volatility. Spreading the bulk of our assets out among 50 issues should help the fund obtain more even performance.

None of these changes is significant alone, but taken altogether we believe they will help us manage the fund. We will be implementing these strategies gradually over the next two months.

1 S&P 500/Barra Growth Index is an unmanaged capitalization-weighted index of stocks in the Standard & Poor's 500 index having the highest price to book ratios. The index consists of approximately half of the S&P 500 on a market capitalization basis.

2 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

How has the portfolio reflected these changes thus far?

To the extent we have made changes, the sector weightings as of October 31, 2000, have shifted as follows: we have reduced our technology weighting from over 40% to 31%; raised our health care holdings from 14% to 21%; and increased our exposure to the consumer staples sector to 12%. All these changes have caused the fund to be more in line with the S&P 500 Index' weightings. Given the sentiment of today's market and the way stocks now look to us we think these adjusted portfolio weightings are more appropriate.

What is your outlook for these large-cap growth corporations?

At present, many economic indicators appear to be in a decelerating trend. This does not bode well for sectors and stocks that depend on economic strength. Consequently, the changes mentioned above reflect where we think investors will focus their attention in the near-term: less in technology, as it appears cyclically sensitive, and more in healthcare and consumer staples, which have more consistent growth prospects.

Barring a material change in the Federal Reserve Board's monetary policy to easing, the economy could be challenged to show vigorous growth in 2001. This sluggishness should continue to benefit stocks that can still show steady growth, but it will be a different environment for most others.

Federated Large Cap Growth Fund--Class A Shares

GROWTH OF $10,000 INVESTED IN FEDERATED LARGE CAP GROWTH FUND

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Large Cap Growth Fund (Class A Shares) (the "Fund") from December 29, 1998 (start of performance) to October 31, 2000, compared to the S&P 500 Index (S&P 500),² and Russell 2000 Index (RUS2).²

Average Annual Total Return³ for the Period Ended 10/31/2000

One Year

(1.11%)

Start of Performance (12/29/1998)

13.59%

[Graphic Representation Omitted - See Appendix]

Past performance is no guarantee of future results. Your investment return and principal value will fluctuate so when shares are redeemed, they may be worth more or less than 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. The indexes are unmanaged.

3 Total return quoted reflects all applicable sales charges.

Federated Large Cap Growth Fund--Class B Shares

GROWTH OF $10,000 INVESTED IN FEDERATED LARGE CAP GROWTH FUND

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Large Cap Growth Fund (Class B Shares) (the "Fund") from December 29, 1998 (start of performance) to October 31, 2000, compared to the S&P 500 Index (S&P500)² and Russell 2000 Index (RUS2).²

Average Annual Total Return³ for the Period Ended 10/31/2000

One Year

(1.66%)

Start of Performance (12/29/1998)

14.21%

[Graphic Representation Omitted - See Appendix]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value of the Fund reflects a 4.75% contingent deferred sales charge on any redemption less than two 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 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 $10,000 INVESTED IN FEDERATED LARGE CAP GROWTH FUND

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Large Cap Growth Fund (Class C Shares) (the "Fund") from December 29, 1998 (start of performance) to October 31, 2000, compared to the S&P 500 Index (S&P 500)² and Russell 2000 Index (RUS2).²

Average Annual Total Return³ for the Period Ended 10/31/2000

One Year

2.76%

Start of Performance (12/29/1998)

16.45%

[Graphic Representation Omitted - 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 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. The indexes are unmanaged.

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

Portfolio of Investments

October 31, 2000

Shares

Value

COMMON STOCKS--96.8%

Automobile--0.2%

43,400

General Motors Corp., Class H

1,406,160

Beverages (Non-Alcoholic)--3.3%

58,900

Coca-Cola Co.

3,556,087

533,590

PepsiCo, Inc.

25,845,766

TOTAL

29,401,853

Biotechnology--5.1%

433,600

Amgen, Inc.

25,121,700

67,400

Immunex Corp.

2,868,712

266,100

Medimmune, Inc.

17,396,287

TOTAL

45,386,699

Broadcasting--0.7%

177,000

AT&T Corp. - Liberty Media Group, Inc., Class A

3,186,000

15,185

Clear Channel Communications, Inc.

912,049

27,600

Cox Communications, Inc., Class A

1,216,125

26,300

Infinity Broadcasting Corp., Class A

874,475

TOTAL

6,188,649

Cellular/Wireless Telecommunications--1.3%

28,190

Comcast Corp., Class A

1,148,742

57,400

NEXTEL Communications, Inc., Class A

2,206,312

82,800

Sprint PCS Group

3,156,750

26,350

Vodafone Group PLC, ADR

1,121,522

28,900

VoiceStream Wireless Corp.

3,800,350

TOTAL

11,433,676

Communications Equipment--6.8%

55,600

ADC Telecommunications, Inc.

1,188,450

5,325

Avaya, Inc.

71,555

67,500

CIENA Corp.

7,095,937

63,900

Lucent Technologies, Inc.

1,489,669

52,300

Metromedia Fiber Network, Inc.

993,700

120,410

Motorola, Inc.

3,002,724

34,300

Nokia Oyj, Class A, ADR

1,466,325

363,570

Nortel Networks Corp.

16,542,435

375,800

Qualcomm, Inc.

24,468,103

Shares

Value

COMMON STOCKS--continued

Communications Equipment--continued

29,600

Sycamore Networks, Inc.

1,872,200

62,600

Telefonaktiebolaget LM Ericsson, Class B, ADR

868,575

19,600

Tellabs, Inc.

978,775

TOTAL

60,038,448

Computers (Hardware)--6.8%

20,800

Brocade Communications Systems, Inc.

4,729,400

37,400

Compaq Computer Corp.

1,137,334

36,400

Dell Computer Corp.

1,073,800

61,000

Gateway, Inc.

3,148,210

122,600

Juniper Networks, Inc.

23,907,000

238,400

Sun Microsystems, Inc.

26,432,600

TOTAL

60,428,344

Computers (Networking)--2.0%

16,325

Cisco Systems, Inc.

879,509

138,400

Network Appliance, Inc.

16,469,600

TOTAL

17,349,109

Computers (Peripherals)--0.5%

51,990

EMC Corp. Mass

4,630,359

Computers Software/Services--5.9%

20,360

America Online, Inc.

1,026,755

35,500

Computer Associates International, Inc.

1,131,562

25,500

Exodus Communications, Inc.

855,844

17,610

Microsoft Corp.

1,212,889

651,960

Oracle Corp.

21,514,680

208,100

Siebel Systems, Inc.

21,837,494

5,600

Verisign, Inc.

739,200

23,600

Veritas Software Corp.

3,327,969

14,100

Yahoo, Inc.

826,613

TOTAL

52,473,006

Consumer Finance--1.2%

288,700

MBNA Corp.

10,844,294

Electrical Equipment--6.3%

555,640

General Electric Co.

30,456,017

61,500

Solectron Corp.

2,706,000

270,400

Sony Corp., ADR

22,443,200

TOTAL

55,605,217

Shares

Value

COMMON STOCKS--continued

Electronics (Instrument.)--0.2%

44,564

Agilent Technologies, Inc.

2,063,870

Electronics (Semiconductors)--7.8%

23,400

Altera Corp.

957,938

43,610

Analog Devices, Inc.

2,834,650

21,600

Broadcom Corp.

4,803,300

24,530

Intel Corp.

1,103,850

223,090

JDS Uniphase Corp.

18,167,892

15,600

Linear Technology Corp.

1,007,175

249,500

Maxim Integrated Products, Inc.

16,544,969

38,700

Micron Technology, Inc.

1,344,825

84,000

PMC-Sierra, Inc.

14,238,000

12,400

SDL, Inc.

3,214,700

22,120

Texas Instruments, Inc.

1,085,263

41,000

Xilinx, Inc.

2,969,938

TOTAL

68,272,500

Entertainment--0.5%

26,400

Disney (Walt) Co.

945,450

35,300

Fox Entertainment Group, Inc., Class A

758,950

25,100

News Corp. Ltd., ADR

908,306

30,953

Viacom, Inc., Class B

1,760,452

TOTAL

4,373,158

Equipment (Semiconductors)--0.1%

17,360

Applied Materials, Inc.

922,250

Financial (Diversified)--2.9%

460,036

Citigroup, Inc.

24,209,395

11,900

Morgan Stanley, Dean Witter & Co.

955,719

TOTAL

25,165,114

Health Care (Drugs/Pharms)--12.8%

46,460

Genentech, Inc.

3,832,950

266,100

Lilly (Eli) & Co.

23,782,688

294,400

Merck & Co., Inc.

26,477,600

676,697

Pfizer, Inc.

29,224,852

536,900

Pharmacia Corp.

29,529,500

TOTAL

112,847,590

Health Care (Hospital Management)--1.8%

409,300

HCA - The Healthcare Corp.

16,346,419

Shares

Value

COMMON STOCKS--continued

Health Care (Medical Products/Supplies)--3.5%

277,980

Cardinal Health, Inc.

26,338,605

78,750

Medtronic, Inc.

4,277,109

TOTAL

30,615,714

Health Care Diversified--0.9%

64,700

Bristol-Myers Squibb Co.

3,942,656

40,800

Johnson & Johnson

3,758,700

TOTAL

7,701,356

Household Products (Non-Durable)--0.6%

93,100

Colgate-Palmolive Co.

5,470,556

Insurance (Multi-Line)--1.9%

171,800

American International Group, Inc.

16,836,400

Investment Banking/Brokerage--1.6%

409,185

Schwab (Charles) Corp.

14,372,623

Manufacturing (Diversified)--0.6%

61,500

Corning, Inc.

4,704,750

18,005

Tyco International Ltd.

1,020,658

TOTAL

5,725,408

Metals and Mining--0.5%

94,000

Level 3 Communications, Inc.

4,482,625

Natural Gas - Distributor - Pipe Line--3.5%

377,300

Enron Corp.

30,962,181

Oil & Gas (Drilling & Equipment)--3.6%

76,300

Halliburton Co.

2,827,869

383,700

Schlumberger Ltd.

29,209,163

TOTAL

32,037,032

Retail (Building Supplies)--5.0%

447,300

Home Depot, Inc.

19,233,900

549,540

Lowe's Cos., Inc.

25,107,109

TOTAL

44,341,009

Retail -- (Department Store)--0.2%

34,100

Kohl's Corp.

1,847,794

Retail -- (General Merchandising Chain)--4.0%

1,241,400

Target Corp.

34,293,675

19,575

Wal-Mart Stores, Inc.

888,216

TOTAL

35,181,891

Shares

Value

COMMON STOCKS--continued

Retail Speciality -- (Apparel)--0.3%

112,900

Gap (The), Inc.

2,914,231

Retail Stores -- (Drug Store)--3.2%

621,500

Walgreen Co.

28,355,937

Retail Stores -- (Food Chains)--0.5%

85,700

Safeway, Inc.

4,686,719

Services (Advertising/Marketing)--0.1%

12,200

Omnicom Group, Inc.

1,125,450

Telephone Long Distance--0.6%

68,800

Global Crossing Ltd.

1,625,400

32,420

MCI Worldcom, Inc.

769,975

39,500

Qwest Communications International, Inc.

1,920,687

36,900

Williams Communications Group, Inc.

675,731

TOTAL

4,991,793

TOTAL COMMON STOCKS (IDENTIFIED COST $814,741,450)

856,825,434

MUTUAL FUNDS--3.0%

26,824,553

Prime Value Obligations Fund, Class IS (at net asset value)

26,824,553

TOTAL INVESTMENTS (IDENTIFIED COST $841,566,003)²

883,649,987

1 Denotes a non-income producing security.

2 The cost of investments for federal tax purposes amounts to $856,478,809. The net unrealized appreciation of investments on a federal tax basis amounts to $27,171,178 which is comprised of $68,233,281 appreciation and $41,062,103 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($885,244,446) at October 31, 2000.

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, 2000

Assets:

Total investments in securities, at value (identified cost $841,566,003 and tax cost $856,478,809)

883,649,987

Cash

1,364,728

Income receivable

109,803

Receivable for investments sold

31,115,361

Receivable for shares sold

3,059,243

TOTAL ASSETS

919,299,122

Liabilities:

Payable for investments purchased

33,009,016

Payable for shares redeemed

509,476

Accrued expenses

536,184

TOTAL LIABILITIES

34,054,676

Net assets for 66,551,385 shares outstanding

885,244,446

Net Assets Consist of:

Paid in capital

933,414,465

Net unrealized appreciation of investments

42,083,984

Accumulated net realized loss on investments

(90,254,003

)

TOTAL NET ASSETS

885,244,446

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

$427,513,790 ÷ 31,979,650 shares outstanding

$13.37

Offering price per share (100/94.50 of $13.37)

$14.15

Redemption proceeds per share

$13.37

Class B Shares:

$400,170,516 ÷ 30,221,452 shares outstanding

$13.24

Offering price per share

$13.24

Redemption proceeds per share (94.50/100 of $13.24)

$12.51

Class C Shares:

$57,560,140 ÷ 4,350,283 shares outstanding

$13.23

Offering price per share

$13.23

Redemption proceeds per share (99.00/100 of $13.23)

$13.10

See Notes which are an integral part of the Financial Statements

Statement of Operations

Year Ended October 31, 2000

Investment Income:

Dividends (net of foreign taxes withheld of $30,369)

1,679,273

Interest

1,153,207

TOTAL INCOME

2,832,480

Expenses:

Investment adviser fee

5,195,087

Administrative personnel and services fee

521,587

Custodian fees

51,630

Transfer and dividend disbursing agent fees and expenses

579,035

Directors'/Trustees' fees

1,137

Auditing fees

10,000

Legal fees

1,842

Portfolio accounting fees

134,389

Distribution services fee--Class A Shares

617,913

Distribution services fee--Class B Shares

2,580,572

Distribution services fee--Class C Shares

350,862

Shareholder services fee--Class A Shares

136,638

Shareholder services fee--Class B Shares

860,191

Shareholder services fee--Class C Shares

116,954

Share registration costs

300,950

Printing and postage

102,164

Insurance premiums

1,404

Miscellaneous

13,922

TOTAL EXPENSES

11,576,277

Waiver, Reimbursement, and Expense Reduction:

Waiver of investment adviser fee

$(13,503

)

Reimbursement of investment adviser fee

(1,176

)

Fees paid indirectly from directed brokerage arrangements

(7,812

)

TOTAL WAIVER, REIMBURSEMENT, AND EXPENSE REDUCTION

(22,491

)

Net expenses

11,553,786

Net operating loss

(8,721,306

)

Realized and Unrealized Gain (Loss) on Investments:

Net realized loss on investments

(85,055,435

)

Net change in unrealized appreciation of investments

11,077,275

Net realized and unrealized gain (loss) on investments

(73,978,160

)

Change in net assets resulting from operations

(82,699,466

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended
10/31/2000

Period Ended
10/31/1999

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(8,721,306

)

(1,085,033

)

Net realized loss on investments ($(85,056,439) and $(5,068,154), respectively, as computed for federal tax purposes)

(85,055,435

)

(5,197,564

)

Net change in unrealized appreciation of investments

11,077,275

29,328,728

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(82,699,466

)

23,046,131

Distribution to Shareholders:

Distributions from net investment income

Class A Shares

(960

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(960

)

Share Transactions:

Proceeds from sale of shares

862,499,791

260,725,123

Proceeds from shares issued in connection with the tax-free transfer of assets from IAI Growth Fund

5,961,041

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

(166,056,888

)

(20,230,826

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

702,403,944

242,494,797

Change in net assets

619,704,478

265,539,968

Net Assets:

Beginning of period

265,539,968

End of period

885,244,446

265,539,968

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 Each Period)

Year Ended
10/31/2000

Period Ended
10/31/1999

Net Asset Value, Beginning of Period

$12.78

$10.00

Income From Investment Operations:

Net operating loss

(0.13

)²

(0.08

)²

Net realized and unrealized gain on investments

0.72

2.86

TOTAL FROM INVESTMENT OPERATIONS

0.59

2.78

Less Distributions:

Distributions from net investment income

(0.00

)³

Net Asset Value, End of Period

$13.37

$12.78

Total Return⁴

4.62

27.83

Ratios to Average Net Assets:

Expenses

1.25

1.20

%⁵

Net operating loss

(0.84

(0.82

%)⁵

Expense waiver/reimbursement⁶

0.00

%⁷

0.39

%⁵

Supplemental Data:

Net assets, end of period (000 omitted)

$427,514

$105,338

Portfolio turnover

173

1 Reflects operations for the period from December 29, 1998 (date of initial 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 undistributed income method 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 Computed on an annualized basis.

6 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

7 Amount represents less than 0.01%.

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended
10/31/2000

Period Ended
10/31/1999

Net Asset Value, Beginning of Period

$12.75

$10.00

Income From Investment Operations:

Net operating loss

(0.24

)²

(0.15

)²

Net realized and unrealized gain on investments

0.73

2.90

TOTAL FROM INVESTMENT OPERATIONS

0.49

2.75

Less Distributions:

Distributions from net investment income

Net Asset Value, End of Period

$13.24

$12.75

Total Return³

3.84

27.53

Ratios to Average Net Assets:

Expenses

2.00

1.95

%⁴

Net operating loss

(1.59

(1.57

%)⁴

Expense waiver/reimbursement⁵

0.00

%⁶

0.39

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$400,171

$145,310

Portfolio turnover

173

1 Reflects operations for the period from December 29, 1998 (date of initial 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 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

6 Amount represents less than 0.01%.

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended
10/31/2000

Period Ended
10/31/1999

Net Asset Value, Beginning of Period

$12.75

$10.00

Income From Investment Operations:

Net operating loss

(0.24

)²

(0.15

)²

Net realized and unrealized gain on investments

0.72

2.90

TOTAL FROM INVESTMENT OPERATIONS

0.48

2.75

Less Distributions:

Distributions from net investment income

Net Asset Value, End of Period

$13.23

$12.75

Total Return³

3.76

27.53

Ratios to Average Net Assets:

Expenses

2.00

1.95

%⁴

Net operating loss

(1.59

(1.57

%)⁴

Expense waiver/reimbursement⁵

0.00

%⁶

0.39

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$57,560

$14,892

Portfolio turnover

173

1 Reflects operations for the period from December 29, 1998 (date of initial 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 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

6 Amount represents less than 0.01%.

Notes to Financial Statements

October 31, 2000

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 eight 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 September 15, 2000, the Fund acquired all the net assets of Investment Advisers, Inc. (IAI) Growth Fund in a tax-free re-organization as follows:

Class A Shares
of the
Fund Issued

IAI Growth
Fund Net
Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund
Prior to
Combination

Net Assets
of IAI
Growth Fund
Immediately
Prior to
Combination

Net Assets of
the Fund
Immediately
After Combination

391,144

$5,961,041

$736,008

$968,374,982

$5,961,041

$974,336,023

1 Unrealized Appreciation is included in the IAI Growth Fund Net Assets Received amount shown above.

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

Class A Shares
of the
Fund Issued

Common
Trust Net
Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund
Prior to
Combination

Net Assets of
Common Trust
Immediately
Prior to
Combination

Net Assets of
the Fund
Immediately
After Combination

159,784

$2,000,500

$941,973

$148,666,006

$2,000,500

$150,666,506

2 Unrealized appreciation is included in the Common Trust Fund net assets received amount shown 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 prices 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. Investments in other open-end regulated investment companies are valued at net asset 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.

Increase (Decrease)

Paid-In Capital

Accumulated Net
Realized Loss
on Investments

Undistributed
Net Investment Income

$(8,720,302)

$(1,004)

$8,721,306

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

Federal Taxes

At October 31, 2000, the Fund, for federal tax purposes, had a capital loss carryforward of $75,341,197, 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 as follows:

Expiration Year

Expiration Amount

2007

$ 5,068,154

2008

$70,273,043

When-Issued and Delayed Delivery Transactions

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Year Ended
10/31/2000

Period Ended
10/31/1999¹

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

29,213,803

450,485,894

8,912,362

104,202,867

Shares issued in connection of the tax-free transfer of assets from IAI Growth Fund

391,144

5,961,041

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

(5,866,809

)

(90,416,338

)

(830,634

)

(9,305,178

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

23,738,138

366,030,597

8,241,512

96,898,189

Year Ended
10/31/2000

Period Ended
10/31/1999¹

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

23,313,134

355,845,246

12,262,520

142,135,740

Shares redeemed

(4,485,308

)

(68,030,859

)

(868,894

)

(10,282,121

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

18,827,826

287,814,387

11,393,626

131,853,619

Year Ended
10/31/2000

Period Ended
10/31/1999¹

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

3,676,444

56,168,651

1,224,134

14,386,516

Shares redeemed

(493,885

)

(7,609,691

)

(56,410

)

(643,527

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

3,182,559

48,558,960

1,167,724

13,742,989

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

45,748,523

702,403,944

20,802,862

242,494,797

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

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser 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

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. Effective March 1, 2000, the Fund began to accrue and pay a distribution services fee on Class A Shares.

Share Class Name		Percentage of Average Daily Net Assets of Class
Class A Shares		0.25%
Class B Shares		0.75%
Class C Shares		0.75%

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.

Expense Reduction

Interfund Transactions

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 (and in-kind contributions), for the year ended October 31, 2000, were as follows:

Purchases	$	1,815,891,102

Sales	$	1,151,898,277

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF THE FEDERATED EQUITY FUNDS AND 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 (the "Fund") as of October 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for the years ended October 31, 2000 and 1999, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

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, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager
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 (12/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

Federated Investors
World-Class Investment Manager

Federated New Economy Fund

A Portfolio of Federated Equity Funds

1ST ANNUAL REPORT

October 31, 2000

Established 2000

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

President

Federated New Economy Fund

President's Message

Dear Fellow Shareholder:

Federated New Economy Fund was created on August 30, 2000, and I am pleased to present its first Annual Report.

The fund invests in corporations that are using information technology--whether it is hardware, software, cellular or digital. These devices allow corporations to control inventories, to better serve clients, and to be more competitive in this country and globally.

Imagine a house built before 1900. It did not have electricity or a telephone. By 1900, houses were wired to accommodate lighting, then with more power, houses could accommodate a telephone, then a radio, and then a television. Today, all of these devices are taken for granted, plus houses are being wired for Internet access. Individuals now can have access to information, communications, entertainment, and literally to hundreds of channels bringing sophisticated information into their lives. New Economy corporations are reinventing themselves with this same progression. However, these corporations are being forced to do it at an incredible rate.

Federated New Economy Fund has selected 40 corporations--8 of which were created in the 19th century and 12 of which were created in the 1990s. The fund's assets are in corporations that are in the process of evolving into successfully competing corporations in 11 different industry sectors. I urge you to examine the fund's portfolio and contemplate the evolution of these companies. For example, Wells Fargo was established as a bank in 1929, and today provides every type of investment service imaginable. Additionally, American Express Co., established in 1850, has become an outstanding financial institution and has diversified into many different business areas. These companies are not afraid of change--they welcome it!

Please take time to read Linda Duessel's discussion about the fund. Significant technological and/or market advances of industry competitors that are unanswered by companies in the fund, and the speed of advances and changes in technology may adversely affect some fund holdings.

There is a truism in buying real estate that simply states "It's location, location, location." In the investment world, the truism is "Timing is everything." The timing of this fund was opportune because the Ides of March had taken its toll on the technology sector, and hundreds of securities in the stock indices have been declining for more than a year. We believe many stocks are at bargain prices and are held in our portfolio of approximately 40 stocks. We are adding to these positions as the fund continues its asset growth.

We believe Federated New Economy Fund is very attractive to investors who see American corporations changing the way they conduct business, and as a result will enhance shareholder value in the long run. I would like to thank all the investment representatives and fund shareholders who have entrusted over $35 million to Federated New Economy Fund, and I recommend all shareholders add to their account regularly.

Regardless of the market's fluctuations, over time you have two easy, convenient ways to increase your opportunity to participate in the growth of quality American companies. First, if you are not already doing so, you can reinvest your dividends and capital gains automatically in additional shares. This increases the number of shares in your account through the benefit of compounding. Second, you can "pay yourself first" by investing through a systematic investment program. This program withdraws a specific amount from your checking account on a regular basis to purchase more fund shares.¹ For more information, please contact your investment representative.

As always, we welcome your comments and suggestions.

Sincerely yours,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

1 Systematic investing does not assure a profit or protect against a 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.

Linda Duessel

Senior Vice President

Federated Investment Management
Company

Investment Review

Why did you start Federated New Economy Fund at this time?

We wanted to offer a conservative alternative to investors who want to invest in companies benefiting from the great advances made in technology over the last 15 years, but in a way that seeks to be less volatile than a pure technology fund. The fund is for investors who believe that there is a New Economy--an idea-based economy where companies of all kinds leverage technology to improve productivity and grow revenues. We see opportunities in two types of companies: those that have been specifically created by technologies in the New Economy, and those we call "transforming companies"--established, often well-known firms that are using technology to maintain and enhance their market leadership.

Why did you select only 40 stocks, and why those particular companies?

There is a limited universe of companies we believe rightly deserve the adjective "superior." We believe these superior companies will continue to grow at the expense of lesser competitors: the strong will become stronger. Within the technology sector, we favor financially strong companies whose competitors face serious barriers to entry. We want names with a first-mover advantage, brand strength, solid partnerships and exceptional management. For transforming companies, we look for firms that have demonstrated their ability to apply cutting-edge technology in product-enhancing ways--ways that are allowing them to enhance earnings by increasing market share, unit sales, and profit margins.

What is the fund's benchmark, and how has the fund performed?

Federated New Economy Fund's benchmark is the Standard & Poor's 500 ("S&P 500") Index, because we aim to be a core holding in a shareholder's portfolio. Fund managers will use a "blend" style, i.e., selecting both growth and value stocks across all sectors of the S&P 500.¹ The fund's performance has only been measured since September 1, 2000, so relative performance numbers probably are not very meaningful at this point. During the two-month reporting period, the S&P 500 Index declined by 5.68%, and the fund's net asset value declined by about 11% (Class A and Class B Shares were $10 per share on September 1, 2000 and $8.90 on October 31, 2000. Class C Shares were $10 per share on September 1, 2000 and $8.89 on October 31, 2000). Because of its technology holdings, the fund will probably remain more volatile than the S&P 500 Index, in both up and down markets. However, it is also worth noting that the fund outperformed the technology-heavy NASDAQ Composite Index,² which declined by nearly 20% over the same two-month reporting period.

Would you tell us about five of the fund's top holdings, and why you chose them?

General Electric Co. (3.3% of net assets) has written the playbook on business-to-business e-commerce. This is a company determined to leverage technology and--more to the point--they know how to execute. This year, GE's volume of Internet transactions is expected to generate more than $5 billion in worldwide revenues. Additionally, GE management believes that Internet-derived productivity gains will save them 20%-50% of selling, general and administrative expenses.

News Corporation Ltd., ADR (3.2% of net assets), the fourth largest media conglomerate by size, is the premier vertically-integrated media company, with strategic investments in television production and distribution. The company provides content to the ever-growing number of news and entertainment outlets, and is involved in numerous promising Internet ventures.

Genentech, Inc. (3.5% of net assets) is the second-largest independent biotechnology company in the world and has the most diverse product line. The company spends 28% of its revenues on research and development, and has the best product pipeline in the biotechnology industry.

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

2 Nasdaq Composite Index is an unmanaged index that measures all Nasdaq domestic and non-U.S.-based common stocks listed on the Nasdaq Stock Market.

Enron Corp. (3.4% of net assets) is among the premier energy companies in the U.S., and it reported strong third quarter earnings based on dramatic increases in the company's wholesale energy segment. The company has become a leader in establishing new markets through such product innovations as global energy online trading and global broadband trading. Enron plans to install thousands of computer servers to create communications pooling points, creating a standardized broadband trading market similar to that in existence for natural gas, electricity and coal.

Citigroup, Inc. (3.3% of net assets) is, simply, the most profitable company in the world. An established financial services player and the "one-stop" financial services center, Citigroup is moving aggressively into the Internet. The Internet is ideal for financial services because it weds convenience for customers with productivity benefits for the company.

What is your market outlook?

We may not see a genuine rally in the stock market, but we believe we are near the market's lows. Because the fund owns top company names across all industry sectors in both "growth" and "value" stocks, we are positioned to take advantage of the expected rally in the domestic equity market when it comes. In the last quarter of 2000, the declines in the Dow Jones Industrial Average, S&P 500 Index, and NASDAQ took market valuations to levels we believe are attractive.

In your opinion, who is the ideal shareholder for this fund?

Federated New Economy Fund is an ideal core holding for investors who want maximum exposure to the wide variety of large, successful companies that are likely to prosper, as technologies are applied to their full potential across the broad spectrum of American business. This is a fund for investors who want applied technology exposure in 40 U.S. corporations.

Portfolio of Investments

October 31, 2000

Shares

Value

COMMON STOCKS--81.7%

Air Freight--1.0%

7,400

FedEx Corp.

346,764

Aluminum--2.0%

25,000

Alcoa, Inc.

717,187

Banks (Major Regional)--2.9%

22,000

Wells Fargo Co.

1,018,875

Biotechnology--1.9%

10,500

Medimmune, Inc.

686,438

Broadcasting (TV, Radio & Cable)--5.2%

38,800

AT&T Corp. - Liberty Media Group, Inc., Class A

698,400

31,700

News Corp. Ltd., ADR

1,147,144

TOTAL

1,845,544

Communications Equipment--5.3%

11,300

Corning, Inc.

864,450

22,600

Nortel Networks Corp.

1,028,300

TOTAL

1,892,750

Computers (Hardware)--1.5%

4,800

Sun Microsystems, Inc.

532,200

Computers (Networking)--1.5%

10,200

Cisco Systems, Inc.

549,525

Computers (Peripherals)--1.5%

5,800

EMC Corp. Mass

516,562

Computers Software/Services--11.8%

13,900

America Online, Inc.

700,977

5,195

Ariba, Inc.

656,518

27,000

Exodus Communications, Inc.

906,187

3,000

I2 Technologies, Inc.

510,000

22,700

Oracle Corp.

749,100

5,000

Verisign, Inc.

660,000

TOTAL

4,182,782

Electrical Equipment--6.3%

21,600

General Electric Co.

1,183,950

26,100

Koninklijke (Royal) Philips Electronics NV, ADR

1,042,369

TOTAL

2,226,319

Shares

Value

COMMON STOCKS--continued

Electronics - Semiconductors--4.9%

22,200

Intel Corp.

999,000

2,830

SDL, Inc.

733,678

TOTAL

1,732,678

Financial (Diversified)--6.1%

16,900

American Express Co.

1,014,000

22,100

Citigroup, Inc.

1,163,012

TOTAL

2,177,012

Health Care (Drugs/Pharmaceuticals)--5.3%

15,100

Genentech, Inc.

1,245,750

14,800

Pfizer, Inc.

639,175

TOTAL

1,884,925

Investment Banking/Brokerage--2.5%

25,000

Schwab (Charles) Corp.

878,125

Manufacturing (Diversified)--2.9%

17,900

Tyco International Ltd.

1,014,706

Natural Gas - Distribution - Pipe Line--3.4%

14,600

Enron Corp.

1,198,113

Oil & Gas (Drilling & Equipment)--2.8%

13,000

Schlumberger Ltd.

989,625

Retail (Building Supplies)--2.0%

16,400

Home Depot, Inc.

705,200

Retail - General Merchandise Chain--5.4%

39,400

Target Corp.

1,088,425

18,600

Wal-Mart Stores, Inc.

843,975

TOTAL

1,932,400

Services (Advertising/Marketing)--2.4%

9,400

Omnicom Group, Inc.

867,150

Telephone Long Distance--3.1%

33,100

XO Communications, Inc., Class A

1,116,608

TOTAL COMMON STOCKS (IDENTIFIED COST $30,397,482)

29,011,488

PREFERRED STOCKS--3.0%

Broadcasting (TV, Radio & Cable)--1.3%

9,110

XM Satellite Radio Holdings, Inc., Conv. Pfd., $4.13

452,448

Telephone Long Distance--1.7%

3,000

Global Crossing Ltd., Conv. Pfd., $16.92

613,125

TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,233,626)

1,065,573

Principal
Amount
or Shares

Value

CORPORATE BONDS--9.0%

Cellular/Wireless Telecommunications--1.9%

790,000

NEXTEL Communications, Inc., Conv. Bond, 5.25%, 1/15/2010

680,664

Computers (Hardware)--2.4%

605,000

Juniper Networks, Inc., Conv. Bond, 4.75%, 3/15/2007

847,472

Computers Software/Services--1.8%

140,000

Siebel Systems, Inc., Conv. Bond, 5.50%, 9/15/2006

640,111

Telephone Long Distance--2.9%

1,070,000

Level 3 Communications, Inc., Conv. Bond, 6.00%, 9/15/2009

1,009,299

TOTAL CORPORATE BONDS (IDENTIFIED COST $3,468,200)

3,177,546

MUTUAL FUND--5.6%

1,983,380

Prime Value Obligations Fund, IS Shares (at net asset value)

1,983,380

TOTAL INVESTMENTS (IDENTIFIED COST $37,082,688)²

35,237,987

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $37,082,688. The net unrealized depreciation of investments on a federal tax basis amounts to $1,844,701 which is comprised of $654,398 appreciation and $2,499,099 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($35,499,281) at October 31, 2000.

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, 2000

Assets:

Total investments in securities, at value (identified and tax cost $37,082,688)

35,237,987

Cash

64,149

Income receivable

26,123

Receivable for shares sold

2,187,668

TOTAL ASSETS

37,515,927

Liabilities:

Payable for investments purchased

1,939,059

Payable for shares redeemed

29,560

Accrued expenses

48,027

TOTAL LIABILITIES

2,016,646

Net assets for 3,989,430 shares outstanding

35,499,281

Net Assets Consist of:

Paid-in capital

37,368,696

Net unrealized depreciation of investments

(1,844,701

)

Accumulated net realized loss on investments

(24,714

)

TOTAL NET ASSETS

35,499,281

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($17,101,616 ÷ 1,921,313 shares outstanding)

$8.90

Offering price per share (100/94.50 of $8.90)¹

$9.42

Redemption proceeds per share

$8.90

Class B Shares:

Net asset value per share ($15,612,399 ÷ 1,754,922 shares outstanding)

$8.90

Offering price per share

$8.90

Redemption proceeds per share (94.50/100 of $8.90)¹

$8.41

Class C Shares:

Net asset value per share ($2,785,266 ÷ 313,195 shares outstanding)

$8.89

Offering price per share

$8.89

Redemption proceeds per share (99.00/100 of $8.89)¹

$8.80

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

See Notes which are an integral part of the Financial Statements

Statement of Operations

Period Ended October 31, 2000¹

Investment Income:

Dividends

10,959

Interest

33,694

TOTAL INCOME

44,653

Expenses:

Investment adviser fee

40,280

Administrative personnel and services fee

28,811

Custodian fees

4,456

Transfer and dividend disbursing agent fees and expenses

9,330

Auditing fees

10,365

Legal fees

383

Portfolio accounting fees

10,871

Distribution services fee--Class B Shares

9,859

Distribution services fee--Class C Shares

1,743

Shareholder services fee--Class A Shares

4,189

Shareholder services fee--Class B Shares

3,286

Shareholder services fee--Class C Shares

581

Share registration costs

44,276

Printing and postage

5,656

Miscellaneous

366

TOTAL EXPENSES

174,452

Waiver and Expense Reimbursement:

Waiver of investment adviser fee

(40,280

)

Reimbursement of other operating expenses

(66,217

)

TOTAL WAIVER AND REIMBURSEMENT

(106,497

)

Net expenses

67,955

Net operating loss

(23,302

)

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(24,714

)

Net change in unrealized depreciation of investments

(1,844,701

)

Net realized and unrealized loss on investments

(1,869,415

)

Change in net assets resulting from operations

(1,892,717

)

1 For the period from September 1, 2000 (date of initial public investment) to October 31, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Period Ended October 31

2000

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(23,302

)

Net realized loss on investments ($(24,714), as computed for federal tax purposes)

(24,714

)

Net change in unrealized depreciation

(1,844,701

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(1,892,717

)

Share Transactions:

Proceeds from sale of shares

38,100,745

Cost of shares redeemed

(708,747

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

37,391,998

Change in net assets

35,499,281

Net Assets:

Beginning of period

End of period

35,499,281

1 For the period from September 1, 2000 (date of initial public investment) to October 31, 2000.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class A Shares

(For a Share Outstanding Throughout Each Period)

Period Ended October 31

2000

Net Asset Value, Beginning of Period

$10.00

Income From Investment Operations:

Net operating loss

(0.00

)²

Net realized and unrealized loss on investments

(1.10

)

TOTAL FROM INVESTMENT OPERATIONS

(1.10

)

Net Asset Value, End of Period

$ 8.90

Total Return³

(11.00

Ratios to Average Net Assets:

Expenses

1.75

%⁴

Net operating loss

(0.34

%)⁴

Expense waiver/reimbursement⁵

3.31

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$17,102

Portfolio turnover

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

2 Less than $(0.01) per share.

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

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class B Shares

(For a Share Outstanding Throughout Each Period)

Period Ended October 31

2000

Net Asset Value, Beginning of Period

$10.00

Income From Investment Operations:

Net operating loss

(0.01

)

Net realized and unrealized loss on investments

(1.09

)

TOTAL FROM INVESTMENT OPERATIONS

(1.10

)

Net Asset Value, End of Period

$ 8.90

Total Return²

(11.00

Ratios to Average Net Assets:

Expenses

2.50

%³

Net operating loss

(1.13

%)³

Expense waiver/reimbursement⁴

3.31

%³

Supplemental Data:

Net assets, end of period (000 omitted)

$15,612

Portfolio turnover

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

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

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class C Shares

(For a Share Outstanding Throughout Each Period)

Period Ended October 31

2000

Net Asset Value, Beginning of Period

$10.00

Income From Investment Operations:

Net operating loss

(0.01

)

Net realized and unrealized loss on investments

(1.10

)

TOTAL FROM INVESTMENT OPERATIONS

(1.11

)

Net Asset Value, End of Period

$ 8.89

Total Return²

(11.10

Ratios to Average Net Assets:

Expenses

2.50

%³

Net operating loss

(1.20

%)³

Expense waiver/reimbursement⁴

3.31

%³

Supplemental Data:

Net assets, end of period (000 omitted)

$2,785

Portfolio turnover

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

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

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 2000

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 eight portfolios. The financial statements included herein are only those of Federated New Economy 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.

SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

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. Investments in open-end regulated investment companies are valued at net asset value.

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Dividends and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Increase (Decrease)

Paid-in Capital

Undistributed
Net Investment Income

$(23,302)

$23,302

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

Federal Taxes

At October 31, 2000, the Fund for federal tax purposes, had a capital loss carryforward of $24,714, which will reduce taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and this will reduce the amount of 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 2008.

When-Issued and Delayed Delivery Transactions

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Period Ended October 31

2000¹

Class A Shares:

Shares

Amount

Shares sold

1,944,350

18,345,922

Shares redeemed

(23,037

)

(208,516

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

1,921,313

18,137,406

Period Ended October 31

2000¹

Class B Shares:

Shares

Amount

Shares sold

1,804,836

16,790,633

Shares redeemed

(49,914

)

(456,831

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

1,754,922

16,333,802

Period Ended October 31

2000¹

Class C Shares:

Shares

Amount

Shares sold

317,911

2,964,190

Shares redeemed

(4,716

)

(43,400

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

313,195

2,920,790

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

3,989,430

37,391,998

1 For the period from September 1, 2000 (date of initial public investment) to October 31, 2000.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment Adviser fee equal to 1.25% of the Fund's average daily net assets.

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund may invest in Prime Value Obligations Fund, which is managed by the Adviser. The Adviser has agreed to reimburse certain investment adviser fees as a result of these transactions.

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 Shares, and Class C Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.

Share Class Name

Percentage of Average Daily
Net Assets of Class

Class B Shares

0.75%

Class C Shares

0.75%

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

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services 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

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, 2000, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $15,539,846 and $13,176,756, 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 (and in-kind contributions), for the period ended October 31, 2000, were as follows:

Purchases	$	36,509,112

Sales	$	1,385,091

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED EQUITY FUNDS AND SHAREHOLDERS OF FEDERATED NEW ECONOMY FUND:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Federated New Economy Fund (the "Fund") as of October 31, 2000, and the related statement of operations for the period then ended, the statement of changes in net assets for the period ended October 31, 2000, and the financial highlights for the period presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, 2000, 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 New Economy Fund as of October 31, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated period in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager
Federated New Economy Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor

Cusip 314172776
Cusip 314172768
Cusip 314172750

25940 (12/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

Federated Investors
World-Class Investment Manager

Federated Small Cap Strategies Fund

A Portfolio of Federated Equity Funds

5TH ANNUAL REPORT

October 31, 2000

Established 1995

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

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 fifth Annual Report. The fund's net assets totaled $382.1 million as of October 31, 2000, with ownership of 162 U.S. small-cap companies across 11 industry sectors.

This report covers the 12-month reporting period from November 1, 1999 through October 31, 2000. It begins with an interview with Aash M. Shah, Vice President, who co-manages the fund with James Grefenstette, Senior Vice President, both of Federated Investment Management Company. Following their discussion 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 capitalization 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 growth by owning a highly diversified portfolio of small-cap stocks.¹ These stocks, issued by companies with a typical market capitalization of less than $1 billion, offer the potential for high returns over time in exchange for a higher level of risk, 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 experienced its most volatile year to-date. In this volatile environment, Federated Small Cap Strategies Fund still managed to record positive total returns across all share classes. The portfolio managers note that valuation levels of small-cap stocks are quite low versus large-cap stocks, which suggests a significant buying opportunity.

1 In return for a higher level of growth potential small-cap stocks have historically experienced a higher degree of price volatility.

Individual share class total return performance for the 12-month reporting period ended October 31, 2000, follows.²

	Total Return	Net Asset Value Increase
Class A Shares	1.92%	$18.72 to $19.08 = 1.92%
Class B Shares	1.15%	$18.23 to $18.44 = 1.15%
Class C Shares	1.10%	$18.20 to $18.40 = 1.10%

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. Of course, the fund is a long-term investment and is subject to the day-to-day volatility in the stock market. Regardless of the market's fluctuations, over time, you may increase your opportunity to participate in the growth and earnings of high-quality U.S. corporations by "paying yourself first"--adding to your account on a regular basis through a systematic investment program. You can arrange to withdraw a specific amount from your checking account on a regular basis and purchase fund shares. Buying shares regularly, (i.e., monthly additions of the same dollar amount) automatically accumulates more shares in your account at lower prices.³Please contact your investment representative for more information.

Thank you for participating in the growth and earnings opportunities of over 162 dynamic U.S. companies. As always, we welcome your comments and suggestions.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

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 (3.69%), (4.35%), and 0.10%, respectively.

Aash M. Shah, CFA

Vice President

Federated Investment Management Company

James Grefenstette, CFA

Senior Vice President

Federated Investment Management Company

Investment Review

The markets experienced significant volatility during the fund's fiscal year. What are your comments?

The past year recorded the most volatile period in the history of the NASDAQ Composite Index. Both large cap and small cap technology stocks displayed very high volatility. Federated Small Cap Strategies Fund shareholders experienced volatility also due to the fact that Technology remained the fund's largest sector exposure during the fiscal year.¹

How did Federated Small Cap Strategies Fund perform over the entire 12-month period ended October 31, 2000?

The fund's 12-month total returns for Class A, B, and C shares were 1.92%, 1.15% and 1.10%, respectively, based on net asset value.²

In what industry sectors are you currently finding opportunities?

We are overweight in the technology sector due to strong operating fundamentals and the severe correction in these stocks which has provided attractive valuations. We are also increasing our exposure in the health care and financials sectors as we discover attractive companies at very reasonable prices. We remain underweighted in the utilities, energy, and transportation sectors.

1 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

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 for Class A, B and C shares were (3.69%), (4.35%) and 0.10%, respectively.

What were the fund's top ten holdings as of October 31, 2000, and what were the sector weightings?

The fund's top ten holdings and sector weightings were as follows:

Name		Percentage of Net Assets
Qlogic Corp.		2.4%
Advance Paradigm, Inc.		2.3%
C&D Technologies, Inc.		2.2%
Affiliated Managers Group		1.9%
Lincare Holdings, Inc.		1.5%
American Eagle Outfitters, Inc.		1.5%
Harman International Industries, Inc.		1.4%
Shaw Group, Inc.		1.4%
Tetra Tech, Inc.		1.4%
InFocus Corp.		1.3%
TOTAL		17.3%

Sector	Percentage of Net Assets	Percentage of S&P 600 Index
Technology	28.1%	18.1%
Financials	15.2%	12.3%
Health Care	14.1%	14.3%
Capital Goods	12.3%	14.5%
Consumer Cyclicals	12.3%	16.9%
Consumer Staples	5.3%	8.6%
Basic Materials	3.3%	3.6%
Energy	2.7%	5.1%
Transportation	1.9%	3.0%
Utilities	1.9%	3.5%
Communication Services	0.9%	0.3%
Other	3.7%	--

What is the long-term potential of the small-cap market?

Small-cap stocks remain very attractive for long-term investors. Two powerful longer term drivers are: valuation levels of small company stocks are extremely attractive versus larger-cap stocks; and earnings growth in the small-cap market is expected to outpace larger cap stocks over the next three to five years. Our analysis of the smaller cap market reveals numerous opportunities to find companies with rapidly growing revenues and earnings at attractive prices. Companies in the small-cap sector still appear very reasonably priced relative to large-cap companies.

Federated Small Cap Strategies Fund may be an ideal investment vehicle for this market for the following reasons: sector discipline--we stay invested in all 11 industry sectors at all times with appropriate overweights and underweights (one half to two times sector bands); and small-cap discipline--we have kept the median capitalization of the fund below $1 billion, which is truly a small-cap orientation. Although small-cap equities may be more volatile than their larger-cap counterparts, history has shown them to be an excellent long term investment. Based on monthly historical data from 1946 to 1999, given a 15-year holding period, small cap stocks outperformed large cap stocks 78% of the time.

How You May Seek to Invest for Success:

INITIAL INVESTMENT

If you made an initial investment of $5,000 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 $9,162 on 10/31/00. You would have earned a 12.88%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.

[Graphic Representation Omitted - See Appendix]

As of 9/30/00, the Class A Shares' average annual 1-year and since inception (11/1/95) total returns were 9.06% and 14.60%, respectively. Class B Shares' average annual 1-year and since inception (11/1/95) total returns were 9.06% and 14.86%, respectively. Class C Shares' average annual 1-year and since inception (11/1/95) total returns were 13.53% and 15.05%, respectively.²

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 three 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 $80,073 and they were still able to receive income totaling $12,287 over the past two years. This represents a 13.64% average annual total return.¹

[Graphic Representation Omitted - 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 $10,000¹ in the Federated Small Cap Strategies Fund (Class A Shares) (the "Fund") from November 1, 1995 (start of performance) to October 31, 2000 compared to the Russell 2000 Index (RUS2)² and Standard & Poor's 600 Small Cap Index (S&P 600).²

Average Annual Total Return³ for the Period Ended 10/31/2000
1 Year	(3.69%	)

Start of Performance (11/1/1995)	12.88%

[Graphic Representation Omitted - See Appendix]

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 S&P 600 have been adjusted to reflect reinvestment of dividends on securities in the indexes.

2 The RUS2 and 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 charges.

Federated Small Cap Strategies Fund--Class B Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Small Cap Strategies Fund (Class B Shares) (the "Fund") from November 1, 1995 (start of performance) to October 31, 2000 compared to the Russell 2000 Index (RUS2)² and Standard & Poor's 600 Small Cap Index (S&P 600).²

Average Annual Total Return³ for the Period Ended 10/31/2000
1 Year	(4.35%	)

Start of Performance (11/1/1995)	13.10%

[Graphic Representation Omitted - 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 RUS2 and 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.

Federated Small Cap Strategies Fund--Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Small Cap Strategies Fund (Class C Shares) (the "Fund") from November 1, 1995 (start of performance) to October 31, 2000 compared to the Russell 2000 Index (RUS2)² and Standard & Poor's 600 Small Cap Index (S&P 600).²

Average Annual Total Return³ for the Period Ended 10/31/2000

1 Year

0.10%

Start of Performance (11/1/1995)

13.30%

[Graphic Representation Omitted - 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 RUS2 and 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, 2000

Shares

Value

COMMON STOCKS--98.0%

Basic Materials--3.3%

71,200

ATMI, Inc.

1,343,900

32,600

Cabot Microelectronics Corp.

1,440,512

118,700

Cambrex Corp.

4,740,581

26,000

Carpenter Technology Corp.

806,000

20,000

Fuller (H.B.) Co.

676,250

145,200

International Fibercom, Inc.

1,869,450

113,500

USX-U.S. Steel Group, Inc.

1,808,906

TOTAL

12,685,599

Capital Goods--12.3%

69,100

^{1, 2}

ACT Manufacturing, Inc.

2,271,662

40,200

Black Box Corp.

2,648,175

143,200

C&D Technologies, Inc.

8,466,700

57,000

Carlisle Cos., Inc.

2,372,625

71,000

Dycom Industries, Inc.

2,671,375

110,100

Excel Technology, Inc.

2,752,500

125,700

Federal Signal Corp.

2,938,237

3,500

HON Industries, Inc.

84,219

113,400

Harman International Industries, Inc.

5,443,200

97,500

MasTec, Inc.

2,821,406

30,000

Newport News Shipbuilding, Inc.

1,475,625

36,500

Pentair, Inc.

1,088,156

66,200

Shaw Group, Inc.

5,395,300

132,800

Spartech Corp.

2,050,100

152,200

Terex Corp.

1,873,963

261,600

Tidel Technologies, Inc.

1,536,900

37,000

York International Corp.

1,005,938

TOTAL

46,896,081

Communication Services--0.9%

72,500

Leap Wireless International, Inc.

3,606,875

Consumer Cyclicals--12.3%

148,300

Abercrombie & Fitch Co., Class A

3,494,319

163,000

American Eagle Outfitters, Inc.

5,613,312

106,300

Brunswick Corp.

2,066,206

54,700

Centex Corp.

2,023,900

Shares

Value

COMMON STOCKS--continued

Consumer Cyclicals--continued

11,700

Cerner, Corp.

724,669

56,200

D. R. Horton, Inc.

1,039,700

35,500

Ethan Allen Interiors, Inc.

1,038,375

95,400

Gentex Corp.

2,361,150

61,600

Houghton Mifflin Co.

2,267,650

38,000

La-Z Boy Chair Co.

598,500

40,000

Lands' End, Inc.

1,026,000

170,900

Lear Corp.

4,657,025

133,800

Mens Wearhouse, Inc.

3,913,650

186,000

O'Reilly Automotive, Inc.

3,348,000

10,500

PolyMedica Corp., Inc.

603,750

174,500

Ross Stores, Inc.

2,301,219

81,300

Tech Data Corp.

3,384,113

168,500

United Rentals, Inc.

3,622,750

83,600

Zale Corp.

2,831,950

TOTAL

46,916,238

Consumer Staples--5.3%

113,400

Charles River Laboratories International, Inc.

2,976,750

20,000

Constellation Brands, Inc., Class A

975,000

47,100

Outback Steakhouse, Inc.

1,342,350

127,400

Patterson Dental Co.

3,989,213

152,081

Tetra Tech, Inc.

5,284,815

77,100

Valassis Communications, Inc.

2,139,525

39,000

Whole Foods Market, Inc.

1,803,750

63,000

XM Satellite Radio Holdings, Inc., Class A

1,827,000

TOTAL

20,338,403

Energy--2.7%

26,300

Atwood Oceanics, Inc.

882,694

121,100

Global Industries Ltd.

1,271,550

93,100

Newfield Exploration Co.

3,514,525

94,200

Petroleum Geo-Services, ADR

1,289,363

84,500

Pride International, Inc.

2,138,906

64,400

Varco International, Inc.

1,110,900

TOTAL

10,207,938

Financials--15.2%

122,400

Affiliated Managers Group

7,359,300

68,000

Allied Capital Corp.

1,402,500

Shares

Value

COMMON STOCKS--continued

Financials--continued

152,600

Amex Financial Select Standard & Poor Depository Receipt

4,403,941

78,000

Associated Banc Corp.

1,876,875

52,700

Astoria Financial Corp.

1,976,250

12,000

Bank United Corp., Class A

680,250

46,000

City National Corp.

1,581,250

54,200

Commerce Bancshares, Inc.

1,947,812

104,700

Compass Bancshares, Inc.

1,904,231

84,500

CompuCredit Corp.

2,608,938

57,000

Eaton Vance Corp.

2,839,312

58,600

Greater Bay Bancorp

1,908,162

103,100

Intercept Group, Inc.

2,790,144

85,200

Jefferies Group, Inc.

2,321,700

58,500

Metris Cos., Inc.

1,893,937

150,500

Mutual Risk Management Ltd.

2,727,813

101,200

National Commerce Bancorporation

2,150,500

97,000

Protective Life Corp.

2,243,125

83,000

Provident Financial Group, Inc.

2,510,750

15,000

Radiant Group, Inc.

1,063,125

50,800

SEI Investments, Co.

4,610,100

32,500

Silicon Valley Bancshares

1,503,125

70,400

Southwest Securities Group, Inc.

1,988,800

75,000

Webster Financial Corp.

1,828,125

TOTAL

58,120,065

Health Care--14.1%

178,000

Advance Paradigm, Inc.

8,699,750

13,800

Aviron

902,175

15,000

Beckman Coulter, Inc.

1,050,937

43,900

Celgene Corp.

2,826,062

26,500

Cell Genesys, Inc.

611,156

49,800

^{1, 2}

Cephalon, Inc.

2,670,525

66,500

Cima Labs, Inc.

3,657,500

50,700

Cubist Pharmaceuticals, Inc.

2,178,516

75,100

CuraGen Corp.

4,853,337

50,000

Dentsply International, Inc.

1,734,375

20,600

Dura Pharmaceuticals, Inc.

709,412

38,000

IDEXX Laboratories, Inc.

912,000

77,500

INAMED Corp.

2,170,000

Shares

Value

COMMON STOCKS--continued

Health Care--continued

89,131

King Pharmaceuticals, Inc.

3,994,183

80,500

Lexicon Genetics, Inc.

1,630,125

135,000

Lincare Holdings, Inc.

5,678,438

30,900

Medimmune, Inc.

2,020,088

37,400

Millennium Pharmaceuticals, Inc.

2,713,838

36,500

^{1, 2}

Rosetta Inpharmatics, Inc.

809,844

26,800

Techne Corp.

3,021,700

21,400

United Therapeutics Corp.

1,144,900

TOTAL

53,988,861

Technology--28.1%

190,200

ACTV, Inc.

1,872,281

64,000

ANTEC Corp.

780,000

102,200

APW Ltd.

4,720,362

114,900

Airnet Communications Corp.

1,748,634

15,000

^{1, 2}

Akamai Technologies, Inc.

765,000

51,400

AudioCodes Ltd.

2,033,512

27,400

Avanex Corp.

2,782,812

40,600

Clarent Corp.

1,261,137

17,000

Cobalt Networks, Inc.

937,125

30,400

Comverse Technology, Inc.

3,397,200

91,000

Credence Systems Corp.

1,706,250

14,200

Cree Research, Inc.

1,409,350

10,000

Cymer, Inc.

250,000

40,700

DMC Stratex Networks, Inc.

941,187

41,300

Digex, Inc.

1,621,025

21,500

E.piphany, Inc.

1,937,687

46,600

^{1, 2}

F5 Networks, Inc.

1,444,600

122,000

FactSet Research Systems

4,620,140

27,800

GlobeSpan, Inc.

2,138,863

263,500

^{1, 2}

GoAmerica, Inc.

2,750,281

44,800

Henry Jack & Associates, Inc.

2,464,000

110,000

InFocus Corp.

4,860,625

12,900

Inrange Technologies Corp.

472,463

21,800

Juniper Networks, Inc.

4,251,000

52,100

^{1, 2}

Kana Communications, Inc.

1,224,350

93,300

MCX Communications, Inc.

1,457,813

183,400

iGATE Capital Corp.

928,463

Shares

Value

COMMON STOCKS--continued

Technology--continued

30,500

Mentor Graphics Corp.

714,844

30,600

Mercury Interactive Corp.

3,396,600

58,400

Micrel, Inc.

2,642,600

38,000

^{1, 2}

MicroStrategy, Inc.

909,625

57,800

Netro Corp.

1,260,763

24,000

Network Engines, Inc.

750,000

25,800

Newport Corp.

2,946,441

134,700

Oak Technology, Inc.

3,780,019

60,375

Orbotech, Ltd.

3,196,102

29,700

Pixelworks, Inc.

989,381

11,600

Polycom, Inc.

754,000

92,978

Qlogic Corp.

8,995,622

102,000

REMEC, Inc.

3,040,875

19,500

RSA Security, Inc.

1,131,000

269,800

Radview Software Ltd.

1,349,000

73,600

Semtech Corp.

2,373,600

34,825

Sierra Wireless

2,293,548

23,600

Sycamore Networks, Inc.

1,492,700

36,500

Verity, Inc.

857,750

72,400

Vignette Corp.

2,158,425

53,800

Virata Corp.

1,042,375

35,300

Vitesse Semiconductor Corp.

2,468,794

95,000

WebTrends Corp.

3,053,359

57,000

Xircom, Inc.

805,125

TOTAL

107,178,708

Transportation--1.9%

202,400

Cheap Tickets, Inc.

2,150,500

30,000

EGL, Inc.

855,000

90,500

USFreightways Corp.

2,330,375

103,100

Yellow Corp.

1,855,800

TOTAL

7,191,675

Shares

Value

COMMON STOCKS--continued

Utilities--1.9%

75,500

Avista Corp.

1,694,031

41,000

NICOR, Inc.

1,447,813

74,000

OGE Energy Corp.

1,521,625

101,100

Utilicorp United, Inc.

2,685,469

TOTAL

7,348,938

TOTAL COMMON STOCKS (IDENTIFIED COST $318,864,028)

374,479,381

MUTUAL FUND--3.7%

13,986,565

Prime Value Obligations Fund, Class IS (at net asset value)

13,986,565

TOTAL INVESTMENTS (IDENTIFIED COST $332,850,593)³

388,465,946

1 Non-income producing security.

2 Certain shares are temporarily on loan to unaffiliated broker/dealers.

3 The cost of investments for federal tax purposes amounts to $335,537,758. The net unrealized appreciation of investments on a federal tax basis amounts to $52,928,188 which is comprised of $90,419,468 appreciation and $37,491,280 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($382,111,090) at October 31, 2000.

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, 2000

Assets:

Total investments in securities, at value (identified cost $332,850,593 and tax cost $335,537,758)

388,465,946

Short-term investments held as collateral for securities lending

10,283,069

Income receivable

49,775

Receivable for investments sold

13,894,292

Receivable for shares sold

6,722,198

TOTAL ASSETS

419,415,280

Liabilities:

Payable for investments purchased

24,384,657

Payable for shares redeemed

2,454,799

Payable on collateral due to broker

10,283,069

Accrued expenses

181,665

TOTAL LIABILITIES

37,304,190

Net assets for 20,428,533 shares outstanding

382,111,090

Net Assets Consist of:

Paid in capital

320,382,768

Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency

55,615,353

Accumulated net realized gain on investments, options, futures and foreign currency transactions

6,112,227

Undistributed net investment income

742

TOTAL NET ASSETS

382,111,090

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($165,412,529 ÷ 8,671,552 shares outstanding)

$19.08

Offering price per share (100/94.50 of $19.08)¹

$20.19

Redemption proceeds per share

$19.08

Class B Shares:

Net asset value per share ($188,440,134 ÷ 10,221,011 shares outstanding)

$18.44

Offering price per share

$18.44

Redemption proceeds per share (94.50/100 of $18.44)¹

$17.43

Class C Shares:

Net asset value per share ($28,258,427 ÷ 1,535,970 shares outstanding)

$18.40

Offering price per share

$18.40

Redemption proceeds per share (99.00/100 of $18.40)¹

$18.22

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, 2000

Investment Income:

Dividends

1,067,651

Interest

963,778

TOTAL INCOME

2,031,429

Expenses:

Investment adviser fee

3,198,116

Administrative personnel and services fee

321,130

Custodian fees

40,992

Transfer and dividend disbursing agent fees and expenses

669,679

Directors'/Trustees' fees

4,666

Auditing fees

13,038

Legal fees

4,559

Portfolio accounting fees

109,761

Distribution services fee--Class B Shares

1,640,126

Distribution services fee--Class C Shares

249,512

Shareholder services fee--Class A Shares

436,159

Shareholder services fee--Class B Shares

546,708

Shareholder services fee--Class C Shares

83,171

Share registration costs

45,572

Printing and postage

249,286

Insurance premiums

1,779

Miscellaneous

23,807

TOTAL EXPENSES

7,638,061

Reimbursement and Expense Reductions:

Reimbursement of investment adviser fee

(375

)

Fees paid indirectly from directed brokerage arrangements

(9,947

)

TOTAL REIMBURSEMENT AND EXPENSE REDUCTIONS

(10,322

)

Net expenses

7,627,739

Net operating loss

(5,596,310

)

Realized and Unrealized Gain on Investments, Options, Futures and Foreign Currency:

Net realized gain on investments, options, futures and foreign currency transactions

10,187,396

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

1,204,103

Net realized and unrealized gain on investments, options, futures and foreign currency

11,391,499

Change in net assets resulting from operations

5,795,189

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31

2000

1999

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(5,596,310

)

(4,563,837

)

Net realized gain on investments, options, futures, and foreign currency transactions ($8,779,174 and $38,974,309, respectively, as computed for federal tax purposes)

10,187,396

38,258,310

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

1,204,103

43,090,432

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

5,795,189

76,784,905

Share Transactions:

Proceeds from sale of shares

755,451,221

470,298,177

Cost of shares redeemed

(757,702,495

)

(539,271,539

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

(2,251,274

)

(68,973,362

)

Change in net assets

3,543,915

7,811,543

Net Assets:

Beginning of period

378,567,175

370,755,632

End of period (including undistributed net investment income of $742 and $0, respectively)

382,111,090

378,567,175

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$18.72

$15.26

$18.75

$14.68

$10.00

Income From Investment Operations:

Net operating loss

(0.18

)²

(0.13

)

(0.14

)²

(0.04

)

(0.05

)³

Net realized and unrealized gain (loss) on investments, options, futures and foreign currency transactions

0.54

3.59

(3.35

)

4.33

4.75

TOTAL FROM INVESTMENT OPERATIONS

0.36

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 foreign currency transactions

(0.00

)⁴

(0.22

)

TOTAL DISTRIBUTIONS

(0.00

)

(0.22

)

(0.02

)

Net Asset Value, End of Period

$19.08

$18.72

$15.26

$18.75

$14.68

Total Return⁵

1.92

22.67

(18.60

29.55

47.06

Ratios to Average Net Assets:

Expenses

1.35

1.31

1.28

1.44

1.35

Net operating loss

(0.87

(0.72

(0.82

(0.65

(0.39

Expense waiver/reimbursement⁶

0.00

%⁷

0.09

0.07

1.70

Supplemental Data:

Net assets, end of period (000 omitted)

$165,413

$148,983

$142,250

$134,903

$23,242

Portfolio turnover

219

118

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 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 results of operations.

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 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

7 Amount is less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$18.23

$14.96

$18.53

$14.62

$10.00

Income From Investment Operations:

Net operating loss

(0.33

)²

(0.27

)

(0.28

)²

(0.09

)

(0.16

)³

Net realized and unrealized gain (loss) on investments, options, futures and foreign currency transactions

0.54

3.54

(3.29

)

4.22

4.78

TOTAL FROM INVESTMENT OPERATIONS

0.21

3.27

(3.57

)

4.13

4.62

Less Distributions:

Distributions from net realized gain on investments and foreign currency transactions

(0.00

)⁴

(0.22

)

Net Asset Value, End of Period

$18.44

$18.23

$14.96

$18.53

$14.62

Total Return⁵

1.15

21.86

(19.25

28.56

46.20

Ratios to Average Net Assets:

Expenses

2.10

2.06

2.03

2.19

2.10

Net operating loss

(1.62

(1.47

(1.57

(1.40

(1.27

Expense waiver/reimbursement⁶

0.00

%⁷

0.09

0.07

1.70

Supplemental Data:

Net assets, end of period (000 omitted)

$188,440

$197,509

$195,188

$183,180

$32,112

Portfolio turnover

219

118

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 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

7 Amount is less than 0.01%

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$18.20

$14.95

$18.51

$14.60

$10.00

Income From Investment Operations:

Net operating loss

(0.33

)²

(0.29

)

(0.27

)²

(0.10

)

(0.16

)³

Net realized and unrealized gain (loss) on investments, options, futures and foreign currency transactions

0.53

3.54

(3.29

)

4.23

4.76

TOTAL FROM INVESTMENT OPERATIONS

0.20

3.25

(3.56

)

4.13

4.60

Less Distributions:

Distributions from net realized gain on investments and foreign currency transactions

(0.00

)⁴

(0.22

)

Net Asset Value, End of Period

$18.40

$18.20

$14.95

$18.51

$14.60

Total Return⁵

1.10

21.74

(19.22

28.60

46.00

Ratios to Average Net Assets:

Expenses

2.10

2.06

2.03

2.19

2.10

Net investment income (net operating loss)

(1.62

(1.47

(1.57

1.40

(1.28

Expense waiver/reimbursement⁶

0.00

%⁷

0.09

0.07

1.70

Supplemental Data:

Net assets, end of period (000 omitted)

$28,258

$32,075

$33,318

$26,375

$5,496

Portfolio turnover

219

118

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

7 Amount is less than 0.01%.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 2000

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 eight 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 Valuation

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

Increase (Decrease)

Paid-In Capital

Undistributed
Net Investment Income

Accumulated Net
Realized Gain

$(5,557,733)

$5,597,052

$(39,319)

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

Federal Taxes

When-Issued and Delayed Delivery Transactions

Futures Contracts

The Fund purchases stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss.

At October 31, 2000, the Fund had no open 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.

Written Options Contracts

Contracts	Number of Contracts	Premium
Outstanding at 10/31/1999	--	$	--

Options written	351		905,404

Options expired	--		--

Options closed	(351)		(905,404)

Outstanding at 10/31/2000	--	$	--

Securities Lending

The Fund participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. Collateral for securities loaned must be in cash or government securities. Collateral is maintained at a minimum level of 100% of the market value on investments loaned, plus interest, if applicable. In accordance with the Fund's securities lending agreement, the market value of securities on loan is determined each day at close of business and any additional collateral required to cover the value of securities on loan is delivered to the Fund on the next business day. Earnings on collateral are allocated between the custodian, as a fee for its services under the program, and the Fund, according to agreed-upon rates.

As of October 31, 2000, securities subject to this type of arrangement and related collateral were as follows:

Market Value of
Securities Loaned

Market Value
of Collateral

$10,690,197

$10,283,069

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Year Ended October 31

2000

1999

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

32,636,627

673,960,458

22,563,662

386,446,755

Shares redeemed

(31,923,228

)

(659,632,290

)

(23,929,948

)

(410,809,125

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

713,399

14,328,168

(1,366,286

)

(24,362,370

)

Year Ended October 31

2000

1999

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

2,021,052

42,193,013

2,562,644

42,926,613

Shares redeemed

(2,635,995

)

(54,209,031

)

(4,770,027

)

(79,704,128

)

NET CHANGE RESULTING FROM CLASS B SHARES TRANSACTIONS

(614,943

)

(12,016,018

)

(2,207,383

)

(36,777,515

)

Year Ended October 31

2000

1999

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

1,882,448

39,297,750

2,442,114

40,924,809

Shares redeemed

(2,108,388

)

(43,861,174

)

(2,909,559

)

(48,758,286

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

(225,940

)

(4,563,424

)

(467,445

)

(7,833,477

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

(127,484

)

(2,251,274

)

(4,041,114

)

(68,973,362

)

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser 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 Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.

Share Class Name		Percentage of Average Daily Net Assets of Class
Class A Shares		0.25%
Class B Shares		0.75%
Class C Shares		0.75%

For the period ended October 31, 2000, 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.

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, 2000, the Fund paid $28,038 pursuant to this agreement.

Expense Reduction

Interfund Transactions

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 (and in-kind contributions), for the year ended October 31, 2000 were as follows:

Purchases	$	910,998,378

Sales	$	898,607,065

CONCENTRATION OF CREDIT RISK

The Fund may invest a portion of its assets in securities of companies that are deemed by the Fund's management to be classified in similar business sectors. The economic developments within a particular sector may have an adverse effect on the ability of issuers to meet their obligations. Additionally, economic developments may have an effect on the liquidity and volatility of portfolio securities.

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED EQUITY FUNDS AND 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, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for the years ended October 31, 2000 and 1999, and the financial highlights for the years 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 audits. 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.

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, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager
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 (12/00)

Federated Investors
World-Class Investment Manager

Federated Growth Strategies Fund

A Portfolio of Federated Equity Funds

16TH ANNUAL REPORT

October 31, 2000

Established 1984

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

J. Christopher Donahue

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 16th Annual Report. As of October 31, 2000, the fund's total net assets of approximately $1.7 billion were invested in 115 common stocks of mid-to large-cap corporations, i.e., market cap of approximately $18 billion. The fund's managers concentrate on selecting established companies because their stock prices are reasonable and exhibit positive growth rates into the future.

This report covers the 12-month period from November 1, 1999 through October 31, 2000. It begins with an interview with the fund's portfolio manager, James E. Grefenstette, Senior 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- and large-cap stocks selected for their strong price and earnings momentum. The fund's portfolio included common stocks representing 11 industry sectors with names that investors will recognize immediately--American Express Co., Citigroup Inc., Duke Energy Corp., Home Depot, Inc., Merrill Lynch & Co., Inc., Morgan Stanley Dean Witter & Co., Pfizer, Inc., Sprint Corp. (PCS Group), and Toys "R' Us, Inc. to name a few.

During the latter part of the reporting period, the stock market showed negative momentum and unprecedented volatility--particularly among large-cap growth stocks and technology stocks. Over the entire period, however, the fund had a very positive return. Individual share class total return performance for the 12-month reporting period, including realized capital gains, follows.¹

	Total Return	Capital Gains	Net Asset Value Increase
Class A Shares	20.47%	$4.328	$37.70 to $40.66 = 7.85%
Class B Shares	19.61%	$4.328	$36.38 to $38.79 = 6.62%
Class C Shares	19.81%	$4.328	$36.62 to $39.14 = 6.88%

The fund received a 3-Star, 4-Star, and 4-Star Overall Morningstar Rating™ in the domestic equity category out of 3,948 funds as of October 31, 2000, for Class A, B, and C Shares, respectively.²

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 reporting period, based on offering price (i.e., less any applicable sales charge), for Class A, B, and C Shares were 13.86%, 14.11%, and 18.81%, respectively.

2 Morningstar proprietary ratings reflect historical risk-adjusted performance. The ratings are subject to change every month. The Overall Morningstar Rating™ is a weighted average of the Fund's 3-, 5- and 10-year (if applicable) annual returns in excess of 90-day U.S. Treasury bill returns with appropriate fee adjustments, and a risk factor that reflects fund performance below 90-day U.S. Treasury bill returns. The top 10% of funds in a broad asset class receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the next 10% receive 1 star. Ratings are for Class A , B, and C Shares. For the Fund's 3-, 5- and 10-year periods as of 10/31/00, the Fund received 3, 4 and 3 stars for Class A Shares. For Class B and C Shares the Fund's 3- and 5-year ratings were 3 and 4 stars, respectively. All three share classes of the Fund were rated among 3948, 2458 and 801 funds, respectively. Source: Morningstar, Inc.© 2000. Morningstar does not guarantee the accuracy of this information. Past performance cannot guarantee future results. Morningstar is not affiliated with Federated.

I strongly urge you to consider taking advantage of share price fluctuations in this volatile market by adding to your account on a regular basis. One way is to 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) could give you the opportunity to accumulate more shares in your account at an average lower cost per share.³ 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,

J. Christopher Donahue

J. Christopher Donahue
President
December 15, 2000

James E.
Grefenstette, CFA

Senior Vice President

Federated Investment Management
Company

Investment Review

What is your view of the past 12 months, which has been particularly volatile in the mid- and large-cap areas of the U.S. stock market?

For the first half of the fund's fiscal year, growth stocks continued to be the dominant performers as lower earnings growth rates encouraged investors to favor those stocks that were less economically sensitive. For the six-month period ended April 30, 2000, the Standard & Poor's 500 Index ("S&P 500") produced a return of 7.19%, while small-cap stocks, as represented by the Standard & Poor's 600 Small Cap Index ("S&P 600"), returned 17.26%.¹ Although positive, stocks were very volatile in the first half of the year. The returns for mid-cap stocks, as represented by the Standard & Poor's 400 Index ("S&P 400") was 21.14%.

The second half of the fund's fiscal year, stocks became even more volatile. Large cap stocks, particularly those in the technology sector that had led the market quarter after quarter, took it on the chin. One of the catalysts was a high Consumer Price Index in March. This, along with other price indexes climbing, caused investors to worry increasingly about inflation and more aggressive tightenings by the Federal Reserve Board (the "Fed").

More recently, we have seen a mixture of divergent signs with regard to the status of economic health. The steadily declining value of the euro relative to the U.S. dollar was a major factor in the poor performance of many international economies. Inflation indexes have calmed down, and various other economic indicators have shown some signs of weakness around the globe. This weakness has caused some investors to question the ability of some high-priced technology stocks to deliver the expected revenues and earnings in 2001.

1 The S&P 500 is an unmanaged index comprised of common stocks in industry, transportation, finance and public utility companies. The S&P 600 consists of 600 domestic stocks that represent the small cap stock market. The S&P 400 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. These indexes are unmanaged and investments cannot be made in an index.

Stock markets around the world, including the United States, moved generally lower as major central banks maintained the monetary tightening programs started last year.

For the 12-month reporting period ended October 31, 2000, large-cap stocks, as represented by the S&P 500, produced a return of 6.07% while mid-cap stocks, as represented by the S&P 400, returned 31.64%.

How did the fund's total return compare to that of the S&P 500 Index and its peers?

For the fiscal year ended October 31, 2000, the fund's Class A, B, and C Shares produced total returns of 20.47%, 19.61%, and 19.81%, respectively, based on net asset value.² These returns compared favorably to the 6.07% return of the S&P 500, but lagged the 34.32% total return of the fund's peer group, the Lipper Multi-Cap Growth Funds Average.³

What accounted for the fund's performance?

The average stock in the fund has had a faster growth profile than the average stock in the market, or of those held by our peer funds. This helped the fund considerably in the first half of the year, but hurt performance in the second half. The lag was caused specifically by the fund's underweights in the finance, health care and consumer staples sectors, and an overweight position in the technology sector.⁴ The market moved quickly from concerns about economic softness, and investors rotated away from faster but riskier areas of growth--such as technology --and into sectors where growth, albeit modest growth, is more assured.

2 Past performance 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 13.86%, 14.11%, and 18.81%, respectively.

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.

4 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

What are some of the fund's recent portfolio additions?

Genzyme Corp. (0.96% of net assets): One of the few first tier biotechnology companies, Genzyme has made numerous acquisitions, but has divested non-core businesses and is building a strong niche marketing organization. Genzyme has four major new products in development and three marketed products, including the successful Cerezyme, the only treatment for Gaucher's disease. The stock has been a strong performer with good price momentum, as investors have recognized it as an inexpensive play on the industry with improving fundamentals.

Dentsply International, Inc. (0.62% of net assets): This leading provider of dental supplies is well positioned in a market that should continue to have high single-digit growth fueled by better insurance coverage, new technologies increasing the number of available procedures, and rising demand for cosmetic procedures. This is also a lower risk market due to the lack of government reimbursement. Dentsply is an inexpensive stock, trading at less than 1.2 times its growth rate, and its price momentum is strong.

Health Management Associates, Inc. (0.82% of net assets): One of the largest hospital management companies and the leader in the non-urban segment, HMA has an excellent management team, and has generated the best margins and most consistent growth in the industry. We like hospitals as a group because their sentiment and fundamentals are improving. In addition, they are a good way to play the stabilization in health care services because they offer the most significant market capitalizations, strong lobbying efforts, and local market dominance. Hospitals also are in a good position to get better rates from HMOs, who are now enjoying double-digit price increases. Customer choice and fear of reprisal have been putting upward pressure on admission rates.

Lowe's Companies, Inc. (1.02% of net assets): Well-positioned in the growing "do-it-yourself" home retailing market segment, Lowe's plans to enter more attractive, large markets over the next few years. Its stock offers growth at a reasonable price, selling at just 15 times analysts' earnings estimates for the year ending January 2002. Meanwhile, its main competitor, Home Depot, Inc., sells at 26 times 2002 earnings forecasts. Both firms are well-run, but Home Depot's price-to-earnings ratio is nearly 50% higher than Lowe's.

What were the fund's top ten holdings, and what were its industry weightings as of October 31, 2000?

Name	Percentage of Net Assets	Market Capitalization ($ Billion)
EMC Corp. Mass	2.0%	$194.9

Gemstar-TV Guide International Ltd.	1.9%	$ 16.0

McLeodUSA, Inc., Class A	1.8%	$ 9.1

Sanmina Corp.	1.8%	$ 10.9

Flextronics International Ltd.	1.7%	$ 12.2

Philip Morris Cos., Inc.	1.6%	$ 91.9

Enron Corp.	1.6%	$ 59.4

American International Group, Inc.	1.5%	$ 227.8

Sun Microsystems, Inc.	1.5%	$ 92.0

Citigroup, Inc.	1.5%	$ 221.8

TOTAL	16.9%	$ 936.0

Sector	Percentage of Net Assets	Percentage of S&P 500 Index
Technology	35.0%	28.0%
Health Care	12.1%	11.9%
Financials	11.0%	15.7%
Consumer Cyclicals	7.4%	6.7%
Consumer Staples	7.0%	10.8%
Energy	5.7%	5.8%
Communication Services	5.3%	6.5%
Capital Goods	5.1%	8.8%
Utilities	5.1%	3.2%
Basic Materials	1.3%	2.0%
Transportation	0.5%	0.6%
Mutual Funds	4.6%	--

What is your outlook for growth stocks?

Growth stocks tend to do well in environments where economic growth is decelerating, and interest rates are declining. We believe that we are moving into this kind of environment. The risk, and this is a material concern at present, is that outright economic weakness will threaten prospects for even some secular growth areas, technology in particular. We believe the U.S. economy is definitely slowing, and growth in the technology sector will continue, but the risks are measurable.

The fund is currently overweight, relative to the S&P 500, in the technology, health care and utilities sectors. Technology and health care should enjoy a longer term secular growth rate higher than the average stock. Additionally, utilities should benefit from a shorter term secular growth rate driven by under-investment in power-generation facilities, while demand for electricity is growing.

We remain underweight in those sectors tied most directly to the growth rate of the U.S. economy--basic materials, capital goods and transportation. We believe the effects of higher interest rates and higher energy prices will continue to dampen economic growth.

The growth style of equity investing retains its long-term appeal because the drivers of economic growth continue to be the "growthier" parts of our economy: technology, health care and communications. The United States economy is not being driven by heavy industries such as paper, chemicals, autos or steel. The build-out of a new kind of communications infrastructure is still in its early stages. It is a massive project that will last for the better part of this decade, and we believe will likely keep investors focused on growth stocks for some time to come.

Two Ways You May Seek to Invest for Success:

INITIAL INVESTMENT

If you had made an initial investment of $17,000 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 $234,710 on 10/31/00. You would have earned a 17.60%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.

[Graphic Representation Omitted - See Appendix]

As of 9/30/00, the Class A Shares' average annual 1-year, 5-year, and 10-year total returns were 36.63%, 25.58%, and 20.05%, respectively. Class B Shares' 1-year, 5-year, and since-inception (8/16/95) total returns were 38.04%, 25.85%, and 26.31%, respectively. Class C Shares' 1-year, 5-year, and since-inception (8/16/95) total returns were 42.83%, 26.18%, and 26.56%, respectively.²

ONE STEP AT A TIME

$1,000 initial investment and subsequent investments of $1,000 each year for 16 years (reinvesting all dividends and capital gains) grew to $82,529.

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 $17,000 but your account would have reached a total value of $82,529¹ by 10/31/00. You would have earned an average annual total return of 17.17%.

[Graphic Representation Omitted - 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, 1990, 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 $30,000 has grown to $110,512. This represents a 19.25% average annual total return.¹ For the Rices, a dedicated program of monthly investments really paid off.

[Graphic Representation Omitted - 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 $10,000¹ in the Federated Growth Strategies Fund (Class A Shares) (the "Fund") from October 31, 1990 to October 31, 2000 compared to the S&P 500² and the Lipper Growth Fund Index (LGFI).²

Average Annual Total Returns³ for the Year Ended 10/31/2000
1 Year		13.86%
5 Years		23.52%
10 Years		19.11%
Start of Performance (8/23/1984)		17.60%

[Graphic Representation Omitted - 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 $10,000¹ in the Federated Growth Strategies Fund (Class B Shares) (the "Fund") from August 16, 1995 (start of performance) to October 31, 2000 compared to the S&P 500² and the Lipper Growth Fund Index (LGFI).²

Average Annual Total Returns³ for the Year Ended 10/31/2000
1 Year		14.11%
5 Years		23.78%
Start of Performance (8/16/1995)		23.45%

[Graphic Representation Omitted - See Appendix]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value of the Fund reflects a 1.00% contingent deferred sales charge on any redemption less than six 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 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 $10,000¹ in the Federated Growth Strategies Fund (Class C Shares) (the "Fund") from August 16, 1995 (start of performance) to October 31, 2000 compared to the S&P 500² and the Lipper Growth Fund Index (LGFI).²

Average Annual Total Returns³ for the Year Ended 10/31/2000
1 Year		18.81%
5 Years		24.11%
Start of Performance (8/16/1995)		23.69%

[Graphic Representation Omitted - 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.

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 indexes are unmanaged.

3 Total return quoted reflects all contingent deferred sales charges.

Portfolio of Investments

October 31, 2000

Shares

Value

COMMON STOCKS--94.9%

Basic Materials--1.3%

359,000

Air Products & Chemicals, Inc.

13,395,187

298,800

Dow Chemical Co.

9,150,750

TOTAL

22,545,937

Capital Goods--5.1%

742,770

Flextronics International Ltd.

28,225,260

290,325

Molex, Inc.

15,677,550

367,800

Precision Castparts Corp.

13,884,450

262,700

Sanmina Corp.

30,029,894

TOTAL

87,817,154

Communication Services--5.3%

394,500

Level 3 Communications, Inc.

18,812,719

1,574,500

McLeodUSA, Inc., Class A

30,309,125

298,800

Nextel Communications, Inc., Class A

11,485,125

142,700

Sprint Corp. (PCS Group)

5,440,438

721,100

XO Communications, Inc., Class A

24,325,858

TOTAL

90,373,265

Consumer Cyclicals--7.4%

470,900

BJ's Wholesale Club, Inc.

15,510,269

267,500

DeVry, Inc.

9,880,781

474,500

Gemstar-TV Guide International Ltd.

32,532,906

257,600

Home Depot, Inc.

11,076,800

384,300

Lowe's Cos., Inc.

17,557,706

119,300

Macrovision Corp.

8,693,987

532,400

Target Corp.

14,707,550

993,600

Toys `R' Us, Inc.

17,077,500

TOTAL

127,037,499

Consumer Staples--7.0%

891,600

AT&T Corp. - Liberty Media Group, Inc., Class A

16,048,800

201,500

Cardinal Health, Inc.

19,092,125

270,800

Echostar Communications Corp., Class A

12,253,700

342,700

News Corp. Ltd., ADR

14,736,100

544,700

Patterson Dental Co.

17,055,919

762,500

Philip Morris Cos., Inc.

27,926,563

433,100

XM Satellite Radio Holdings, Inc., Class A

12,559,900

TOTAL

119,673,107

Shares

Value

COMMON STOCKS--continued

Energy--5.7%

315,100

Diamond Offshore Drilling, Inc.

10,890,644

282,300

ENSCO International, Inc.

9,386,475

359,200

Global Marine, Inc.

9,518,800

499,600

Grant Prideco, Inc.

9,273,825

159,500

Murphy Oil Corp.

9,241,031

212,100

Nabors Industries, Inc.

10,795,890

339,100

Noble Drilling Corp.

14,093,844

557,900

R&B Falcon Corp.

13,947,500

299,100

Weatherford International, Inc.

10,917,150

TOTAL

98,065,159

Financials--11.0%

271,800

American Express Co.

16,308,000

263,200

American International Group, Inc.

25,793,600

477,733

Citigroup, Inc.

25,140,699

139,200

Federal National Mortgage Association

10,718,400

370,200

Lehman Brothers Holdings, Inc.

23,877,900

286,200

Merrill Lynch & Co., Inc.

20,034,000

202,400

Morgan Stanley, Dean Witter & Co.

16,255,250

206,000

Providian Financial Corp.

21,424,000

72,000

SEI Investments Co.

6,534,000

119,300

State Street Corp.

14,881,482

215,600

Waddell & Reed Financial, Inc., Class A

6,872,250

TOTAL

187,839,581

Health Care--12.1%

198,000

Allergan, Inc.

16,644,375

306,200

Dentsply International, Inc.

10,621,312

164,300

Enzon, Inc.

11,706,375

135,200

Forest Laboratories, Inc., Class A

17,914,000

232,300

Genzyme Corp.

16,493,300

710,800

Health Management Associates, Inc., Class A

14,082,725

106,600

Human Genome Sciences, Inc.

9,422,441

63,300

IDEC Pharmaceuticals Corp.

12,414,712

188,700

Maxim Pharmaceuticals, Inc.

8,373,563

151,500

Medimmune, Inc.

9,904,313

125,600

Millennium Pharmaceuticals, Inc.

9,113,850

402,032

Pfizer, Inc.

17,362,757

296,300

Pharmacia Corp.

16,296,500

Shares

Value

COMMON STOCKS--continued

Health Care--continued

276,600

Schering Plough Corp.

14,296,763

75,300

UnitedHealth Group, Inc.

8,235,938

229,600

Watson Pharmaceuticals, Inc.

14,364,350

TOTAL

207,247,274

Technology--35.0%

989,000

ACTV, Inc.

9,735,469

167,300

ASM Lithography Holding NV

4,653,031

201,000

Adobe System, Inc.

15,288,562

126,600

Applied Micro Circuits Corp.

9,676,987

66,400

Ariba, Inc.

8,391,300

103,100

Avanex Corp.

10,471,094

161,200

BEA Systems, Inc.

11,566,100

51,900

Broadcom Corp., Class A

11,541,262

104,000

Brocade Communications Systems, Inc.

23,647,000

128,500

CIENA Corp.

13,508,562

95,200

Check Point Software Technologies Ltd.

15,077,300

213,100

Cisco Systems, Inc.

11,480,762

943,300

Citrix Systems, Inc.

20,870,512

151,800

Commerce One, Inc.

9,743,663

126,100

Comverse Technology, Inc.

14,091,675

254,400

Conexant Systems, Inc.

6,693,900

116,600

Corning, Inc.

8,919,900

55,700

Cree Research, Inc.

5,528,225

384,600

EMC Corp. Mass

34,253,437

67,500

I2 Technologies, Inc.

11,475,000

112,200

Inktomi Corp.

7,117,687

149,750

Interlink Electronics, Inc.

3,350,656

84,100

JDS Uniphase Corp.

6,848,894

59,200

Juniper Networks, Inc.

11,544,000

165,100

Macromedia, Inc.

12,723,019

60,900

Mercury Interactive Corp.

6,759,900

451,314

Nortel Networks Corp.

20,534,787

502,300

Oracle Corp.

16,575,900

58,500

PMC-Sierra, Inc.

9,915,750

283,800

Palm, Inc.

15,201,038

392,300

Peoplesoft, Inc.

17,120,217

79,500

Phone.com, Inc.

7,358,719

194,700

Qlogic Corp.

18,837,225

301,600

Qualcomm, Inc.

19,636,988

Shares

Value

COMMON STOCKS--continued

Technology--continued

572,700

RF Micro Devices, Inc.

11,418,206

117,000

Redback Networks, Inc.

12,453,188

26,600

SDL, Inc.

6,896,050

178,200

Sandisk Corp.

9,575,466

174,400

Siebel Systems, Inc.

18,301,100

230,200

Sun Microsystems, Inc.

25,523,425

121,400

Sycamore Networks, Inc.

7,678,550

85,600

VeriSign, Inc.

11,299,200

119,700

Veritas Software Corp.

16,879,570

333,100

Vitesse Semiconductor Corp.

23,296,181

202,000

Vitria Technology, Inc.

5,428,750

306,900

Xilinx, Inc.

22,231,069

TOTAL

601,119,276

Transportation--0.5%

174,200

Expeditors International Washington, Inc.

9,036,625

Utilities--4.5%

104,400

Calpine Corp.

8,241,075

211,300

Coastal Corp.

15,939,944

139,500

Duke Energy Corp.

12,058,031

177,844

Dynegy, Inc.

8,236,400

334,000

Enron Corp.

27,408,875

183,800

Southern Energy, Inc.

5,008,550

TOTAL

76,892,875

TOTAL COMMON STOCKS (IDENTIFIED COST $1,236,920,043)

1,627,647,752

MUTUAL FUND--4.6%

78,142,557

Prime Value Obligations Fund, Class IS (at net asset value)

78,142,557

TOTAL INVESTMENTS (IDENTIFIED COST $1,315,062,600)²

1,705,790,309

1 Denotes a non-income producing security.

2 The cost of investments for federal tax purposes amounts to $1,319,877,251. The net unrealized appreciation of investments on a federal tax basis amounts to $385,913,058 which is comprised of $467,645,447 appreciation and $81,732,389 depreciation at October 31, 2000.

Note: The categories of investments are shown as a percentage of net assets ($1,715,451,954) at October 31, 2000.

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, 2000

Assets:

Total investments in securities, at value (identified cost $1,315,062,600 and tax cost $1,319,877,251)

1,705,790,309

Cash

32,642

Income receivable

170,886

Receivable for investments sold

2,725,626

Receivable for shares sold

18,963,544

TOTAL ASSETS

1,727,683,007

Liabilities:

Payable for investments purchased

9,925,577

Payable for shares redeemed

1,480,832

Accrued expenses

824,644

TOTAL LIABILITIES

12,231,053

Net assets for 42,766,746 shares outstanding

1,715,451,954

Net Assets Consist of:

Paid in capital

1,214,456,532

Net unrealized appreciation of investments

390,727,709

Accumulated net realized gain on investments

110,267,713

TOTAL NET ASSETS

1,715,451,954

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Class A Shares:

Net asset value per share ($1,216,668,745 ÷ 29,924,174 shares outstanding)

$40.66

Offering price per share (100/94.50 of $40.66)¹

$43.03

Redemption proceeds per share

$40.66

Class B Shares:

Net asset value per share ($425,398,205 ÷ 10,967,543 shares outstanding)

$38.79

Offering price per share

$38.79

Redemption proceeds per share (94.50/100 of $38.79)¹

$36.66

Class C Shares:

Net asset value per share ($73,385,004 ÷1,875,029 shares outstanding)

$39.14

Offering price per share

$39.14

Redemption proceeds per share (99.00/100 of $39.14)¹

$38.75

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, 2000

Investment Income:

Dividends (net of foreign taxes withheld of $23,070)

4,174,695

Interest

2,706,112

TOTAL INCOME

6,880,807

Expenses:

Investment adviser fee

11,655,341

Administrative personnel and services fee

1,170,300

Custodian fees

92,249

Transfer and dividend disbursing agent fees and expenses

1,128,746

Directors'/Trustees' fees

8,873

Auditing fees

12,975

Legal fees

5,908

Portfolio accounting fees

164,655

Distribution services fee--Class B Shares

2,628,422

Distribution services fee--Class C Shares

440,819

Shareholder services fee--Class A Shares

2,862,307

Shareholder services fee--Class B Shares

876,141

Shareholder services fee--Class C Shares

146,939

Share registration costs

302,587

Printing and postage

182,592

Insurance premiums

3,818

Miscellaneous

33,429

TOTAL EXPENSES

21,716,101

Waiver, Reimbursement and Expense Reductions:

Waiver of shareholder services fee--Class C Shares

(11,755

)

Reimbursement of investment adviser fee

(2,004

)

Fees paid indirectly from directed broker arrangements

(11,591

)

TOTAL WAIVER, REIMBURSEMENT AND EXPENSE REDUCTIONS

(25,350

)

Net expenses

21,690,751

Net operating loss

(14,809,944

)

Realized and Unrealized Gain on Investments:

Net realized gain on investments

111,917,248

Net change in unrealized appreciation of investments

55,638,673

Net realized and unrealized gain on investments

167,555,921

Change in net assets resulting from operations

152,745,977

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended October 31

2000

1999

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(14,809,944

)

(7,362,063

)

Net realized gain (loss) on investments ($115,086,779 and $132,898,358, respectively, as computed for federal tax purposes)

111,917,248

133,571,596

Net change in unrealized appreciation of investments

55,638,673

226,084,937

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

152,745,977

352,294,470

Distributions to Shareholders:

Distributions from net realized gain on investments

Class A Shares

(90,688,065

)

Class B Shares

(21,701,036

)

Class C Shares

(3,423,623

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(115,812,724

)

Share Transactions:

Proceeds from sale of shares

1,900,763,790

867,487,600

Proceeds from shares issued in connection with the tax-free transfer of assets from a Common Trust Fund

3,284,745

Proceeds from shares issued in connection with the tax-free transfer of assets from a Common Trust Fund

712,988

Proceeds from shares issued in connection with the tax-free acquisition of assets from IAI Mid-Cap Growth Fund

40,028,222

Net asset value of shares issued to shareholders in payment of distributions declared

95,412,266

Cost of shares redeemed

(1,342,412,948

)

(840,233,139

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

694,504,318

30,539,206

Change in net assets

731,437,571

382,833,676

Net Assets:

Beginning of period

984,014,383

601,180,707

End of period

1,715,451,954

984,014,383

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$37.70

$23.53

$31.54

$25.84

$26.22

Income From Investment Operations:

Net investment income (net operating loss)

(0.33

)²

(0.25

)²

(0.14

)²

(0.04

)

0.04

Net realized and unrealized gain (loss) on investments

7.62

14.42

(1.48

)

8.56

5.01

TOTAL FROM INVESTMENT OPERATIONS

7.29

14.17

(1.62

)

8.52

5.05

Less Distributions:

Distributions from net investment income

(0.00

)³

(0.04

)

Distributions from net realized gain on investments

(4.33

)

(6.39

)

(2.82

)

(5.39

)

TOTAL DISTRIBUTIONS

(4.33

)

(6.39

)

(2.82

)

(5.43

)

Net Asset Value, End of Period

$40.66

$37.70

$23.53

$31.54

$25.84

Total Return⁴

20.47

60.22

(6.12%

)

36.37

23.16

Ratios to Average Net Assets:

Expenses

1.20

1.24

1.20

1.14

1.13

Net investment income (net operating loss)

(0.76

(0.80

(0.54

(0.14

0.15

Expense waiver/reimbursement⁵

0.10

0.15

Supplemental Data:

Net assets, end of period (000 omitted)

$1,216,669

$776,828

$510,552

$509,678

$307,382

Portfolio turnover

115

125

119

146

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

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$36.38

$22.88

$31.02

$25.65

$26.23

Income From Investment Operations:

Net operating loss

(0.63

)²

(0.47

)²

(0.34

)²

(0.10

)

(0.10

)

Net realized and unrealized gain (loss) on investments

7.37

13.97

(1.41

)

8.29

4.91

TOTAL FROM INVESTMENT OPERATIONS

6.74

13.50

(1.75

)

8.19

4.81

Less Distributions:

Distributions from net realized gain on investments

(4.33

)

(6.39

)

(2.82

)

(5.39

)

Net Asset Value, End of Period

$38.79

$36.38

$22.88

$31.02

$25.65

Total Return³

19.61

59.00

(6.78

35.23

22.03

Ratios to Average Net Assets:

Expenses

1.95

1.99

1.96

1.99

2.03

Net operating loss

(1.50

(1.55

(1.34

(1.04

(0.79

Supplemental Data:

Net assets, end of period (000 omitted)

$425,398

$177,091

$77,975

$39,588

$10,858

Portfolio turnover

115

125

119

146

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

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended October 31

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$36.62

$23.02

$31.16

$25.68

$26.22

Income From Investment Operations:

Net operating loss

(0.62

)²

(0.47

)²

(0.34

)²

(0.20

)

(0.05

)

Net realized and unrealized gain (loss) on investments

7.47

14.07

(1.41

)

8.50

4.90

TOTAL FROM INVESTMENT OPERATIONS

6.85

13.60

(1.75

)

8.30

4.85

Less Distributions:

Distributions from net realized gain on investments

(4.33

)

(6.39

)

(2.82

)

(5.39

)

Net Asset Value, End of Period

$39.14

$36.62

$23.02

$31.16

$25.68

Total Return³

19.81

59.08

(6.74

35.66

22.12

Ratios to Average Net Assets:

Expenses

1.93

1.97

1.94

1.90

1.92

Net investment income

(1.48

(1.53

(1.34

(0.91

(0.72

Expense waiver/reimbursement⁴

0.02

0.09

0.12

Supplemental Data:

Net assets, end of period (000 omitted)

$73,385

$30,096

$12,654

$5,860

$3,667

Portfolio turnover

115

125

119

146

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

4 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

October 31, 2000

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 eight 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:

Shares
of the
Fund Issued

Common Trust Fund
Net Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund Prior
to Combination

Net Assets
of Common
Trust Fund
Immediately Prior
to Combination

Net Assets of
Fund Immediately
After Combination

89,455

$3,284,745

$2,494,749

$849,717,618

$3,284,745

$853,002,363

On June 16, 2000, the Fund received a tax-free transfer of assets from a Common Trust Fund as follows:

Shares
of the
Fund Issued

Common Trust Fund
Net Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund Prior
to Combination

Net Assets
of Common
Trust Fund
Immediately Prior
to Combination

Net Assets of
Fund Immediately
After Combination

16,655

$712,988

$139,914

$1,631,106,655

$712,988

$1,631,819,643

1 Unrealized appreciation is included in the Common Trust Fund Net Assets Received amounts shown above.

On September 15, 2000, the Fund acquired all the net assets of Investment Advisers Inc. ("IAI") MidCap Growth Fund in a tax-free reorganization as follows:

Class A Shares
of the
Fund Issued

IAI MidCap
Growth Fund
Net Assets
Received

Unrealized
Appreciation

Net Assets of
the Fund Prior
to Combination

Net Assets of
IAI MidCap
Growth Fund
Immediately Prior
to Combination

Net Assets of the
Fund Immediately
After Combination

886,168

$40,028,222

$11,192,223

$1,833,726,248

$40,028,222

$1,873,754,470

2 Unrealized appreciation is included in the IAI MidCap Growth Fund Net Assets Received amount shown above.

SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

Listed equities 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. Investments in other open-end regulated investment companies are valued at net asset value.

Repurchase Agreements

Investment Income, Expenses and Distributions

Increase (Decrease)

Paid-in Capital

Accumulated Net
Realized Gain

Undistributed Net
Investment Income

$(14,818,474)

$8,530

$14,809,944

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 a trade date basis.

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:

Year Ended October 31

2000

1999

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

34,596,449

1,503,669,201

21,770,130

693,496,699

Shares issued in connection with the tax-free transfer of assets from a Common Trust Fund

89,455

3,284,745

Shares issued in connection with the tax-free transfer of assets from a Common Trust Fund

16,655

712,988

Shares issued in connection with the tax-free acquisition of assets from IAI MidCap Growth Fund

886,168

40,028,222

Shares issued to shareholders in payment of distributions declared

1,940,102

71,765,572

Shares redeemed

(28,122,031

)

(1,217,804,485

)

(22,951,587

)

(721,971,631

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

9,317,343

398,371,498

(1,092,002

)

(25,190,187

)

Year Ended October 31

2000

1999

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

7,030,115

295,469,107

3,047,082

96,420,679

Shares issued to shareholders in payment of distributions declared

573,797

20,402,328

Shares redeemed

(1,503,614

)

(62,950,945

)

(1,587,720

)

(49,602,318

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

6,100,298

252,920,490

1,459,362

46,818,361

Year Ended October 31

2000

1999

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

2,400,282

101,625,482

2,396,438

77,570,222

Shares issued to shareholders in payment of distributions declared

90,644

3,244,366

Shares redeemed

(1,437,789

)

(61,657,518

)

(2,124,350

)

(68,659,190

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

1,053,137

43,212,330

272,088

8,911,032

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

16,470,778

694,504,318

639,448

30,539,206

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser 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"), 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.

Share Class Name

Percentage of Average Daily
Net Assets of Class

Class B Shares

0.75%

Class C Shares

0.75%

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

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 (and in-kind contributions), for the year ended October 31, 2000, were as follows:

Purchases	$	2,186,782,089

Sales	$	1,723,050,092

CONCENTRATION OF CREDIT RISK

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED EQUITY FUNDS AND 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, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for the years ended October 31, 2000 and October 31, 1999, and the financial highlights for the years 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 audits. The financial highlights for each of the years in the three years 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, 2000, the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts
December 8, 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

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

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

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.

Federated
World-Class Investment Manager
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 (12/00)






FEDERATED AGGRESSIVE GROWTH FUND

 .     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 11/25/96 to 10/31/00.
      The "y" axis is measured in increments  of $3,000  ranging from $0 to $12,000 and
      indicates  that  the  ending  value  of   hypothetical   initial   investment  of
      $4,000(378  Shares) in the Fund's Class A Shares,  assuming the  reinvestment  of
      capital  gains  and  dividends,  would  have  grown to  $7,921  (382  Shares)  on
      10/31/00.

      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 11/25/96 to 10/31/00. The "y" axis is measured in increments of
      $2,000 ranging from $0 to $8,000 and indicates that the ending value of
      hypothetical yearly investments of $1,000 (95 Shares) in the Fund's Class
      A Shares, assuming the reinvestment of capital gains and dividends, would
      have grown to $5,992 (286 Shares) on 10/31/00.

      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 11/25/96 to 10/31/00. The "y" axis is measured in increments of
      $7,000 ranging from $0 to $35,000 and indicates that the ending value of
      hypothetical initial investment of $5,000 (471 Shares) and a monthly
      investment of $250 in the Fund's Class A Shares, assuming the reinvestment
      of capital gains and dividends, would have grown to $25,708 (1,229 Shares)
      on 10/31/00.

 .     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  Aggressive  Growth Fund (the "Fund") are  represented  by a
      solid  line.  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 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 S&P 500  and  the  LSGI.  The "x"  axis  reflects  computation  periods  from
      11/25/96 to  10/31/00.  The "y" axis  reflects  the cost of the  investment.  The
      right  margin  reflects the ending value of the  hypothetical  investment  in the
      Fund's  Class A  Shares  as  compared  to the S&P 500 and the  LSGI.  The  ending
      values were $19,967, $19,953, and $19,404, respectively.

      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 Aggressive Growth Fund (the "Fund") are
      represented by a solid line. 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 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 S&P 500 and the LSGI. The "x" axis
      reflects computation periods from 11/25/96 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class B Shares as
      compared to the S&P 500 and the LSGI. The ending values were $20,281,
      $19,976, and $19,404, respectively.

      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 Aggressive Growth Fund (the "Fund") are
      represented by a solid line. 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 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 S&P 500 and the LSGI. The "x" axis
      reflects computation periods from 11/25/96 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class C Shares as
      compared to the S&P 500 and the LSGI. The ending values were $20,469,
      $19,976, and $19,404, respectively.

FEDERATED CAPITAL APPRECIATION FUND

      The graphic presentation here displayed consists of a 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
      1/1/77 to 10/31/00. The "y" axis is measured in increments of $100,000
      ranging from $0 to $800000 and indicates that the ending value of a
      hypothetical initial investment of $24,000 (6,818 Shares) in the fund's
      Class A Shares, assuming all sales charges and the reinvestment of capital
      gains and dividends, would have grown to $729,559 (25,114) on 10/31/00.

      The graphic presentation here displayed consists of a 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
      1/1/77 to 10/31/00. The "y" axis is measured in increments of $50,000
      ranging from $0 to $250,000 and indicates that the ending value of
      hypothetical yearly investments of $1,000 (284 Shares) in the fund's Class
      A Shares, assuming the reinvestment of capital gains and dividends, would
      have grown to $247,098 (8,506 Shares) on 10/31/00.

      The graphic presentation here displayed consists of a 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
      10/31/90 to 10/31/00. The "y" axis is measured in increments of $20,000
      ranging from $0 to $120,000 and indicates that the ending value of
      hypothetical initial investment of $5,000 (626 Shares) in the fund's Class
      A Shares, assuming the reinvestment of capital gains and dividends, and
      additional investments of $250 every month would have grown to $114,015
      (3,925 Shares) on 10/31/00.

      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 Capital Appreciation Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth and Income Funds Average
      (LGIFA) is represented by a broken line. The line graph is a visual
      representation of a comparison of change in value of a $10,000
      hypothetical investment in the Class A Shares of the Fund, and the S&P
      500, and the LGIFA. The "x" axis reflects computation periods from
      10/31/90 to 10/31/00. The "y" axis reflects the cost of the investment.
      The right margin reflects the ending value of the hypothetical investment
      in the Fund's Class A Shares as compared to the S&P 500, and the LGIFA.
      The ending values were $62,194, $58,923, and $45,400, respectively.

      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 Capital Appreciation Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth and Income Funds Average
      (LGIFA) is represented by a broken line. The line graph is a visual
      representation of a comparison of change in value of a $10,000
      hypothetical investment in the Class B Shares of the Fund, and the S&P
      500, and the LGIFA. The "x" axis reflects computation periods from 1/4/96
      to 10/31/00. The "y" axis reflects the cost of the investment. The right
      margin reflects the ending value of the hypothetical investment in the
      Fund's Class B Shares as compared to the S&P 500, and the LGIFA. The
      ending values were $25,815, $24,961, and $20,753, respectively.

      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 Capital Appreciation Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth and Income Funds Average
      (LGIFA) is represented by a broken line. The line graph is a visual
      representation of a comparison of change in value of a $10,000
      hypothetical investment in the Class C Shares of the Fund, and the S&P
      500, and the LGIFA. The "x" axis reflects computation periods from 1/4/96
      to 10/31/00. The "y" axis reflects the cost of the investment. The right
      margin reflects the ending value of the hypothetical investment in the
      Fund's Class C Shares as compared to the S&P 500, and the LGIFA. The
      ending values were $25,985, $24,961, and $20,753, respectively.

FEDERATED LARGE CAP GROWTH FUND

      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 Large Cap Growth Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P 500) is
      represented by a dotted line and the Russell 2000 Index (RUS2) 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 S&P 500 and the RUS2. The "x" axis
      reflects computation periods from 12/29/98 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class A Shares as
      compared to the S&P 500 and the RUS2. The ending values were $12,638,
      $11,764, and $12,411, respectively.

      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 Large Cap Growth Fund (the "Fund") are
      represented by a solid line. The Standard and Poor's 500 Index (S&P 500)
      is represented by a dotted line and the Russell 2000 Index (RUS2) 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 S&P 500 and the RUS2. The "x" axis
      reflects computation periods from 12/29/98 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class B Shares as
      compared to the S&P 500 and the RUS2. The ending values were $12,768,
      $11,764, and $12,411, respectively.

      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 Large Cap Growth Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P 500) is
      represented by a dotted line and the Russell 2000 Index (RUS2) 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 S&P 500 and the RUS2. The "x" axis
      reflects computation periods from 12/29/98 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class C Shares as
      compared to the S&P 500 and the RUS2. The ending values were $13,129,
      $11,764, and $12,411, respectively.

FEDERATED SMALL CAP STRATEGIES FUND

 .     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 10/31/00.
      The "y" axis is measured in increments  of $2,000  ranging from $0 to $12,000 and
      indicates  that the ending value of  hypothetical  initial  investment  of $5,000
      (473 Shares) in the Fund's Class A Shares,  assuming the  reinvestment of capital
      gains and dividends, would have grown to $9,162 (480 Shares) on 10/31/00.

      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 10/31/00. The "y" axis is measured in increments of
      $31,250 ranging from $0 to $125,000 and indicates that the ending value of
      hypothetical initial investments of $50,000 (4,776 Shares) in the Fund's
      Class A Shares, assuming the reinvestment of capital gains and dividends
      in the first three years and then a 7% annual withdrawal would have grown
      to $80,073 (80,073 Shares) on 10/31/00 and an income of $12,287 over two
      years.

 .     The  graphic   presentation  here  displayed   consists  of  a  line  graph.  The
      corresponding  components of the line graph are listed above.  The Class A Shares
      of Federated  Small Cap Strategies  Fund (the "Fund") are  represented by a solid
      line.  The  Russell  2000 Index  (Rus2) is  represented  by a dotted line and the
      Standard & Poor's 600 Small Cap Index  (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&P 600.  The "x" axis  reflects  computation  periods  from  11/1/95  to
      10/31/00.  The "y" axis  reflects  the cost of the  investment.  The right margin
      reflects the ending value of the  hypothetical  investment  in the Fund's Class A
      Shares as compared to the Rus2 and the S&P 600. The ending  values were  $18,326,
      $17,930, and $19,845, respectively.


      The graphic presentation here displayed consists of a line graph. The
      corresponding components of the line graph are listed above. The Class B
      Shares of Federated Small Cap Strategies Fund (the "Fund") are represented
      by a solid line. The Russell 2000 Index (Rus2) is represented by a dotted
      line and the Standard & Poor's 600 Small Cap Index (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&P 600. The "x" axis
      reflects computation periods from 11/1/95 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class B Shares as
      compared to the Rus2 and the S&P 600. The ending values were $18,508,
      $17,930, and $19,845, respectively.

      The graphic presentation here displayed consists of a line graph. The
      corresponding components of the line graph are listed above. The Class C
      Shares of Federated Small Cap Strategies Fund (the "Fund") are represented
      by a solid line. The Russell 2000 Index (Rus2) is represented by a dotted
      line and the Standard & Poor's 600 Small Cap Index (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&P 600. The "x" axis
      reflects computation periods from 11/1/95 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class C Shares as
      compared to the Rus2 and the S&P 600. The ending values were $18,668,
      $17,930, and $19,845, respectively.

FEDERATED GROWTH STRATEGIES FUND

      The graphic presentation here displayed consists of a 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 10/31/00. The "y" axis is measured in increments of $50,000
      ranging from $0 to $300,000 and indicates that the ending value of a
      hypothetical initial investment of $17,000 (1,607 Shares) in the fund's
      Class A Shares, assuming all sales charges and the reinvestment of capital
      gains and dividends, would have grown to $234,710 (5,773 Shares) on
      10/31/00.

      The graphic presentation here displayed consists of a 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 10/31/00. The "y" axis is measured in increments of $20,000
      ranging from $0 to $100,000 and indicates that the ending value of
      hypothetical yearly investments of $1,000 (95 Shares) in the fund's Class
      A Shares, assuming the reinvestment of capital gains and dividends, would
      have grown to $82,529 (2,030 Shares) on 10/31/00.

      The graphic presentation here displayed consists of a 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
      10/31/90 to 10/31/00. The "y" axis is measured in increments of $20,000
      ranging from $0 to $120,000 and indicates that the ending value of
      hypothetical initial investment of $5,000 (282 Shares) in the fund's Class
      A Shares, assuming the reinvestment of capital gains and dividends, and
      additional investments of $250 every month would have grown to $110,512
      (2,718 Shares) on 10/31/00.

      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 Growth Strategies Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth Fund Index (LGFI) is
      represented by a broken line. The line graph is a visual representation of
      a comparison of change in value of a $10,000 hypothetical investment in
      the Class A Shares of the Fund, and the S&P 500, and the LGFI. The "x"
      axis reflects computation periods from 10/31/90 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class A Shares as
      compared to the S&P 500, and the LGFI. The ending values were $60,862,
      $58,923, and $54,115, respectively.

      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 Growth Strategies Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth Fund Index (LGFI) is
      represented by a broken line. The line graph is a visual representation of
      a comparison of change in value of a $10,000 hypothetical investment in
      the Class B Shares of the Fund, and the S&P 500, and the LGFI. The "x"
      axis reflects computation periods from 8/16/95 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class B Shares as
      compared to the S&P 500, and the LGFI. The ending values were $29,971,
      $27,902, and $24,094, respectively.

      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 Growth Strategies Fund (the "Fund") are
      represented by a solid line. The Standard & Poor's 500 Index (S&P500) is
      represented by a dotted line, the Lipper Growth Fund Index (LGFI) is
      represented by a broken line. The line graph is a visual representation of
      a comparison of change in value of a $10,000 hypothetical investment in
      the Class C Shares of the Fund, and the S&P 500, and the LGFI. The "x"
      axis reflects computation periods from 8/16/95 to 10/31/00. The "y" axis
      reflects the cost of the investment. The right margin reflects the ending
      value of the hypothetical investment in the Fund's Class C Shares as
      compared to the S&P 500, and the LGFI. The ending values were $30,278,
      $27,902, and $24,094, respectively.