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FEDERATED STOCK TRUST
PROSPECTUS
Federated Stock Trust (the "Trust") is a no-load, open-end,
diversified management investment company (a mutual fund) investing in
common stocks of high quality companies to achieve growth of income
and capital.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know
before you invest in the Trust. Keep this prospectus for future
reference.
The Trust has also filed a Statement of Additional Information dated
December 31, 1994, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy
of the Statement of Additional Information free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about
the Trust, contact the Trust at the address listed in the back of this
prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1994
TABLE OF CONTENTS
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<TABLE>
<S> <C>
SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 5
TRUST INFORMATION 5
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Management of the Trust 5
Distribution of Trust Shares 7
Administration of the Trust 7
Brokerage Transactions 8
NET ASSET VALUE 8
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INVESTING IN THE TRUST 8
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Share Purchases 8
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Trust Shares 9
Subaccounting Services 9
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
Retirement Plans 10
REDEEMING SHARES 10
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Telephone Redemption 10
Written Requests 11
Accounts With Low Balances 11
SHAREHOLDER INFORMATION 11
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Voting Rights 11
Massachusetts Partnership Law 12
TAX INFORMATION 12
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Federal Income Tax 12
Pennsylvania Corporate and Personal
Property Taxes 12
PERFORMANCE INFORMATION 12
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FINANCIAL STATEMENTS 14
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 24
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ADDRESSES 25
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</TABLE>
I
SUMMARY OF TRUST EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)....................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)............ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)........................................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)................................ None
Exchange Fee...................................................................................... None
<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee.................................................................................... 0.75%
12b-1 Fee......................................................................................... None
Total Other Expenses.............................................................................. 0.26%
Shareholder Services Fee (after waiver) (1).......................................... 0.10%
Total Trust Operating Expenses (2)........................................................ 1.01%
<FN>
(1) The maximum Shareholder Services Fee is 0.25%.
(2) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1995. The Total Trust
Operating Expenses were 0.97% for the fiscal year ended October 31, 1994.
</TABLE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $10 $32 $56 $124
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
FEDERATED STOCK TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 24.
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------------------------------
10/94 10/93 10/92 10/91 10/90
- ----------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 26.40 $ 24.18 $ 23.99 $ 18.55 $ 25.19
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.46 0.48 0.56 0.51 0.70
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Net realized and unrealized gain
(loss) on investments 0.68 4.27 1.79 6.23 (4.42)
- ----------------------------------- --------- --------- --------- --------- ---------
Total from investment operations 1.14 4.75 2.35 6.74 (3.72)
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.43) (0.49) (0.55) (0.56) (0.78)
- -----------------------------------
Distributions in excess of net
investment income -- (0.02)(e) -- -- --
- ----------------------------------- --------- --------- --------- --------- ---------
Total distributions from net
investment income (0.43) (0.51) (0.55) (0.56) (0.78)
- -----------------------------------
Distributions from net realized
gain on investment transactions (0.78) (2.02) (1.61) (0.74) (2.14)
- ----------------------------------- --------- --------- --------- --------- ---------
Total distributions (1.21) (2.53) (2.16) (1.30) (2.92)
- ----------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 26.33 $ 26.40 $ 24.18 $ 23.99 $ 18.55
- ----------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN (B) 4.55% 20.88% 10.78% 37.50% (16.36%)
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.97% 0.97% 0.99% 1.00% 0.98%
- -----------------------------------
Net investment income 1.81% 1.83% 2.33% 2.25% 3.03%
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Expense waiver/reimbursement -- -- -- -- --
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SUPPLEMENTAL DATA
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Net assets, end of period (000
omitted) $600,664 $554,062 $386,490 $369,505 $332,241
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Portfolio turnover 28% 26% 54% 49% 53%
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<CAPTION>
10/89 10/88(A) 01/88 01/87 01/86 01/85
- ----------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 22.87 $ 22.10 $ 24.00 $ 20.43 $ 17.34 $ 14.84
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.70 0.52 0.68 0.66 0.66 0.63
- -----------------------------------
Net realized and unrealized gain
(loss) on investments 2.34 1.03 (1.50) 4.99 3.48 2.77
- ----------------------------------- --------- --------- --------- --------- --------- ---------
Total from investment operations 3.04 1.55 (0.82) 5.65 4.14 3.40
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.65) (0.52) (0.64) (0.64) (0.65) (0.71)
- -----------------------------------
Distributions in excess of net
investment income -- -- -- -- -- --
- ----------------------------------- --------- --------- --------- --------- --------- ---------
Total distributions from net
investment income (0.65) (0.52) (0.64) (0.64) (0.65) (0.71)
- -----------------------------------
Distributions from net realized
gain on investment transactions (0.07) (0.26) (0.44) (1.44) (0.40) (0.19)
- ----------------------------------- --------- --------- --------- --------- --------- ---------
Total distributions (0.72) (0.78) (1.08) (2.08) (1.05) (0.90)
- ----------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 25.19 $ 22.87 $ 22.10 $ 24.00 $ 20.43 $ 17.34
- ----------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (B) 13.48% 7.14% (3.64%) 29.02% 24.78% 24.29%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.95% 0.94%(c) 0.89% 0.93% 1.00% 0.94%
- -----------------------------------
Net investment income 2.75% 3.08%(c) 2.82% 3.04% 3.69% 4.38%
- -----------------------------------
Expense waiver/reimbursement -- -- -- -- 0.04%(d) 0.32%(d)
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SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $573,047 $636,426 $675,110 $611,856 $284,856 $85,816
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Portfolio turnover 35% 31% 51% 19% 35% 35%
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<FN>
(a) For the nine months ended October 31, 1988.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
Annual Report for the fiscal year ending October 31, 1994, which can be obtained
free of charge.
2
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 30, 1981. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Trustees
have not established separate series or classes of shares.
Trust shares are sold and redeemed at net asset value without a sales charge
imposed by the Trust.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is to provide growth of income and capital
by investing principally in a professionally-managed and diversified portfolio
of common stock of high-quality companies. These companies generally are leaders
in their industries and are characterized by sound management and the ability to
finance expected growth. While there is no assurance that the Trust will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus. Unless otherwise stated, the investment
objective and the policies and limitations described below cannot be changed
without the approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Trust's investment approach is based on the
conviction that over the long term the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of major corporations.
COMMON STOCKS. The Trust invests primarily in common stocks of companies
selected by the Trust's investment adviser on the basis of traditional
research techniques, including assessment of earnings and dividend growth
prospects and of the risk and volatility of the company's industry.
Ordinarily, these companies will be in the top 25% of their industries with
regard to revenues. However, other factors, such as product position or
market share, will be considered by the Trust's investment adviser and may
outweigh revenues.
OTHER CORPORATE SECURITIES. The Trust may invest in preferred stocks,
corporate bonds, notes, and warrants of these companies. The prices of fixed
income securities generally fluctuate inversely to the direction of interest
rates.
U.S. GOVERNMENT SECURITIES. The Trust may invest in U.S. government
securities.
REPURCHASE AGREEMENTS. The U.S. government securities in which the Trust
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities to the
Trust and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. The Trust or its custodian will take possession of the
securities subject to repurchase agreements, and these securities will be
marked to market daily. To the extent that
3
the original seller does not repurchase the securities from the Trust, the
Trust could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy
or became insolvent, disposition of such securities by the Trust might be
delayed pending court action. The Trust believes that under the regular
procedures normally in effect for custody of the Trust's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Trust and allow retention or
disposition of such securities. The Trust will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are found by the Trust's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
MONEY MARKET INSTRUMENTS. The Trust may also invest in money market
instruments.
As a matter of investment policy, which may be changed without shareholder
approval, the Trust will not invest more than 10% of its assets in ADRs.
SECURITIES OF FOREIGN ISSUERS. The Trust may invest in the securities of
foreign issuers which are freely traded on United States securities
exchanges or in the over-the-counter market in the form of American
Depoisitary Receipts ("ADRs"). Securities of a foreign issuer may present
greater risks in the form of nationalization, confiscation, domestic
marketability, or other national or international restrictions.
As a matter of practice, the Trust will not invest in the securities of a
foreign issuer if any such risk appears to the investment adviser to be
substantial.
At least 80% of the Trust's portfolio will be invested in common stocks, unless
it is in a defensive position.
RESTRICTED AND ILLIQUID SECURITIES. The Trust intends to invest in restricted
securities up to specific limitations. These limitations are not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Trust may otherwise invest
pursuant to the investment objective and policies but which are subject to
restriction on resale under federal securities law. As a matter of investment
practice, which may be changed without shareholder approval, the Trust will
limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, and repurchase
agreements providing for settlement in more than seven days after notice, to 10%
of net assets.
The Trust may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Trust, who agree that it is purchasing the paper for investment purposes and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Trust through or with the assistance of the
issuer or the investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Trust believes that Section 4(2) commercial
paper and possibly certain other restricted securities which meet the criteria
for liquidity established by the Board of Trustees of the Trust are quite
liquid. The Trust intends, therefore, to treat the restricted securities which
meet the criteria for liquidity established by the Trustees, including Section
4(2) commercial
4
paper, as determined by the investment adviser of the Trust, as liquid and not
subject to the investment limitation applicable to illiquid securities and
restricted securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Trust purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause the Trust to miss a price or yield considered to be advantageous.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices. Accordingly, the Trust may pay more/less than the market value of the
securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.
PORTFOLIO TURNOVER. Although the Trust does not intend to invest for the
purpose of seeking short-term profits, securities in its portfolio will be sold
whenever the Trust's investment adviser believes it is appropriate to do so in
light of the Trust's investment objective, without regard to the length of time
a particular security may have been held.
INVESTMENT LIMITATIONS
The Trust will not:
- borrow money or pledge securities except, under certain circumstances, the
Trust may borrow up to one-third of the value of its total assets and
pledge up to 10% of the value of those assets to secure such borrowings;
- invest more than 5% of its total assets in the securities of one issuer
(except cash and cash items and U.S. government securities);
- invest more than 5% of total assets in securities of issuers that have
records of less than three years of continuous operations;
- invest more than 10% of its total assets in securities subject to
restrictions on resale; or
- acquire more than 10% of the voting securities of any one issuer.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
5
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Management, the Trust's investment adviser, (the "Adviser"), subject to
direction by the Trustees. The Adviser continually conducts investment research
and supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The annual investment advisory fee is based on the Trust's
average daily net assets as shown on the chart below.
<TABLE>
<CAPTION>
ADVISORY FEE AS %
AVERAGE DAILY OF AVERAGE DAILY
NET ASSETS NET ASSETS
-------------------- -------------------------
<S> <C>
First $500 million .75 of 1%
Second $500 million .675 of 1%
Third $500 million .600 of 1%
Fourth $500 million .525 of 1%
Over $2 billion .40 of 1%
</TABLE>
Under the investment advisory contract, the Adviser will reimburse the Trust
the amount, limited to the amount of the advisory fee, by which the Trust's
aggregate annual operating expenses, including its investment advisory fee
but excluding interest, taxes, brokerage commissions, expenses of
registering and qualifying the Trust and its shares under federal and state
laws, expenses of withholding taxes, and extraordinary expenses exceed 1% of
its average daily net assets. This does not include reimbursement to the
Trust of any expenses incurred by shareholders who use the transfer agent's
subaccounting facilities. The adviser has also undertaken to reimburse the
Trust for operating expenses in excess of limitations established by certain
states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956 as
Federated Investors, Inc., develops and manages mutual funds primarily for
the financial industry. Federated Investors' track record of competitive
performance and its disciplined, risk averse investment philosophy serve
approximately 3,500 client institutions nationwide. Through these same
client institutions, individual shareholders also have access to this same
level of investment expertise.
6
Peter R. Anderson has been the Trust's senior portfolio manager since 1982.
Mr. Anderson joined Federated Investors in 1972 as, and is presently, a
Senior Vice President of the Trust's investment adviser. Mr. Anderson is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Wisconsin.
Frederick L. Plautz has been the Trust's co-portfolio manager since February
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Trust's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from the
University of Wisconsin.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of
investment companies. Federated Securities Corp. is a wholly-owned subsidiary of
Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS
ADMINISTRATIVE FEE OF THE TRUST
-------------------- ------------------------------------
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the shares to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.
7
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts is
custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Trust and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro and Morin, L.L.P. Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms believed to meet these criteria, the adviser may give consideration to
those firms which have sold or are selling shares of the Trust and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Trustees.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE TRUST
- --------------------------------------------------------------------------------
SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or mail.
To purchase shares of the Trust, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Trust reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Trust by Federal Reserve wire, call the
Trust before 4:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) on the next business day following the
order. Federal funds should be wired as follows: Federated Services Company,
c/o State Street Bank and Trust Company, Boston, Massachusetts; Attention:
EDGEWIRE; For Credit to: Federated Stock Trust; Fund Number (this number can
be found on the account statement or by contacting the Trust); Group Number
or Order Number; Nominee or Institution Name; ABA Number 011000028.
8
BY MAIL. To purchase shares of the Trust by mail, send a check made payable
to Federated Stock Trust to: Federated Services Company, State Street Bank
and Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602. Orders
by mail are considered received after payment by check is converted by the
transfer agent's bank State Street Bank, into federal funds. This is
generally the next business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000 plus any non-affiliated
bank or broker's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a non-
affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Trust shares are sold at their net asset value, next determined after an order
is received. There is no sales charge imposed by the Trust. Investors who
purchase Trust shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.
The net asset value is determined at the close of business of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
EXCHANGING SECURITIES FOR TRUST SHARES
Investors may exchange certain securities or a combination of securities and
cash for Trust shares. The securities and any cash must have a market value of
at least $25,000. The Trust reserves the right to determine the acceptability of
securities to be exchanged. Securities accepted by the Trust are valued in the
same manner as the Trust values its assets. Investors wishing to exchange
securities should first contact Federated Securities Corp. Shares purchased by
exchange of U.S. government securities cannot be redeemed by telephone for
fifteen business days to allow time for the transfer to settle.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Trust shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Trust shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
9
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust. Detailed confirmations of each purchase or redemption
are sent to each shareholder. Quarterly confirmations are sent to report
dividends paid during that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Trust on the record date. Unless shareholders request cash payments by writing
to the Trust, dividends are automatically reinvested in additional shares of the
Trust on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Trust, if any, will be distributed at least once
every 12 months.
RETIREMENT PLANS
Shares of the Trust can be purchased as an investment for retirement plans or
for IRA accounts. For further details contact Federated Securities Corp. and
consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Trust redeems shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any time,
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
An authorization form permitting the Trust to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Written Requests" should be considered.
10
WRITTEN REQUESTS
Trust shares may also be redeemed by sending a written request to the Trust.
Call the Trust for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his name, the Trust name,
his account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Trust, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Trust's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for the election of Trustees under certain circumstances. Trustees
may be
11
removed by the Trustees or by shareholders at a special meeting. A special
meeting of the Trust shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. Unless otherwise
exempt, shareholders are required to pay federal income tax on any dividends and
other distributions received. This applies whether dividends and distributions
are received in cash or as additional shares. No federal income tax is due on
any dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its total return and yield.
12
Total return represents the change, over a specific period of time, in the value
of an investment in the Trust after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Trust is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Trust
over a thirty-day period by the offering price per share of the Trust on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Trust and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The Trust is sold without any sales charge or other similar non-recurring
charges.
From time to time, the Trust may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
13
FEDERATED STOCK TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <S> <C>
EQUITIES--93.0%
- -------------------------------------------------------------------------------
BASIC INDUSTRY--8.5%
-------------------------------------------------------------------
227,000 *FMC Corp. $13,847,000
-------------------------------------------------------------------
228,600 Lubrizol Corp. 7,372,350
-------------------------------------------------------------------
306,000 Phelps Dodge Corp. 18,780,750
-------------------------------------------------------------------
480,000 Praxair, Inc. 11,100,000
------------------------------------------------------------------- -----------
Total 51,100,100
------------------------------------------------------------------- -----------
CONSUMER DURABLES--8.8%
-------------------------------------------------------------------
94,700 Chrysler Corp. 4,616,625
-------------------------------------------------------------------
241,900 Eastman Kodak Co. 11,641,438
-------------------------------------------------------------------
354,000 Ford Motor Co. 10,443,000
-------------------------------------------------------------------
199,400 General Motors Corp. 7,876,300
-------------------------------------------------------------------
613,000 Mattel, Inc. 17,930,250
------------------------------------------------------------------- -----------
Total 52,507,613
------------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--6.1%
-------------------------------------------------------------------
151,200 Avon Products, Inc. 9,563,400
-------------------------------------------------------------------
246,400 Phillip Morris 15,092,000
-------------------------------------------------------------------
301,000 Reebok International Ltd. 12,002,375
------------------------------------------------------------------- -----------
Total 36,657,775
------------------------------------------------------------------- -----------
CONSUMER SERVICES--6.5%
-------------------------------------------------------------------
439,000 American Stores Co. 11,907,875
-------------------------------------------------------------------
321,500 Sears, Roebuck & Co. 15,914,250
-------------------------------------------------------------------
505,100 Tele-Communications, Inc., Class A 11,427,888
------------------------------------------------------------------- -----------
Total 39,250,013
------------------------------------------------------------------- -----------
</TABLE>
14
FEDERATED STOCK TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
ENERGY--10.4%
-------------------------------------------------------------------
391,000 Baker Hughes, Inc. $ 8,015,500
-------------------------------------------------------------------
320,000 Chevron Corp. 14,400,000
-------------------------------------------------------------------
172,000 Mapco, Inc. 9,395,500
-------------------------------------------------------------------
219,900 Texaco, Inc. 14,375,963
-------------------------------------------------------------------
518,700 USX Corp. 9,725,625
-------------------------------------------------------------------
140,210 *Western Atlas, Inc. 6,449,660
------------------------------------------------------------------- -----------
Total 62,362,248
------------------------------------------------------------------- -----------
FINANCE--15.3%
-------------------------------------------------------------------
169,000 Amli Residential Properties Trust 3,211,000
-------------------------------------------------------------------
276,600 Bank of Boston Corp. 7,952,250
-------------------------------------------------------------------
295,200 Citicorp 14,095,800
-------------------------------------------------------------------
200,483 Dean Witter, Discover & Co. 7,743,656
-------------------------------------------------------------------
81,400 Federal National Mortgage Association 6,186,400
-------------------------------------------------------------------
90,300 First Interstate Bancorp 7,224,000
-------------------------------------------------------------------
214,620 Mellon Bank Corp. 11,938,238
-------------------------------------------------------------------
133,400 NationsBank Corp. 6,603,300
-------------------------------------------------------------------
324,600 PNC Bank Corp. 7,628,100
-------------------------------------------------------------------
15,000 Providian Corp. 476,250
-------------------------------------------------------------------
201,900 Transamerica Corp. 9,918,338
-------------------------------------------------------------------
251,666 Travelers, Inc. 8,745,394
------------------------------------------------------------------- -----------
Total 91,722,726
------------------------------------------------------------------- -----------
HEALTHCARE--8.0%
-------------------------------------------------------------------
227,900 American Home Products Corp. 14,471,650
-------------------------------------------------------------------
202,700 Becton, Dickinson & Co. 9,577,575
-------------------------------------------------------------------
202,000 Bristol-Myers Squibb Co. 11,791,750
-------------------------------------------------------------------
</TABLE>
15
FEDERATED STOCK TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
HEALTHCARE--CONTINUED
-------------------------------------------------------------------
261,775 U.S. Healthcare, Inc. $12,368,869
------------------------------------------------------------------- -----------
Total 48,209,844
------------------------------------------------------------------- -----------
INDUSTRIAL/MANUFACTURING--7.6%
-------------------------------------------------------------------
80,900 Deere & Co. 5,804,575
-------------------------------------------------------------------
180,900 General Electric Co. 8,841,488
-------------------------------------------------------------------
161,910 *Litton Industries, Inc. 5,950,193
-------------------------------------------------------------------
122,100 Loews Corp. 10,775,325
-------------------------------------------------------------------
277,400 Textron, Inc. 14,147,400
------------------------------------------------------------------- -----------
Total 45,518,981
------------------------------------------------------------------- -----------
TECHNOLOGY--12.2%
-------------------------------------------------------------------
417,000 General Motors Corp., Class E 15,272,625
-------------------------------------------------------------------
164,700 Hewlett-Packard Co. 16,099,425
-------------------------------------------------------------------
29,100 International Business Machines Corp. 2,167,950
-------------------------------------------------------------------
299,000 Martin-Marietta Corp. 13,716,625
-------------------------------------------------------------------
225,100 Raytheon Co. 14,350,125
-------------------------------------------------------------------
342,200 Rockwell International Corp. 11,934,225
------------------------------------------------------------------- -----------
Total 73,540,975
------------------------------------------------------------------- -----------
TRANSPORTATION--1.4%
-------------------------------------------------------------------
364,900 Ryder Systems, Inc. 8,575,150
------------------------------------------------------------------- -----------
UTILITIES--8.2%
-------------------------------------------------------------------
252,500 AT&T Corp. 13,887,500
-------------------------------------------------------------------
70,000 British Telecommunication PLC, ADR 4,506,250
-------------------------------------------------------------------
118,350 Detroit Edison Co. 3,121,481
-------------------------------------------------------------------
164,000 Duke Power Co. 6,498,500
-------------------------------------------------------------------
169,000 Enron Corp. 5,471,371
-------------------------------------------------------------------
387,200 MCI Communications Corp. 8,905,600
-------------------------------------------------------------------
</TABLE>
16
FEDERATED STOCK TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT SECURITY NAME VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
UTILITIES--CONTINUED
-------------------------------------------------------------------
115,000 Nacional Financiera, SNC, PRIDES, $6.79 $ 6,670,000
------------------------------------------------------------------- -----------
Total 49,060,702
------------------------------------------------------------------- -----------
TOTAL EQUITIES (IDENTIFIED COST $441,987,283) 558,506,127
------------------------------------------------------------------- -----------
CONVERTIBLE SECURITIES--2.9%
- -------------------------------------------------------------------------------
$6,575,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000 9,734,616
-------------------------------------------------------------------
1,093,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 7,514,375
------------------------------------------------------------------- -----------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $13,760,555) 17,248,991
------------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--4.9%
- -------------------------------------------------------------------------------
29,275,000 J.P. Morgan and Co., Inc., 4.71%, dated 10/31/94, due 11/7/94 (at
amortized cost) 29,275,000
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $485,022,838) $605,030,118+
------------------------------------------------------------------- -----------
<FN>
+ The cost of investments for federal tax purposed amounts to $485,311,177. The
net appreciation on a federal tax basis amounts to $119,718,941, which is
comprised of $125,606,163 appreciation and $5,887,222 depreciation at October
31, 1994.
* Non-income producing.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement was through participation in a joint
account with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($600,663,895) at October 31, 1994.
The following abbreviations are used in this portfolio:
ADR--American Depository Receipts
PLC--Public Limited Company
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
(See Notes which are an integral part of the Financial Statements)
</TABLE>
17
FEDERATED STOCK TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $485,022,838, and tax cost,
$485,311,177) $605,030,118
- -----------------------------------------------------------------------------------
Cash 4,653
- -----------------------------------------------------------------------------------
Income receivable 1,201,767
- -----------------------------------------------------------------------------------
Receivable for investments sold 3,988,469
- -----------------------------------------------------------------------------------
Receivable for Shares sold 914,411
- ----------------------------------------------------------------------------------- ------------
Total assets 611,139,418
- -----------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Payable for investments purchased $10,044,180
- ----------------------------------------------------------------------
Payable for Shares redeemed 383,894
- ----------------------------------------------------------------------
Accrued expenses 47,449
- ---------------------------------------------------------------------- ----------
Total liabilities 10,475,523
- ----------------------------------------------------------------------------------- ------------
NET ASSETS for 22,812,675 Shares outstanding $600,663,895
- ----------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------
Paid-in capital $464,765,262
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 120,007,280
- -----------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 15,152,821
- -----------------------------------------------------------------------------------
Undistributed net investment income 738,532
- ----------------------------------------------------------------------------------- ------------
Total Net Assets $600,663,895
- ----------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($600,663,895 DIVIDED BY 22,812,675 Shares outstanding) $ 26.33
- ----------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
18
FEDERATED STOCK TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------
Interest $ 1,780,447
- -------------------------------------------------------------------------
Dividends 13,986,583
- ------------------------------------------------------------------------- -----------
Total income 15,767,030
- -------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee $4,204,915
- ------------------------------------------------------------
Administrative personnel and services fee 528,231
- ------------------------------------------------------------
Custodian fees 194,966
- ------------------------------------------------------------
Transfer agent and dividend disbursing agent fees 73,281
- ------------------------------------------------------------
Trustees fees 11,407
- ------------------------------------------------------------
Auditing fees 22,006
- ------------------------------------------------------------
Legal fees 12,113
- ------------------------------------------------------------
Portfolio accounting fees 41,626
- ------------------------------------------------------------
Share registration costs 32,462
- ------------------------------------------------------------
Printing and postage 10,912
- ------------------------------------------------------------
Insurance premiums 11,949
- ------------------------------------------------------------
Taxes 12,992
- ------------------------------------------------------------
Miscellaneous 4,161
- ------------------------------------------------------------
Shareholder services fee 334,212
- ------------------------------------------------------------ ----------
Total expenses 5,495,233
- ------------------------------------------------------------------------- -----------
Net investment income 10,271,797
- ------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------
Net realized gain (loss) on investments 15,153,654
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 89,647
- ------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments 15,243,301
- ------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $25,515,098
- ------------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
FEDERATED STOCK TRUST
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 10,271,797 $ 8,479,812
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($15,441,993 and
$16,842,550, respectively, as computed for federal income tax
purposes) 15,153,654 16,842,550
- ----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 89,647 58,309,454
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 25,515,098 83,631,816
- ---------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income (9,572,779) (8,867,467)
- ----------------------------------------------------------------
Distributions in excess of net investment income 0 (305,905)
- ----------------------------------------------------------------
Distributions from net realized gains (16,842,679) (32,311,490)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to
shareholders (26,415,458) (41,484,862)
- ---------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS
- ----------------------------------------------------------------
Proceeds from sale of Shares 265,476,902 252,241,445
- ----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 13,333,198 21,205,060
- ----------------------------------------------------------------
Cost of Shares redeemed (231,307,977) (148,021,556)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 47,502,123 125,424,949
- ---------------------------------------------------------------- ------------ ------------
Change in net assets 46,601,763 167,571,903
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 554,062,132 386,490,229
- ---------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$738,532 and $0, respectively) $600,663,895 $554,062,132
- ---------------------------------------------------------------- ------------ ------------
<FN>
(See Notes which are an integral part of the Financial Statements)
</TABLE>
20
FEDERATED STOCK TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Stock Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end, no-load
management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sale price on national
securities exchanges. Unlisted securities and bonds are generally valued at
the price provided by an independent pricing service. Short-term securities
with remaining maturities of sixty days or less may be stated at amortized
cost, which approximates value.
REPURCHASE AGREEMENTS--It is the policy of the Trust 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 in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued
interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees of the Trust (the "Trustees"). Risks
may arise from the potential inability of counterparties to honor the terms
of the repurchase agreement. Accordingly, the Trust could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date. 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").
FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all taxable income. Accordingly, no
provisions for federal tax are necessary.
21
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust 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.
RECLASSIFICATION--During the fiscal year ended 1994, the Trust adopted
Statement of Position 93-2, Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book and tax
differences have been reclassified to paid-in capital. The cumulative net
effect of such differences, totaling $10,078, was reclassified from net
realized gain and undistributed net investment income to paid-in-capital.
Net investment income and net assets were not affected by this change.
GENERAL--Investment transactions are accounted for on the trade date.
(3) CAPITAL SHARES
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1994 1993
------------ --------------
<S> <C> <C>
- --------------------------------------------------
Shares sold 10,334,187 9,996,402
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 526,068 888,633
- --------------------------------------------------
Shares redeemed (9,032,374) (5,885,738)
- -------------------------------------------------- ------------ --------------
Net change 1,827,881 4,999,297
- -------------------------------------------------- ------------ --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment
advisory fee up to a maximum of .75 of 1% of the Trust's average daily net
assets. The Adviser will waive, to the extent of its advisory fee, the
amount, if any, by which the Trust's aggregate annual operating expenses
(excluding interest, taxes, brokerage commissions, expenses of registering
and qualifying the Trust and its shares under federal and state laws,
expenses of withholding taxes, and extraordinary expenses) exceed 1% of
average daily net assets of the Trust.
22
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Trust with administrative personnel and services. Prior to March 1, 1994,
these services were provided at approximate cost. Effective March 1, 1994,
the FAS fee is based on the level of average aggregate daily net assets of
all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Trust will pay
FSS up to .25 of 1% of average net assets of the Trust for the period. This
fee is to obtain certain personal services for shareholders and to maintain
the shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer
and dividend disbursing agent for the Trust. The FServ fee is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records.
The fee is based on the level of the Trust's average net assets for the
period plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------
PURCHASES $211,213,161
- -------------------------------------------------- ------------
SALES $147,428,739
- -------------------------------------------------- ------------
</TABLE>
23
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- ---------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED STOCK TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Stock Trust as of October 31, 1994,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights (see page 2 of this prospectus) for each of the periods
presented therein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Stock Trust at October 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the periods
presented therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 9, 1994
24
ADDRESSES
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<TABLE>
<S> <C>
Federated Stock Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-8602
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Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
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Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
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Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
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</TABLE>
25
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FEDERATED STOCK TRUST
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
December 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
313900102
8120102A (12/94) [RECYCLED PAPER SYMBOL]
Federated Stock Trust
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of the Federated Stock Trust (the "Trust") dated December 31,
1994. This Statement is not a prospectus itself. To receive a copy of
the prospectus, write or call Federated Stock Trust.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated December 31, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
General Information About the Trust 1
Investment Objective and Policies 1
Types of Investments 1
When-Issued And Delayed Delivery
Transactions 1
Portfolio Turnover 1
Investment Limitations 1
Federated Stock Trust Management 3
Officers and Trustees
The Funds 6
Trust Ownership 7
Trustee Liability 7
Investment Advisory Services 7
Adviser to the Trust 7
Advisory Fees 7
Other Related Services 8
Administrative Services 8
Transfer Agent and Dividend
Disbursing Agent 8
Shareholder Services Plan 8
Purchasing Shares 9
Conversion to Federal Funds 9
Determining Net Asset Value 9
Determining Market Value of
Securities 9
Redeeming Shares 9
Exchanging Securities for Trust
Shares 9
Tax Consequences 10
Tax Status 10
The Trust's Tax Status 10
Shareholders' Tax Status 10
Total Return 10
Yield 10
Performance Comparisons 11
General Information About the Trust
Federated Stock Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated December 30, 1981. On May 2,
1993, the shareholders of the Trust voted to permit the Trust to offer
separate series and classes of shares.
Investment Objective and Policies
The Trust's investment objective is to provide growth of income and capital by
investing principally in a professionally-managed and diversified portfolio of
common stocks of high quality companies.
Types of Investments
Although the Trust may invest in other securities of these companies and in
money market instruments, it is the Trust's policy to invest at least 80% of
its portfolio in common stocks. The above investment objective and policies
cannot be changed without approval of shareholders.
U.S. Government Obligations
The types of U.S. government obligations in which the Trust may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed
by U.S. government agencies or instrumentalities. These securities are
backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Federal Land Banks;
o Central Bank for Cooperatives;
o Federal Intermediate Credit Banks;
o Federal Home Loan Banks;
o Farmers Home Administration; and
o Federal National Mortgage Association.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Trust. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Trust
sufficient to make payment for the securities to be purchased are segregated
on the Trust's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. The Trust
does not intend to engage in when-issued and delayed delivery transactions to
an extent that would cause the segregation of more than 20% of the total value
of its assets.
Portfolio Turnover
The Trust will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Trust's investment objective. For the fiscal years ended October
31, 1994, and 1993, the portfolio turnover rates were 28% and 26%,
respectively.
Investment Limitations
The Trust will not change any of the investment limitations described below
without approval of shareholders.
Selling Short and Buying on Margin
The Trust will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of portfolio securities.
Borrowing Money
The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets or in an amount up to one-
third of the value of its total assets, including the amount borrowed,
in order to meet redemption requests without immediately selling
portfolio securities. This borrowing provision is not for investment
leverage but solely to facilitate management of the portfolio by
enabling the Trust to meet redemption requests when the liquidation of
portfolio securities would be inconvenient or disadvantageous. Interest
paid on borrowed funds will not be available for investment. The Trust
will liquidate any such borrowings as soon as possible and may not
purchase any portfolio securities while any borrowings are outstanding.
Pledging Assets
The Trust will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of total assets at the time of the borrowing.
Diversification of Investments
The Trust will not invest more than 5% of its total assets in the
securities of any one issuer, except in cash or cash instruments,
repurchase agreements, and securities guaranteed by the U.S. government,
its agencies or instrumentalities.
Purchasing Securities to Exercise Control
The Trust will not purchase securities of a company for the purpose of
exercising control or management. However, the Trust will acquire no
more than 10% of the voting securities of an issuer and may exercise its
voting power in the Trust's best interest. From time to time, the Trust,
together with other investment companies advised by affiliates or
subsidiaries of Federated Investors, may together buy and hold
substantial amounts of a company's voting stock. All such stock may be
voted together. In some cases, the Trust and the other investment
companies might collectively be considered to be in control of the
company in which they have invested. Officers or affiliates of the Trust
might possibly become directors of companies in which the Trust holds
stock.
Purchasing Securities of Other Issuers
The Trust will not purchase securities of other investment companies,
except:
o by purchase in the open market involving only customary brokerage
commissions; or
o as part of a merger, consolidation or other acquisition.
Investing in New Issuers Whose Securities Are Owned by Officers of the
Trust
The Trust will not invest more than 5% of the value of its total assets
in securities of issuers with records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Issuers
The Trust will not purchase or retain the securities of any issuer if
the officers and Board of Trustees (the "Trustees") of the Trust or its
investment adviser owning individually more than 1/2 of 1% of the
issuer's securities together own more than 5% of the issuer's
securities.
Underwriting
The Trust will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies and limitations.
Investing in Real Estate
The Trust will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate.
Investing in Commodities or Minerals
The Trust will not purchase or sell commodities or commodity contracts
or oil, gas, or other mineral development programs or leases.
Lending Cash or Securities
The Trust will not lend any of its assets, except that it may purchase
or hold corporate or government bonds, debentures, notes, certificates
of indebtedness or other debt securities permitted by its investment
objective and policies.
Concentration of Investments in One Industry
The Trust will not invest more than 25% of the value of its total assets
in one industry.
Issuing Senior Securities
The Trust will not issue senior securities except as permitted by its
investment objective and policies.
Dealing in Puts and Calls
The Trust will not write, purchase or sell puts, calls, straddles or
spreads or any combinations of them.
Restricted Securities
The Trust will not invest more than 10% of the value of its total assets
in securities subject to restrictions on resale under federal securities
laws or for other reasons.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
The Trust did not borrow money, pledge securities, or purchase restricted
securities in excess of 5% of the value of its total assets during the last
fiscal year and has no present intent to do so in the coming fiscal year.
Federated Stock Trust Management
Officers and Trustees are listed with their addresses, present positions with
Federated Stock Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue ,
Vice President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
Center; Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; formerly, Chairman, National Advisory
Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated
Cash Management Trust; Automated Government Money Trust; California Municipal
Cash Trust; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust; Federated Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term Trust,
Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds: Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust; New
York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Star Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust
For Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; World Investment Series, Inc.
Trust Ownership
As of December 13, 1994, no shareholder of record owned 5% or more of the
outstanding shares of the Trust.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
Investment Advisory Services
Adviser to the Trust
The Trust's investment adviser is Federated Management (the "Adviser"). It is
a subsidiary of Federated Investors. All of the voting securities of Federated
Investors are owned by a trust, the Trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue.
J. Christopher Donahue, Trustee of Federated Management, is Vice President and
Trustee of Federated Investors, President and Director of Federated
Administrative Services, Inc., and Vice President of the Trust. John W.
McGonigle, Vice President, Secretary, and Trustee of Federated Management, is
Trustee, Vice President, Secretary, and General Counsel of Federated
Investors, Executive Vice President, Secretary, and Director of Federated
Administrative Services, Executive Vice President and Trustee of Federated
Securities Corp., and Vice President and Secretary of the Trust.
The adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or
for anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
October 31, 1994, 1993, and 1992, the Trust's adviser earned $ 4,204,915,
$3,466,826, and $2,825,878, respectively.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%
per year of the remaining average net assets, the adviser will reimburse
the Trust for its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
Other Related Services
Affiliates of the adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust for a fee
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators.") For
the fiscal year ended October 31, 1994, the Administrators collectively earned
$ 528,231. For the fiscal years ended October 31, 1993, and 1992, the Trust
incurred costs for administrative services of $638,234 and $529,494,
respectively.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser to the
Trust, holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Trust. The fee paid to the transfer agent is based upon the
size, type, and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee paid for this service is based upon the level of the Trust's average net
assets for the period plus out-of-pocket expenses.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.
For the fiscal period ending October 31, 1994, payments in the amount of
$334,212 were made pursuant to the Shareholder Services Plan, all of which was
paid to financial institutions.
Brokerage Transactions
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services
for which the adviser or its affiliates might otherwise have paid, it would
tend to reduce their expenses.
For the fiscal years ended October 31, 1994, 1993, and 1992, the Trust paid
total brokerage commissions of $271,265, $336,440, and $463,566, respectively.
Purchasing Shares
Shares are sold at their net asset value without a sales charge on days the
New York Stock Exchange is open for business. The procedure for purchasing
shares of the Trust is explained in the prospectus under "Investing in the
Trust."
Conversion to Federal Funds
It is the Trust's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as
the shareholder's agent in depositing checks and converting them to federal
funds.
Determining Net Asset Value
Net asset value generally changes each day. The days on which the net asset
value is calculated by the Trust are described in the prospectus.
Determining Market Value of Securities
Market values of the Trust's portfolio securities are determined as follows:
o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;
o in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices and for bonds and
other fixed income securities as determined by an independent pricing
service;
o for unlisted equity securities, the latest bid prices;
o for short-term obligations, according to the mean between bid and asked
prices, as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
Redeeming Shares
The Trust redeems shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $5,000.
Exchanging Securities for Trust Shares
Investors may exchange certain securities they already own for Trust shares,
or they may exchange a combination of securities and cash for Trust shares. An
investor should forward the securities in negotiable form with an authorized
letter of transmittal to Federated Securities Corp. The Trust will notify the
investor of its acceptance and valuation of the securities within five
business days of their receipt by State Street Bank.
The Trust values securities in the same manner as the Trust values its assets.
The basis of the exchange will depend upon the net asset value of Trust shares
on the day the securities are valued. One share of the Trust will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other
rights attached to the securities become the property of the Trust, along with
the securities.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
Trust shares, a gain or loss may be realized by the investor.
Tax Status
The Trust's Tax Status
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Trust must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gain from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. At least a percentage of dividends paid
by the Trust will generally qualify for the shareholder's $100 dividends
received deduction available to corporations. The percentage is based on and
equal to the proportion of the Trust's gross income derived from dividends of
domestic corporations. These dividends, and any short-term capital gains, are
taxable as ordinary income.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Trust shares.
Total Return
The Trust's average annual total returns for the one-year, five-year and ten-
year periods ended October 31, 1994, were 4.55% , 9.99%, and 12.97%,
respectively. The Trust's average annual total return since inception was
15.50%.
The average annual total return for the Trust is the average compounded rate
of return for a given period that would equate a $1,000 initial investment to
the ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the quarterly reinvestment of all dividends and
distributions.
Yield
The Trust's yield for the thirty-day period ended October 31, 1994, was 1.95%.
The yield for the Trust is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by the
Trust over a thirty-day period by the offering price per share of the Trust on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the thirty-
day period is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by the Trust because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Trust, performance will be reduced for those shareholders paying those fees.
Performance Comparisons
The Trust's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Trust expenses; and
o various other factors.
The Trust's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance,
investors should consider all relevant factors such as the composition of any
index used, prevailing market conditions, portfolio compositions of other
funds, and methods used to value portfolio securities and compute offering
price. The financial publications and/or indices which the Fund uses in
advertising may include:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, the Trust will quote it
Lipper ranking in the "growth and income funds" category in advertising
and sales literature.
o Dow Jones Industrial Average ("DJIA") represents share prices of
selected blue-chip industrial corporations as well as public utility and
transportation companies. The DJIA indicates daily changes in the
average price of stocks in any of its categories. It also reports total
sales for each group of industries. Because it represents the top
corporations of America, the DJIA's index movements are leading economic
indicators for the stock market as a whole.
o Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments
of all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
Investors may also consult the fund evaluation consulting universes listed
below. Consulting universes may be composed of pension, profit sharing,
commingled, endowment/foundation, and mutual funds.
o Fiduciary Consulting Grid Universe, for example, is composed of over
1,000 funds, representing 350 different investment managers, divided
into subcategories based on asset mix. The funds are ranked quarterly
based on performance and risk characteristics.
o SEI data base for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on
investor groups and asset mix. The funds are ranked every three, six,
and twelve months.
o Mercer Meidinger, Inc. compiles a universe of approximately 600 equity
funds, representing about 500 investment managers, and updates their
rankings each calendar quarter as well as on a one, three, and five year
basis.
Advertisements and other sales literature for the Trust may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Trust based on quarterly reinvestment of dividends over a specified period
of time.
313900102
8120102B (12/94)
APPENDIX
The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Stock Trust." The corresponding
components of the line graph are listed underneath. Federated Stock Trust
(the "Trust") is represented by a broken line. Standard and Poor's 500 Index
(the "S&P 500") is represented by a solid line. Lipper Growth and Income Fund
Average (the "LGIFA") is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$25,000 investment in the Trust, the S&P 500 and the LGIFA. The "x" axis
reflects computation periods from October 31, 1984 through, October 31, 1994.
The "y" axis reflects the cost of the investment, ranging from $10,000 to
$100,000. The right margin reflects the ending value of the hypothetical
investment in the Trust as compared to the S&P 500 and the LGIFA. The ending
values are $84,641, $99,130 and 84,296, respectively.
