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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, 1995, 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 or a paper copy of this prospectus, if you have received your
prospectus electronically, 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, 1995
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 12
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Voting Rights 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 25
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ADDRESSES 26
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</TABLE>
I
SUMMARY OF TRUST EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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 (after waiver) (1)................................................................ 0.72%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.29%
Shareholder Services Fee (after waiver) (2)......................................... 0.10%
Total Operating Expenses (3)............................................................. 1.01%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75% of the first $500 million in average daily net assets, 0.675% of the
second $500 million in average daily net assets, 0.60% of the third $500
million in average daily net assets, 0.525% of the fourth $500 million in
average daily net assets, and 0.40% of average daily net assets in excess of
$2 billion.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.18% absent the waiver of a
portion of the management fee and the voluntary waiver of a portion of the
shareholder services fee.
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 25.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(a)
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $26.33 $26.40 $24.18 $23.99 $18.55 $25.19 $22.87 $22.10
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.47 0.46 0.48 0.56 0.51 0.70 0.70 0.52
- -----------------------------------
Net realized and unrealized gain
(loss) on investments 5.04 0.68 4.27 1.79 6.23 (4.42) 2.34 1.03
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 5.51 1.14 4.75 2.35 6.74 (3.72) 3.04 1.55
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.49) (0.43) (0.49) (0.55) (0.56) (0.78) (0.65) (0.52)
- -----------------------------------
Distributions in excess of net
investment income -- -- (0.02)(e) -- -- -- -- --
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions from net
investment income (0.49) (0.43) (0.51) (0.55) (0.56) (0.78) (0.65) (0.52)
- -----------------------------------
Distributions from net realized
gain on investment transactions (0.69) (0.78) (2.02) (1.61) (0.74) (2.14) (0.07) (0.26)
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (1.18) (1.21) (2.53) (2.16) (1.30) (2.92) (0.72) (0.78)
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $30.66 $26.33 $26.40 $24.18 $23.99 $18.55 $25.19 $22.87
- ----------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
TOTAL RETURN (b) 21.98% 4.55% 20.88% 10.78% 37.50% (16.36%) 13.48% 7.14%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.01% 0.97% 0.97% 0.99% 1.00% 0.98% 0.95% 0.94%*
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Net investment income 1.71% 1.81% 1.83% 2.33% 2.25% 3.03% 2.75% 3.08%*
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Expense waiver/reimbursement 0.15%(d) -- -- -- -- -- -- --
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SUPPLEMENTAL DATA
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Net assets, end of period (000
omitted) $632,069 $600,664 $554,062 $386,490 $369,505 $332,241 $573,047 $636,426
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Portfolio turnover 42% 28% 26% 54% 49% 53% 35% 31%
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<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1988 1987 1986
- ----------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $24.00 $20.43 $17.34
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.68 0.66 0.66
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Net realized and unrealized gain
(loss) on investments (1.50) 4.99 3.48
- ----------------------------------- ------- ------- -------
Total from investment operations (0.82) 5.65 4.14
- ----------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.64) (0.64) (0.65)
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Distributions in excess of net
investment income -- -- --
- ----------------------------------- ------- ------- -------
Total distributions from net
investment income (0.64) (0.64) (0.65)
- -----------------------------------
Distributions from net realized
gain on investment transactions (0.44) (1.44) (0.40)
- ----------------------------------- ------- ------- -------
Total distributions (1.08) (2.08) (1.05)
- ----------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $22.10 $24.00 $20.43
- ----------------------------------- ------- ------- -------
------- ------- -------
TOTAL RETURN (b) (3.64%) 29.02% 24.78%
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RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.89% 0.93% 1.00%
- -----------------------------------
Net investment income 2.82% 3.04% 3.69%
- -----------------------------------
Expense waiver/reimbursement -- -- 0.04%(c)
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $675,110 $611,856 $284,856
- -----------------------------------
Portfolio turnover 51% 19% 35%
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</TABLE>
* Computed on an annualized basis.
(a) For the nine months ended October 31, 1988.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) This voluntary expense decrease for the shareholder services fee 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.
(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 ended October 31, 1995, 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
3
repurchase agreements, and these securities will be marked to market daily.
To the extent that 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.
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 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 investment policy, which may be
changed without shareholder approval, the Trust will not invest more than
10% of its assets in American Depositary Receipts ("ADRs").
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
4
which meet the criteria for liquidity established by the Trustees, including
Section 4(2) commercial 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
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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>
AVERAGE DAILY ADVISORY FEE AS % OF
NET ASSETS AVERAGE DAILY 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>
Both the Trust and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Trust and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Trust's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Trust; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Board of Trustees, and could result in severe
penalties.
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. With over $72 billion
6
invested across more than 260 funds under management and/or administration
by its subsidiaries, as of December 31, 1994, Federated Investors is one of
the largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
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.
Timothy E. Keefe has been the Trust's portfolio manager since June 1, 1995.
Mr. Keefe joined Federated Investors in 1987 and has been an Assistant Vice
President of the Trust's investment adviser since 1993. Mr. Keefe served as
an Investment Analyst of the investment adviser from 1991 to 1993, and from
1987 until 1991 he acted as a Marketing Representative in the Broker Dealer
Department. Mr. Keefe is a Chartered Financial Analyst and received his
M.B.A. in Business Administration from the University of Pittsburgh.
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.
SHAREHOLDER SERVICES. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments up to .25 of 1% of the
average daily net asset value of Shares, computed at an annual rate, to obtain
certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, 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.
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
7
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
ADMINISTRATIVE FEE ASSETS OF THE TRUST
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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.
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,
8
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.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable
to Federated Stock Trust to: Federated Services Company, P.O. Box 8600,
Boston, Massachusetts 02266-8600. 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 as of the close of trading (normally 4:00
p.m., Eastern time) on 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
9
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.
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.
10
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.
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 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 their signatures on written
redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund 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 association whose deposits are insured by the
Savings Association Insurance Fund, 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.
11
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 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.
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
- --------------------------------------------------------------------------------
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-
12
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, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's performance to certain indices.
13
FEDERATED STOCK TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------- ------------------------------------------------------------ ------------
<C> <S> <C>
EQUITIES--88.2%
- -------------------------------------------------------------------------------
CONSUMER DURABLES--4.4%
------------------------------------------------------------
157,400 Eastman Kodak Co. $ 9,857,175
------------------------------------------------------------
347,700 Mattel, Inc. 9,996,375
------------------------------------------------------------
353,700 Volvo, ADR 8,046,675
------------------------------------------------------------ ------------
Total 27,900,225
------------------------------------------------------------ ------------
CONSUMER NON-DURABLES--8.1%
------------------------------------------------------------
137,800 Avon Products, Inc. 9,801,025
------------------------------------------------------------
207,900 IBP, Inc. 12,448,012
------------------------------------------------------------
224,900 Philip Morris Cos., Inc. 19,004,050
------------------------------------------------------------
84,100 RJR Nabisco Holdings Corp. 2,586,075
------------------------------------------------------------
220,300 Reebok International Ltd. 7,490,200
------------------------------------------------------------ ------------
Total 51,329,362
------------------------------------------------------------ ------------
CONSUMER SERVICES--0.8%
------------------------------------------------------------
95,600 Gannett Co., Inc. 5,198,250
------------------------------------------------------------ ------------
ELECTRONIC TECHNOLOGY--11.5%
------------------------------------------------------------
142,900 Hewlett-Packard Co. 13,236,112
------------------------------------------------------------
152,400 Intel Corp. 10,648,950
------------------------------------------------------------
97,500 International Business Machines Corp. 9,481,875
------------------------------------------------------------
147,910 (a) Litton Industries, Inc. 5,860,934
------------------------------------------------------------
238,300 Lockheed Martin Corp. 16,234,188
------------------------------------------------------------
144,500 Raytheon Co. 6,303,813
------------------------------------------------------------
248,200 Rockwell International Corp. 11,044,900
------------------------------------------------------------ ------------
Total 72,810,772
------------------------------------------------------------ ------------
</TABLE>
14
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------- ------------------------------------------------------------ ------------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
ENERGY MINERALS--5.4%
------------------------------------------------------------
212,400 Chevron Corp. $ 9,929,700
------------------------------------------------------------
287,200 Occidental Petroleum Corp. 6,174,800
------------------------------------------------------------
148,900 Texaco, Inc. 10,143,813
------------------------------------------------------------
439,600 USX Corp. 7,802,900
------------------------------------------------------------ ------------
Total 34,051,213
------------------------------------------------------------ ------------
FINANCE--16.7%
------------------------------------------------------------
271,638 Allstate Corp. 9,982,696
------------------------------------------------------------
146,500 American Express Co. 5,951,562
------------------------------------------------------------
202,000 Bank of Boston Corp. 8,989,000
------------------------------------------------------------
146,700 Chemical Banking Corp. 8,343,562
------------------------------------------------------------
99,900 CIGNA Corp. 9,902,587
------------------------------------------------------------
217,200 Citicorp 14,090,850
------------------------------------------------------------
182,883 Dean Witter, Discover & Co. 9,098,429
------------------------------------------------------------
82,700 First Interstate Bancorp 10,668,300
------------------------------------------------------------
248,700 Mellon Bank Corp. 12,466,088
------------------------------------------------------------
174,900 Providian Corp. 6,864,825
------------------------------------------------------------
182,000 Travelers Group, Inc. 9,191,000
------------------------------------------------------------ ------------
Total 105,548,899
------------------------------------------------------------ ------------
HEALTH SERVICES--1.0%
------------------------------------------------------------
124,900 Smithkline Beecham Corp., ADR 6,479,188
------------------------------------------------------------ ------------
HEALTH TECHNOLOGY--7.2%
------------------------------------------------------------
117,000 American Home Products Corp. 10,369,125
------------------------------------------------------------
184,700 Becton, Dickinson & Co. 12,005,500
------------------------------------------------------------
184,700 Bristol-Myers Squibb Co. 14,083,375
------------------------------------------------------------
159,700 Merck & Co., Inc. 9,182,750
------------------------------------------------------------ ------------
Total 45,640,750
------------------------------------------------------------ ------------
</TABLE>
15
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------- ------------------------------------------------------------ ------------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.7%
------------------------------------------------------------
260,500 Baker Hughes, Inc. $ 5,112,312
------------------------------------------------------------
129,610 (a) Western Atlas, Inc. 5,686,639
------------------------------------------------------------ ------------
Total 10,798,951
------------------------------------------------------------ ------------
NON-ENERGY MINERALS--3.2%
------------------------------------------------------------
158,300 Aluminum Co. of America 8,073,300
------------------------------------------------------------
187,900 Phelps Dodge Corp. 11,908,163
------------------------------------------------------------ ------------
Total 19,981,463
------------------------------------------------------------ ------------
PROCESS INDUSTRIES--4.2%
------------------------------------------------------------
154,800 Du Pont (E.I.) de Nemours & Co. 9,655,650
------------------------------------------------------------
123,800 Eastman Chemical Co. 7,366,100
------------------------------------------------------------
356,000 Praxair, Inc. 9,612,000
------------------------------------------------------------ ------------
Total 26,633,750
------------------------------------------------------------ ------------
PRODUCER MANUFACTURING--11.1%
------------------------------------------------------------
175,800 (a) FMC Corp. 12,591,675
------------------------------------------------------------
207,900 General Electric Co. 13,149,675
------------------------------------------------------------
72,300 ITT Corp. 8,856,750
------------------------------------------------------------
77,600 Loews Corp. 11,378,100
------------------------------------------------------------
150,500 Philips Electronics N.V., ADR 5,813,063
------------------------------------------------------------
216,400 Textron, Inc. 14,877,500
------------------------------------------------------------
250,000 Westinghouse Electric Corp. 3,531,250
------------------------------------------------------------ ------------
Total 70,198,013
------------------------------------------------------------ ------------
RETAIL TRADE--2.6%
------------------------------------------------------------
210,200 American Stores Co. 6,279,725
------------------------------------------------------------
293,300 Sears, Roebuck & Co. 9,972,200
------------------------------------------------------------ ------------
Total 16,251,925
------------------------------------------------------------ ------------
</TABLE>
16
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------- ------------------------------------------------------------ ------------
<C> <S> <C>
EQUITIES--CONTINUED
- -------------------------------------------------------------------------------
TECHNOLOGY SERVICES--2.3%
------------------------------------------------------------
291,600 General Motors Corp., Class E $ 13,741,650
------------------------------------------------------------
50,000 (a) DST Systems, Inc. 1,050,000
------------------------------------------------------------ ------------
Total 14,791,650
------------------------------------------------------------ ------------
TRANSPORTATION--1.5%
------------------------------------------------------------
134,100 Consolidated Rail Corp. 9,219,375
------------------------------------------------------------ ------------
UTILITIES--6.5%
------------------------------------------------------------
230,800 AT&T Corp. 14,771,200
------------------------------------------------------------
97,400 CMS Energy Corp. 2,690,675
------------------------------------------------------------
136,100 (a) Columbia Gas System, Inc. 5,239,850
------------------------------------------------------------
154,100 Enron Corp. 5,297,187
------------------------------------------------------------
95,200 FPL Group, Inc. 3,986,500
------------------------------------------------------------
355,200 MCI Communications Corp. 8,857,800
------------------------------------------------------------ ------------
Total 40,843,212
------------------------------------------------------------ ------------
TOTAL EQUITIES (IDENTIFIED COST $379,383,732) 557,676,998
------------------------------------------------------------ ------------
------------
CONVERTIBLE SECURITIES--4.6%
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES--1.0%
------------------------------------------------------------
1,006,900 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 6,293,125
------------------------------------------------------------ ------------
FINANCE--2.3%
------------------------------------------------------------
144,800 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 7,801,100
------------------------------------------------------------
109,000 Sunamerica, Inc., Conv. Pfd., Series E, $3.10 6,758,000
------------------------------------------------------------ ------------
Total 14,559,100
------------------------------------------------------------ ------------
PRODUCER MANUFACTURING--1.3%
------------------------------------------------------------
600,000 (b) Westinghouse Electric Corp., PEPS, Series C, $1.30 8,386,200
------------------------------------------------------------ ------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $29,434,550) 29,238,425
------------------------------------------------------------ ------------
------------
</TABLE>
17
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------- ------------------------------------------------------------ ------------
<C> <S> <C>
(c) REPURCHASE AGREEMENT--6.4%
- -------------------------------------------------------------------------------
$40,630,000 J.P. Morgan & Co., Inc., 5.90%, dated 10/31/1995, due
11/1/1995 (at amortized cost) $ 40,630,000
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST $449,448,282) (d) $627,545,423
------------------------------------------------------------ ------------
------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounted to $8,386,200 which represents 1.3% of
net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $449,448,282.
The net unrealized appreciation of investments on a federal tax basis
amounts to $178,097,141 which is comprised of $182,172,900 appreciation and
$4,075,759 depreciation at October 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($632,069,224) at October 31, 1995.
The following acronym(s) are used throughout this portfolio:
ADR --American Depository Receipt
PEPS --Participating Equity Preferred Stock
STRYPES --Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)
18
FEDERATED STOCK TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$449,448,282) $627,545,423
- ------------------------------------------------------------------
Income receivable 892,392
- ------------------------------------------------------------------
Receivable for investments sold 18,042,355
- ------------------------------------------------------------------
Receivable for shares sold 694,141
- ------------------------------------------------------------------ ------------
Total assets 647,174,311
- ------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Payable for investments purchased $14,382,362
- -----------------------------------------------------
Payable for shares redeemed 112,361
- -----------------------------------------------------
Payable to Bank 442,752
- -----------------------------------------------------
Accrued expenses 167,612
- ----------------------------------------------------- -----------
Total liabilities 15,105,087
- ------------------------------------------------------------------ ------------
NET ASSETS for 20,618,044 shares outstanding $632,069,224
- ------------------------------------------------------------------ ------------
------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------
Paid in capital $408,742,044
- ------------------------------------------------------------------
Net unrealized appreciation of investments 178,097,141
- ------------------------------------------------------------------
Accumulated net realized gain on investments 45,016,155
- ------------------------------------------------------------------
Undistributed net investment income 213,884
- ------------------------------------------------------------------ ------------
Total Net Assets $632,069,224
- ------------------------------------------------------------------ ------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------
$632,069,224 DIVIDED BY 20,618,044 shares outstanding $ 30.66
- ------------------------------------------------------------------ ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
FEDERATED STOCK TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Dividends $ 14,369,895
- ------------------------------------------------------------------
Interest 1,492,354
- ------------------------------------------------------------------ ------------
Total income 15,862,249
- ------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------
Investment advisory fee $ 4,305,810
- -----------------------------------------------------
Administrative personnel and services fee 440,833
- -----------------------------------------------------
Custodian fees 102,829
- -----------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 325,617
- -----------------------------------------------------
Directors'/Trustees' fees 11,909
- -----------------------------------------------------
Auditing fees 14,993
- -----------------------------------------------------
Legal fees 13,307
- -----------------------------------------------------
Portfolio accounting fees 93,188
- -----------------------------------------------------
Shareholder services fee 1,455,815
- -----------------------------------------------------
Share registration costs 41,571
- -----------------------------------------------------
Printing and postage 28,297
- -----------------------------------------------------
Insurance premiums 10,106
- -----------------------------------------------------
Taxes 17,098
- -----------------------------------------------------
Miscellaneous 28,717
- ----------------------------------------------------- -----------
Total expenses 6,890,090
- -----------------------------------------------------
Waivers--
- ------------------------------------------
Waiver of investment advisory fee $(128,351)
- ------------------------------------------
Waiver of shareholder services fee (873,483)
- ------------------------------------------ ---------
Total waivers (1,001,834)
- ----------------------------------------------------- -----------
Net expenses 5,888,256
- ------------------------------------------------------------------ ------------
Net investment income 9,973,993
- ------------------------------------------------------------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
- ------------------------------------------------------------------
Net realized gain on investments 45,305,647
- ------------------------------------------------------------------
Net change in unrealized appreciation of investments 58,089,861
- ------------------------------------------------------------------ ------------
Net realized and unrealized gain on investments 103,395,508
- ------------------------------------------------------------------ ------------
Change in net assets resulting from operations $113,369,501
- ------------------------------------------------------------------ ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
FEDERATED STOCK TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------
OPERATIONS--
- --------------------------------------------------
Net investment income $ 9,973,993 $ 10,271,797
- --------------------------------------------------
Net realized gain (loss) on investments
($45,017,308 net gain and $15,441,993 net gain,
respectively, as computed for federal tax
purposes) 45,305,647 15,153,654
- --------------------------------------------------
Net change in unrealized appreciation 58,089,861 89,647
- -------------------------------------------------- ------------- -------------
Change in net assets resulting from operations 113,369,501 25,515,098
- -------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------
Distributions from net investment income (10,498,641) (9,572,779)
- --------------------------------------------------
Distributions from net realized gains (15,442,313) (16,842,679)
- -------------------------------------------------- ------------- -------------
Change in net assets resulting from
distributions to shareholders (25,940,954) (26,415,458)
- -------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------
Proceeds from sale of shares 146,619,990 265,476,902
- --------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 13,596,554 13,333,198
- --------------------------------------------------
Cost of shares redeemed (216,239,762) (231,307,977)
- -------------------------------------------------- ------------- -------------
Change in net assets resulting from share
transactions (56,023,218) 47,502,123
- -------------------------------------------------- ------------- -------------
Change in net assets 31,405,329 46,601,763
- --------------------------------------------------
NET ASSETS:
- --------------------------------------------------
Beginning of period 600,663,895 554,062,132
- -------------------------------------------------- ------------- -------------
End of period (including undistributed net
investment income of $213,884 and $738,532,
respectively) $ 632,069,224 $ 600,663,895
- -------------------------------------------------- ------------- -------------
------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
21
FEDERATED STOCK TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(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 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--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at the
prices provided by an independent pricing service.
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 under repurchase agreement
transactions. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The 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 and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the 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 of its income. Accordingly, no
provisions for federal tax are necessary.
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
22
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
maintains security positions such that sufficient liquid assets will be
available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed delivery basis are marked to market daily and
begin earning interest on the settlement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Trust or in connnection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Trust will not
incur any registration costs upon such resales. The Trust's restricted
security is valued at the price provided by dealers in the secondary market
or, if no market price is available, at the fair value as determined by the
Trust's pricing committee.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<S> <C> <C>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------------------------------------------------------------------- --------------------- ----------------
Westinghouse Electric Corp., PEPS, Series C, $1.30 09/26/95 - 09/28/95 $ 9,175,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------
1995 1994
- ------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Shares sold 5,349,711 10,334,187
- -------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 541,686 526,068
- -------------------------------------------------------------------
Shares redeemed (8,086,028) (9,032,374)
- ------------------------------------------------------------------- ---------- -----------
Net change resulting from share transactions (2,194,631) 1,827,881
- ------------------------------------------------------------------- ---------- -----------
---------- -----------
</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 .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
23
FEDERATED STOCK TRUST
- --------------------------------------------------------------------------------
under federal and state laws, expenses of withholding taxes, and
extraordinary expenses) exceed 1% of average daily net assets of the Trust.
ADMINISTRATIVE FEE--Federated Administrative Services, under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. This 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
Federated Shareholder Services up to .25 of 1% of average daily net assets
of the Trust for the period. This fee is to obtain certain services for
shareholders and to maintain shareholder accounts. FSS may voluntarily
choose to waive a portion of its fee. FSS can modify or terminate this
voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the
Trust. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Trust's accounting
records for which it receives a fee. The fee is based on the level of the
Trust's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended October 31, 1995, were as follows:
<TABLE>
<S> <C>
Purchases $236,895,317
- ----------------------------------------------------------------- ------------
Sales $323,578,779
- ----------------------------------------------------------------- ------------
</TABLE>
24
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, 1995,
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, 1995, 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, 1995, 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 8, 1995
25
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Stock Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust
Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing
Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- --------------------------------------------------------------------------------
</TABLE>
26
- --------------------------------------------------------------------------------
FEDERATED STOCK TRUST
PROSPECTUS
A No-Load, Open-End,
Diversified Management
Investment Company
December 31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 313900102
8120102A (12/95) [RECYCLED PAPER LOGO]
RECYCLED
PAPER
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,
1995. 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, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE TRUST 1
INVESTMENT OBJECTIVE AND POLICIES1
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 7
TRUST OWNERSHIP 8
TRUSTEES COMPENSATION 8
TRUSTEE LIABILITY 8
INVESTMENT ADVISORY SERVICES 9
ADVISER TO THE TRUST 9
ADVISORY FEES 9
OTHER SERVICES 9
TRUST ADMINISTRATION 9
CUSTODIAN AND PORTFOLIO RECORDKEEPER 9
TRANSFER AGENT 9
INDEPENDENT AUDITOR 9
ADMINISTRATIVE SERVICES 9
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT 9
SHAREHOLDER SERVICES AGREEMENT 10
BROKERAGE TRANSACTIONS 10
PURCHASING SHARES 10
CONVERSION TO FEDERAL FUNDS 10
DETERMINING NET ASSET VALUE 10
DETERMINING MARKET VALUE OF SECURITIES 11
REDEEMING SHARES 11
REDEMPTION IN KIND` 11
MASSACHUSETTS PARTNERSHIP LAW 11
EXCHANGING SECURITIES FOR TRUST SHARES 11
TAX CONSEQUENCES 12
TAX STATUS 12
THE TRUST'S TAX STATUS 12
SHAREHOLDERS' TAX STATUS 12
TOTAL RETURN 12
YIELD 12
PERFORMANCE COMPARISONS 13
ABOUT FEDERATED INVESTORS 14
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:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
othe 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:
oFederal Land Banks;
oCentral Bank for Cooperatives;
oFederal Intermediate Credit Banks;
oFederal Home Loan Banks;
oFarmers Home Administration; and
oFederal 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, 1995, and 1994, the portfolio turnover rates were 42% and 28%,
respectively.
INVESTMENT LIMITATIONS
The Trust will not change any of the investment limitations described below
without approval of shareholders, unless indicated otherwise
SELLING SHORT AND BUYING ON MARGIN
The Trust will not make short sales of or purchase any securities on
margin, except for such credits as are necessary for the clearance of
transactions.
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 where the liquidation of
portfolio securities is deemed inconvenient or disadvantageous. While
any such borrowings are outstanding, no purchases of investment
securities will be made by the Trust.
PLEDGING ASSETS
The Trust will not pledge, mortgage or hypothecate its assets, except
that, to secure borrowings. It may pledge securities having a market
value at the time of pledge not exceeding 10% of the value of the
Trust's total assets.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase the securities of any issuer, except cash,
cash instruments and securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, if as a result more than
5% of its total assets would be invested in the securities of such
issuer.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Trust may not invest in 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 the Adviser or its
affiliated companies, may buy and hold substantial amounts of the voting
stock of a company, and all such stock may be voted together in regard
to the company's affairs In some cases, the Trust and other investment
companies advised by the Adviser or its affiliated companies holding
such stock might collectively be considered to be in control of such a
company . 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 invest in securities issued by any other investment
company or investment trust except by purchase in the open market where
no commission or profit to a sponser or dealer results from such
purchjases other than the customary broker's commission or except when
such a purchase, though not made in open market, is part of a plan of
merger or consolidation.
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 the total assets
of the Trust in securities of issuers which have a record of less than
three years of continuous operation, including the operation of any
predecessor.
INVESTING IN ISSUERS
The Trust will not purchase or retain the securities of any issuer other
than the securities of the Trust, if, to the Trust's knowledge, those
officers and Trustees of the Trust, or of the Adviser, who individually
own beneficially more than 1/2 of 1% of the outstanding securities of
such issuer, together own beneficially more than 5% of such outstanding
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 purchase or sell real estate, but this shall not
prevent the Trust from investing in Municipal Bonds secured by real
estate or interest therein.
INVESTING IN COMMODITIES OR MINERALS
The Trust will not purchase or sell commodities or commodity contracts
or oil, gas, or other mineral exploration or development programs.
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.
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, policies and limitations.
DEALING IN PUTS AND CALLS
The Trust will not write, purchase or sell puts, call, straddles or
spreads or any combinations thereof.
RESTRICTED SECURITIES
The Trust will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4 (2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
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.
This representation may be changed without shareholder vote to the extent
permitted by the above restrictions.
FEDERATED STOCK TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Stock Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
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.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Bithdate February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Director, Federated Securities Corp.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-Law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, 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
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center-Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, 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.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; Funding Chairman, National
Advisory Council for Environmental Policy and Technology and Federal
Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
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
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some 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.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated
U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; 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; 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; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds;
The Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Targeted Duration Trust; Tax-Free Instruments Trust; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; The Virtus Funds;
World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholders of record owned 5% or more
of the outstanding shares of Federated Stock Trust: Charles Schwab & Co.,
Inc., San Francisco, CA, 6.75%; and Boston Safe Deposit & Trust Co., Medford,
MA, 5.01%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
15 portfolios.
+The information is provided for the last calendar year.
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.
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, 1995, 1994, and 1993, the Trust's Adviser earned $4,305,810,
$4,204,915, and $3,466,826, respectively, of which $128,351 was waived for
the period ended October 31, 1995.
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 SERVICES
TRUST ADMINISTRATION
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, 1995, the
Administrators collectively earned $440,833. For the fiscal years ended
October 31, 1994, and 1993, Federated Administrative Services and Federated
Administrative Services, Inc. earned $528,231 and $638,234, 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.
CUSTODIAN AND PORTFOLIO RECORDKEEPER.
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for
the securities and cash of the Trust. It also provides certain accounting
and recordkeeping services with respect to the Trust's portfolio investments.
TRANSFER AGENT .
As transfer agent, Federated Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on size, type, and number of accounts and transactions made by
shareholders.
INDEPENDENT AUDITOR
The independent auditors for the Trust are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
SHAREHOLDER SERVICES AGREEMENT
This arrangement permits the payment of fees to Federated Shareholder
Services and 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.
By adopting the Shareholder Services Agreement, the Trustees expect that the
Trust will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative
detail; (3) enhancing shareholder record keeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1995, payments in the amount of
$1,455,815 were made pursuant to the Shareholder Services Agreement, of which
$873,483 was waived.
BROKERAGE TRANSACTIONS
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust/Fund or to
the adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the Trust/Fund 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. 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. For the fiscal
years ended October 31, 1995, 1994, and 1993, the Trust paid total brokerage
commissions of $549,947, $271,265, and $336,440, respectively.
Although investment decisions for the Trust/Fund are made independently from
those of the other accounts managed by the adviser, investments of the type
theTrust/Fund may make may also be made by those other accounts. When the
Trust/Fund and one or more other accounts managed by the adviser are prepared
to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed
by the adviser to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the Trust/Fund or the size of
the position obtained or disposed of by the Trust/Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Trust/Fund.
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.
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders for such
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 on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations, the Trust is required by the Declaration of Trust 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
from its assets.
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, 1995, were 21.98%, 18.62%, and 12.80%,
respectively. The Trust's average annual total return since inception was
15.46%.
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, 1995, was
1.39%.
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.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the equity sector, Federated Investors has more than 25 years' experience.
As of December 31, 1995, Federated Investors managed 15 equity funds totaling
approximately $4 billion in assets across growth, value, equity income,
international, index and sector (i.e. utility) styles. Federated's value-
oriented management style combines quantitative and qualitative analysis and
features a structured, computer-assisted composite modeling system that was
developed in the 1970s.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Division.
*source: Investment Company Institute
CUSIP 313900102
