FEDERATED GROWTH TRUST
PROSPECTUS
Federated Growth Trust (the "Trust") is a no-load, open-end, diversified
management investment company (a mutual fund) that seeks appreciation of capital
by investing primarily in equity securities of companies with prospects for
above-average growth in earnings and dividends, or of companies where
significant fundamental changes are taking place.
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 Federated Growth Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated December
31, 1993, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Trust, contact the Trust at the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated December 31, 1993
TABLE OF CONTENTS
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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
Acceptable Investments 3
Securities of Foreign Issuers 3
Convertible Securities 4
Restricted Securities 4
When-Issued and Delayed
Delivery Transactions 4
Temporary Investments 5
Repurchase Agreements 5
Put and Call Options 5
Risks 5
Lending of Portfolio Securities 5
Portfolio Turnover 5
Investment Limitations 6
TRUST INFORMATION 6
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Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 7
Distribution of Trust Shares 7
Administrative Arrangements 7
Administration of the Trust 8
Administrative Services 8
Custodian 8
Transfer Agent, and
Dividend Disbursing Agent 8
Legal Counsel 8
Independent Auditors 8
Brokerage Transactions 8
NET ASSET VALUE 8
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INVESTING IN THE TRUST 9
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Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Trust Shares 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
Retirement Plans 10
REDEEMING SHARES 11
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Telephone Redemption 11
Written Requests 11
Signatures 11
Receiving Payment 12
Redemption Before Purchase
Instruments Clear 12
Accounts with Low Balances 12
Redemption in Kind 12
SHAREHOLDER INFORMATION 12
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Voting Rights 12
Massachusetts Partnership Law 13
TAX INFORMATION 13
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Federal Income Tax 13
Pennsylvania Corporate and
Personal Property Taxes 13
PERFORMANCE INFORMATION 14
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FINANCIAL STATEMENTS 15
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REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 23
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ADDRESSES Inside Back Cover
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Deferred Sales Load (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
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee........................................................................ 0.75%
12b-1 Fee............................................................................. None
Other Expenses........................................................................ 0.21%
Total Trust Operating Expenses................................................... 0.96%
</TABLE>
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN
$5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption
at the end of each time period. As noted in the table
above, the Trust charges no redemption fees........... $ 10 $31 $53 $118
</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.
FEDERATED GROWTH TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
23.
<TABLE>
<CAPTION>
PERIOD
ENDED
OCTOBER
YEAR ENDED OCTOBER 31, 31, YEAR ENDED MAY 31,
---------------------------------------------------- -------- ---------------------------------------
1993 1992 1991 1990 1989 1988** 1988 1987 1986 1985***
-------- -------- -------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 21.16 $ 21.58 $ 16.78 $ 20.99 $ 17.18 $ 16.93 $ 17.67 $ 16.03 $ 11.66 $ 10.00
- ----------------------
Income from investment
operations
Net investment income .20 .33 .57 .75 .59 .09 .25 .28 .27 .27
- ----------------------
Net realized and
unrealized gain
(loss) on investments 2.96 .45 5.97 (2.69) 3.80 1.08 (.23) 2.40 4.46 1.60
- ---------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Total from investment
operations 3.16 .78 6.54 (1.94) 4.39 1.17 .02 2.68 4.73 1.87
- ----------------------
Less distributions
- ----------------------
Dividends to
shareholders from
net investment income (.23) (.33) (.61) (.79) (.52) (.15) (.20) (.26) (.29) (.21)
- ----------------------
Distributions to
shareholders from
net realized gain on
investment
transactions (.17) (.87) (1.13) (1.48) (.06) (.77) (.56) (.78) (.07) --
- ---------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Total distributions (.40) (1.20) (1.74) (2.27) (.58) (.92) (.76) (1.04) (.36) (.21)
- ---------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Net asset value, end
of period $ 23.92 $ 21.16 $ 21.58 $ 16.78 $ 20.99 $ 17.18 $ 16.93 $ 17.67 $ 16.03 $ 11.66
- ---------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Total return* 15.06% 3.93% 41.54% (10.41%) 25.87% 6.95% .50% 17.55% 41.58% 19.00%
- ----------------------
Ratios/supplemental
data
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Net assets, end of
period
(000 omitted) $460,811 $391,655 $275,561 $138,407 $134,735 $104,146 $102,395 $134,657 $47,318 $ 7,966
- ----------------------
Ratio of expenses to
average net assets .96% 1.01% 1.01% 1.01% 1.01% 1.00%(b) 1.00% 1.00% 1.00% 0.99%(b)
- ----------------------
Ratio of net
investment income to
average net assets .90% 1.54% 2.88% 4.00% 2.99% 1.30%(b) 1.39% 1.78% 2.35% 3.33%(b)
- ----------------------
Expense adjustment (a) -- -- 0.10% 0.22% 0.14% 0.60%(b) 0.15% 0.18% 0.50% 0.51%(b)
- ----------------------
Portfolio turnover
rate 57% 46% 54% 67% 79% 24% 88% 66% 42% 46%
- ----------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
** For the five months ended October 31, 1988.
*** Reflects operations for the period from August 23, 1984, to May 31, 1985.
For the period prior to August 23, 1984, net income per share aggregating
$0.167 was distributed to the Trust's investment adviser. Such distributions
represented the net income of the Trust prior to the initial public offering
of Trust shares, which commenced August 23, 1984.
(a) This expense decrease is reflected in both the expense and net investment
income ratios shown above.
(b) Computed on an annualized basis.
Further information about the Trust's performance is contained in the Trust's
annual report dated October 31, 1993, which can be obtained free of charge.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 17, 1984. The Trust is designed for assets held by bank
customers or by banks in a fiduciary, advisory, agency, custodial (including
individual retirement accounts), or similar capacity. The Trust is also designed
for funds held by other institutions, corporations, trusts, brokers, investment
counselors, pension and profit-sharing plans, and insurance companies. A minimum
initial investment of $25,000 over a 90-day period is required, except for
retirement plans.
Trust shares are currently 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 appreciation of capital. The Trust
pursues this investment objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends, or
of companies where significant fundamental changes are taking place. The
investment objective cannot be changed without approval of shareholders. 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.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of Trustees
(the "Trustees") without shareholder approval. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Trust invests primarily in equity securities 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 each company's business. The Trust
generally invests in companies with market capitalization of $100,000,000 or
more. The fundamental changes which the investment adviser will seek to identify
in companies include, for example, restructuring of basic businesses or
reallocations of assets which present opportunities for significant share price
appreciation. At times, the Trust will invest in securities of companies which
are deemed by the investment adviser to be candidates for acquisition by other
entities as indicated by changes in ownership, changes in standard
price-to-value ratios, and an examination of other standard analytical indices.
The Trust may invest in preferred stocks, corporate bonds, debentures, notes,
warrants, and put and call options on stocks.
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 depository
receipts. Securities of a foreign issuer may present greater risks in the
form of nationalization, confiscation, domestic marketability, or other
national or international restrictions.
As a matter of practice, the Trust will not invest in the securities of a
foreign issuer if any such risk appears to the investment adviser to be
substantial.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants, or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted, but also react to
movements in the underlying equity securities. The holder is entitled to
receive the fixed income of a bond or the dividend preference of a
preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used, in whole or
in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock. When owned as part of a unit along with warrants,
which are options to buy the common stock, they function as convertible
bonds, except that the warrants generally will expire before the bond's
maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders
of common stock in the case of liquidation. However, convertible securities
are generally subordinated to similar nonconvertible securities of the same
company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than nonconvertible securities of
similar quality. The Trust will exchange or convert the convertible
securities held in its portfolio into shares of the underlying common stock
in instances in which, in the investment adviser's opinion, the investment
characteristics of the underlying common shares will assist the Trust in
achieving its investment objectives. Otherwise, the Trust will hold or
trade the convertible securities. In selecting convertible securities for
the Trust, the Trust's adviser evaluates the investment characteristics of
the convertible security as a fixed income instrument, and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security,
the Trust's adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
RESTRICTED SECURITIES. The Trust may acquire securities which are subject
to legal or contractual delays, restrictions, and costs on resale. Because
of time limitations, the Trust might not be able to dispose of these
securities at reasonable prices or at times advantageous to the Trust. The
Trust intends to limit the purchase of restricted securities which have not
been determined by the Trustees to be liquid, together with other
securities considered to be illiquid, including repurchase agreements
providing for settlement in more than seven days after notice, to not more
than 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Trust relies on
the seller to complete the transaction. The seller's failure to complete the
transaction may cause the Trust to miss a price or yield considered to be
advantageous.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of its investment
adviser, prevailing market conditions warrant, the Trust may, for temporary
defensive purposes, invest in:
- short-term money market instruments;
- securities issued and/or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities; and
- repurchase agreements.
REPURCHASE AGREEMENTS. Certain 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 or other securities to the
Trust and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. 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.
PUT AND CALL OPTIONS. The Trust may purchase put options on stocks. These
options will be used only as a hedge to attempt to protect securities which the
Trust holds against decreases in value. The Trust may purchase these put options
as long as they are listed on a recognized options exchange and the underlying
stocks are held in its portfolio.
The Trust may also write call options on securities either held in its
portfolio, or which it has the right to obtain without payment of further
consideration, or for which it has segregated cash in the amount of any
additional consideration. The call options which the Trust writes and sells must
be listed on a recognized options exchange. Writing of calls by the Trust is
intended to generate income for the Trust and, thereby, protect against price
movements in particular securities in the Trust's portfolio.
RISKS. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange which may or may not exist for
any particular call or put option at any specific time. The absence of a
liquid secondary market also may limit the Trust's ability to dispose of
the securities underlying an option. The inability to close options also
could have an adverse impact on the Trust's ability to effectively hedge
its portfolio.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Trust may lend its portfolio securities on a short-term or a long-term basis up
to one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Trust will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned.
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 directly or through reverse repurchase agreements
(arrangements in which the Trust sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Trust may borrow up to
one-third of the value of its net assets; or
- sell securities short except, under strict limitations, the Trust may
maintain open short positions so long as not more than 10% of the value
of its net assets is held as collateral for those positions.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
The Trust will not:
- purchase securities of other investment companies, except in open market
transactions limited to not more than 10% of its total assets, or except
as part of a merger, consolidation, or other acquisition;
- invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations and in
equity securities of any issuer which are not readily marketable;
- commit more than 5% of its total assets to premiums on open put option
positions;
- invest more than 5% of its total assets in securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
obligations) or acquire more than 10% of any class of voting securities
of any one issuer; or
- invest more than 5% of its total assets in warrants.
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.
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 Trust's Adviser receives an annual investment advisory
fee equal to 0.75 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, which provides for the voluntary waiver of
the advisory fee by the Adviser, the Adviser may voluntarily waive
some or all of its fee. This does not include reimbursement to the Trust of
any expenses incurred by shareholders who use the transfer agent's
subaccounting facilities. The Adviser can terminate this voluntary waiver
at any time in its sole discretion. 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.
Gregory M. Melvin has been the Trust's portfolio manager since January
1987. Mr. Melvin joined Federated Investors in 1980 and has been a Vice
President of the Trust's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
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 subsidiary of Federated Investors.
ADMINISTRATIVE ARRANGEMENTS
The distributor may select brokers and dealers to provide distribution and
administrative services. The distributor may also select administrators
(including depository institutions such as commercial banks and savings and loan
associations) to provide administrative services. These administrative services
include, but are not limited to, distributing prospectuses and other
information, providing accounting assistance and communicating or facilitating
purchases and redemptions of Trust shares.
Brokers, dealers, and administrators will also receive fees from the distributor
based upon shares owned by their clients or customers. The fees are calculated
as a percentage of the average aggregate net asset value of shareholder accounts
during the period for which the brokers, dealers, and administrators provide
services. Any fees paid for these services by the distributor will be reimbursed
by the Adviser.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Trust with the administrative personnel and
services necessary to operate the Trust. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc., provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Trust.
TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Trust, and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Ernst & Young,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms 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
Trustees.
NET ASSET VALUE
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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
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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: State Street Bank and Trust Company, Boston,
Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Growth 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; and ABA
Number 011000028. Payment by Federal Reserve wire cannot be made on Columbus
Day, Veterans' Day, or Martin Luther King Day.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable to
Federated Growth Trust to the Trust's transfer agent, State Street Bank and
Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602. Orders by mail
are considered received after payment by check is converted by State Street Bank
into federal funds. This is normally the next business day after State Street
Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000 plus any non-affiliated
bank or broker's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a
non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Trust shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust. Investors who purchase
Trust shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.
The net asset value is determined at the close of business of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Presidents' 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.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Trust shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Trust shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
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, including prototype retirement plans,
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.
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.
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.
WRITTEN REQUESTS
Trust shares may also be redeemed by sending a written request to the Trust.
Call the Trust for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his name, the Trust name,
his account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Trust, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan 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.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check, the proceeds from the redemption of those
shares are not available, and the shares may not be exchanged, until the Trust
or its agents are reasonably certain that the purchase check has cleared, which
could take up to 10 calendar days.
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.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
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 Trust 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.
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 shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, 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, including capital gains distributions,
received. This applies whether dividends are received in cash or as additional
shares. No federal income tax is due on any dividends earned in an IRA or
qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Trust advertises its total return and yield.
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 gain
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 net asset value per share of the Trust on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Trust and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The Trust is sold without any sales load or other similar non-recurring charges.
From time to time, the Trust may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
FEDERATED GROWTH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--79.4%
- ---------------------------------------------------------------------------------
AUTOMOTIVE PARTS--4.4%
------------------------------------------------------------------
900,000 Allen Group, Inc. $ 20,250,000
------------------------------------------------------------------ ------------
BANKING & FINANCE--6.2%
------------------------------------------------------------------
500,000 MBNA Corp. 17,062,500
------------------------------------------------------------------
250,000 NationsBank Corp. 11,656,250
------------------------------------------------------------------ ------------
Total 28,718,750
------------------------------------------------------------------ ------------
</TABLE>
<TABLE>
<C> <S> <C>
BASIC INDUSTRY--5.5%
------------------------------------------------------------------
150,000 Cleveland-Cliffs, Inc. 5,400,000
------------------------------------------------------------------
310,000 Harsco Corp. 13,020,000
------------------------------------------------------------------
240,000 Medusa Corp. 6,600,000
------------------------------------------------------------------ ------------
Total 25,020,000
------------------------------------------------------------------ ------------
CAPITAL GOODS--17.3%
------------------------------------------------------------------
545,000 Alliant Techsystems, Inc.** 15,873,125
------------------------------------------------------------------
222,100 Dover Corp. 12,770,750
------------------------------------------------------------------
475,000 Greenfield Industries, Inc. 7,837,500
------------------------------------------------------------------
670,000 Kenetech Corp.** 10,468,750
------------------------------------------------------------------
628,200 MagneTek, Inc.** 9,501,525
------------------------------------------------------------------
200,000 Stewart & Stevenson Services, Inc. 9,050,000
------------------------------------------------------------------
675,000 Valence Technology, Inc.** 14,343,750
------------------------------------------------------------------ ------------
Total 79,845,400
------------------------------------------------------------------ ------------
CONSUMER GOODS--RETAIL--7.6%
------------------------------------------------------------------
500,000 Blockbuster Entertainment Corp. 14,187,500
------------------------------------------------------------------
1,200,000 Service Merchandise, Inc.** 12,000,000
------------------------------------------------------------------
600,000 Showbiz Pizza Time, Inc.** 8,700,000
------------------------------------------------------------------ ------------
Total 34,887,500
------------------------------------------------------------------ ------------
</TABLE>
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------
CONSUMER PRODUCTS--15.2%
------------------------------------------------------------------
1,200,000 ADT, Limited** $ 10,800,000
------------------------------------------------------------------
300,000 Dial Corp. 11,512,500
------------------------------------------------------------------
1,405,000 Dr. Pepper/7-Up Holding Co.** 29,329,375
------------------------------------------------------------------
40,000 Exide Electronics Group 740,000
------------------------------------------------------------------
450,000 Genlyte Group, Inc.** 1,687,500
------------------------------------------------------------------
150,000 Nike, Inc. 7,256,250
------------------------------------------------------------------
100,000 Sensormatic Electronics Corp. 4,650,000
------------------------------------------------------------------
200,000 Starter Corp.** 4,050,000
------------------------------------------------------------------ ------------
Total 70,025,625
------------------------------------------------------------------ ------------
ENERGY--2.2%
------------------------------------------------------------------
400,000 Valero Energy Corp. 10,050,000
------------------------------------------------------------------ ------------
HEALTHCARE--11.0%
------------------------------------------------------------------
350,000 Genentech, Inc.** 16,143,750
------------------------------------------------------------------
460,000 Genetics Institute, Inc.** 19,550,000
------------------------------------------------------------------
350,000 National Health Laboratories, Inc. 4,768,750
------------------------------------------------------------------
250,000 Spacelabs Medical, Inc.** 5,937,500
------------------------------------------------------------------
93,000 U.S. Healthcare, Inc. 4,312,875
------------------------------------------------------------------ ------------
Total 50,712,875
------------------------------------------------------------------ ------------
INSURANCE--1.9%
------------------------------------------------------------------
250,000 Travelers Corp. 8,812,500
------------------------------------------------------------------ ------------
TRANSPORTATION--5.5%
------------------------------------------------------------------
305,000 American President Companies, Ltd. 16,927,500
------------------------------------------------------------------
615,000 Greyhound Lines, Inc.** 8,533,125
------------------------------------------------------------------ ------------
Total 25,460,625
------------------------------------------------------------------ ------------
WASTE DISPOSAL--2.6%
------------------------------------------------------------------
3,025,000 Chambers Development, Inc.** 12,100,000
------------------------------------------------------------------ ------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $293,095,490) 365,883,275
------------------------------------------------------------------ ------------
</TABLE>
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
SHARES VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
CONVERTIBLE SECURITIES--15.1%
- ---------------------------------------------------------------------------------
CONSUMER PRODUCTS--6.7%
------------------------------------------------------------------
$45,000,000 Coleman Worldwide Corp. LYON, 5/27/2013 $12,375,000
------------------------------------------------------------------
3,100,000 Mattel, Inc., Conv. Deb., 8.00%, 3/15/2001 5,642,000
------------------------------------------------------------------
300,000 SunAmerica, Inc., Conv. Pfd., $2.68, Series D 12,750,000
------------------------------------------------------------------ ------------
Total 30,767,000
------------------------------------------------------------------ ------------
</TABLE>
<TABLE>
<C> <S> <C>
HEALTHCARE--6.0%
------------------------------------------------------------------
45,000,000 Roche Holdings, Inc., 4.75% LYON, 9/23/2008 23,568,750
------------------------------------------------------------------
19,467 Schering-Plough Corp., Warrant Units, 12/2/96** 3,523,527
------------------------------------------------------------------
50,000 Schering-Plough Corp., Warrants, 12/2/96** 775,000
------------------------------------------------------------------ ------------
Total 27,867,277
------------------------------------------------------------------ ------------
TRANSPORTATION--2.4%
------------------------------------------------------------------
8,575,000 Greyhound Lines, Inc., Conv. Sub. Deb., 8.50%, 3/31/2007 11,233,250
------------------------------------------------------------------ ------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST, $61,667,809) 69,867,527
------------------------------------------------------------------ ------------
REPURCHASE AGREEMENT--3.2%
- ---------------------------------------------------------------------------------
14,675,000 J.P. Morgan Securities, Inc., 2.99%, dated 10/29/93, due 11/1/93
(at amortized cost) (Note 1B)* 14,675,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $369,438,299) $450,425,802+
------------------------------------------------------------------ ------------
</TABLE>
LYON--Liquid Yield Option Note.
+ The cost for federal tax purposes amounts to $369,438,299. The net unrealized
appreciation of investments on a federal tax basis amounts to $80,987,503,
which is comprised of $103,478,932 appreciation and $22,491,429 depreciation
at October 31, 1993.
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement was through participation in a joint
account with other Federated funds.
** Non-income producing.
Note: The categories of investments are shown as a percentage of net assets
($460,811,393) at October 31, 1993.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments at value (Notes 1A and 1B) (identified and tax cost, $369,438,299) $450,425,802
- --------------------------------------------------------------------------------
Cash 1,252
- --------------------------------------------------------------------------------
Receivable for investments sold 12,389,189
- --------------------------------------------------------------------------------
Receivable for Trust shares sold 445,155
- --------------------------------------------------------------------------------
Dividends and interest receivable 382,601
- -------------------------------------------------------------------------------- ------------
Total assets 463,643,999
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for Trust shares repurchased $1,936,439
- -------------------------------------------------------------------
Payable for investments purchased 800,000
- -------------------------------------------------------------------
Accrued expenses 96,167
- ------------------------------------------------------------------- ----------
Total liabilities 2,832,606
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 19,267,476 shares of beneficial interest outstanding $460,811,393
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $370,289,138
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 80,987,503
- --------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 9,314,643
- --------------------------------------------------------------------------------
Undistributed net investment income 220,109
- -------------------------------------------------------------------------------- ------------
Total $460,811,393
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($460,811,393 / 19,267,476 shares of beneficial interest outstanding) $23.92
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
INCOME (Note 1C)--
- ---------------------------------------------------------------------------------
Dividend income $ 4,653,615
- ---------------------------------------------------------------------------------
Interest income 3,495,582
- --------------------------------------------------------------------------------- -----------
Total income 8,149,197
- ---------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------
Investment advisory fee (Note 3) $3,288,904
- --------------------------------------------------------------------
Trustees' fees 13,837
- --------------------------------------------------------------------
Administrative personnel and services (Note 3) 597,926
- --------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 170,920
- --------------------------------------------------------------------
Trust share registration costs 59,900
- --------------------------------------------------------------------
Auditing fees 16,129
- --------------------------------------------------------------------
Legal fees 15,906
- --------------------------------------------------------------------
Printing and postage 13,622
- --------------------------------------------------------------------
Insurance premiums 12,474
- --------------------------------------------------------------------
Taxes 11,913
- --------------------------------------------------------------------
Miscellaneous 4,124
- -------------------------------------------------------------------- ----------
Total expenses 4,205,655
- --------------------------------------------------------------------------------- -----------
Net investment income 3,943,542
- --------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investment transactions (identified cost basis) 11,467,664
- ---------------------------------------------------------------------------------
Change in unrealized appreciation of investments 44,574,581
- --------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 56,042,245
- --------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $59,985,787
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1993 1992
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 3,943,542 $ 5,338,408
- -------------------------------------------------------------
Net realized gain on investments ($9,253,729 and $3,178,328
net gain, respectively, as computed for federal tax
purposes) 11,467,664 964,392
- -------------------------------------------------------------
Change in unrealized appreciation (depreciation) of
investments 44,574,581 (35,347)
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from operations 59,985,787 6,267,453
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)--
- -------------------------------------------------------------
Dividends to shareholders from net investment income (4,405,675) (5,106,830)
- -------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (3,134,631) (11,197,122)
- ------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (7,540,306) (16,303,952)
- ------------------------------------------------------------- ------------- -------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 2)--
- -------------------------------------------------------------
Proceeds from sale of shares 219,086,722 280,410,282
- -------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in Trust shares 3,344,081 7,368,633
- -------------------------------------------------------------
Cost of shares redeemed (205,719,474) (161,648,708)
- ------------------------------------------------------------- ------------- -------------
Change in net assets from Trust share transactions 16,711,329 126,130,207
- ------------------------------------------------------------- ------------- -------------
Change in net assets 69,156,810 116,093,708
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 391,654,583 275,560,875
- ------------------------------------------------------------- ------------- -------------
End of period (including undistributed net investment income
of $220,109 and $682,242, respectively) $ 460,811,393 $ 391,654,583
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Equity portfolio securities listed on the New York Stock Exchange
or any other national securities exchange are valued at the last sale price or, if there
has been no sale on that day, at the mean between bid and asked prices. Unlisted equity
securities are valued at the latest bid prices. Bonds and other fixed income portfolio
securities (which may trade on a national securities exchange and/or over-the-counter)
are valued at the last sale price on a national securities exchange on that day, if
available; otherwise, they shall be valued on the basis of prices provided by an
independent pricing service, when such prices are believed to reflect the fair market
value of such securities. Short-term obligations shall ordinarily be valued at the mean
between bid and asked prices as furnished by an independent pricing service. However,
short-term obligations with maturities of 60 days or less are valued at amortized cost,
which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry System or
to have segregated within the custodian bank's vault all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's underlying securities to ensure the existence of a proper level of
collateral.
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 guidelines established by 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.
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Interest income includes interest and discount earned (net of
premium) on short-term obligations and interest earned on all other debt securities,
including original issue discount as required by the Internal Revenue Code, as amended.
Dividends to shareholders and capital gain distributions, if any, are recorded on the
ex-dividend date.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the Internal
Revenue Code, as amended, available to regulated investment companies and distribute to
shareholders each year all of its taxable income, including any net realized gain on
investments. Accordingly, no provision for federal tax is necessary.
</TABLE>
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in when-issued or
delayed transactions. To the extent the Trust engages in such transactions, it will do so
for the purpose of acquiring portfolio securities consistent with its investment
objective and policies, and not for the purpose of investment leverage. The Trust will
record a when-issued security and the related liability on the trade date. Until the
securities are received and paid for, the Trust will maintain 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.
F. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(2) 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 Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1993 1992
- ------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Shares outstanding, beginning of period 18,512,764 12,769,445
- ------------------------------------------------------------------
Shares sold 9,655,835 12,837,946
- ------------------------------------------------------------------
Shares issued to shareholders electing to receive payment
of dividends and distributions in Trust shares 148,924 362,982
- ------------------------------------------------------------------
Shares redeemed (9,050,047) (7,457,609)
- ------------------------------------------------------------------ ---------- ----------
Shares outstanding, end of year 19,267,476 18,512,764
- ------------------------------------------------------------------ ---------- ----------
</TABLE>
(3) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, the Trust's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to .75 of 1% of the
Trust's average daily net assets. For the fiscal year ended October 31, 1993,
the advisory fee amounted to $3,288,904. Administrative personnel and services
were provided at approximate cost by Federated Administrative Services, Inc.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above corporations.
(4) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
year ended October 31, 1993, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES-- $247,413,363
- ------------------------------------------------------------------------------ ------------
SALES-- $237,644,647
- ------------------------------------------------------------------------------ ------------
</TABLE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED GROWTH TRUST:
We have audited the accompanying statement of assets and liabilities including
the portfolio of investments, of Federated Growth Trust, as of October 31, 1993,
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 ten
years in the period then ended. 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, 1993, 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 Growth Trust at October 31, 1993, 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 financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
December 10, 1993
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Growth 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 P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ----------------------------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ----------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ----------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ----------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED GROWTH TRUST
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
December 31, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
8112804A (12/93)
FEDERATED GROWTH TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Federated Growth Trust (the "Trust") dated December 31, 1993. This Statement is
not a prospectus itself. To receive a copy of the prospectus, write or call the
Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1993
FEDERATED SECURITIES CORP.
(LOGO)
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Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE TRUST 1
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INVESTMENT OBJECTIVE AND POLICIES 1
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Types of Investments 1
Temporary Investments 1
When-Issued and Delayed
Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Portfolio Turnover 3
Investment Limitations 3
TRUST MANAGEMENT 5
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Officers and Trustees 5
The Funds 7
Trust Ownership 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 8
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Adviser to the Trust 8
Advisory Fees 8
Other Related Services 8
ADMINISTRATIVE ARRANGEMENTS 8
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ADMINISTRATIVE SERVICES 8
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BROKERAGE TRANSACTIONS 9
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PURCHASING SHARES 9
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Conversion to Federal Funds 9
DETERMINING NET ASSET VALUE 9
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Determining Market Value of Securities 9
REDEEMING SHARES 9
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Redemption in Kind 9
EXCHANGING SECURITIES FOR TRUST SHARES 10
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Tax Consequences 10
TAX STATUS 10
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The Trust's Tax Status 10
Shareholders' Tax Status 10
TOTAL RETURN 10
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YIELD 11
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PERFORMANCE COMPARISONS 11
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GENERAL INFORMATION ABOUT THE TRUST
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Federated Growth Trust (the "Trust") was established as a Massachusetts business
trust under a Declaration of Trust dated April 17, 1984.
INVESTMENT OBJECTIVE AND POLICIES
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The Trust's investment objective is appreciation of capital. The Trust pursues
this investment objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends, or
of companies where significant fundamental changes are taking place. The
investment objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Trust may invest in common stocks, preferred stocks, corporate bonds,
debentures, notes, warrants, and put options on stocks.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on
revenues, sales, or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered
as a unit).
RESTRICTED SECURITIES
The Trust expects that any restricted securities would be acquired either
from institutional investors who originally acquired the securities in
private placements or directly from the issuers of the securities in
private placements. Restricted securities and securities that are not
readily marketable may sell at a discount from the price they would bring
if freely marketable.
PUT AND CALL OPTIONS
The Trust may purchase listed put options on stocks or write covered call
options to protect against price movements in particular securities in
its portfolio and generate income. A put option gives the Trust, in
return for a premium, the right to sell the underlying security to the
writer (seller) at a specified price during the term of the option. As
writer of a call option, the Trust has the obligation upon exercise of
the option during the option period to deliver the underlying security
upon payment of the exercise price.
The Trust may only: (1) buy put options which are listed on a recognized options
exchange and which are on securities held in its portfolio; and (2) sell listed
call options either on securities held in its portfolio or on securities which
it has the right to obtain without payment of further consideration (or has
segregated cash in the amount of any such additional consideration). The Trust
will maintain its positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or expire. An
option position may be closed out only on an exchange which provides a secondary
market for an option of the same series. Although the investment adviser will
consider liquidity before entering into option transactions, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. The Trust reserves the right to
hedge the portfolio by buying financial futures and put options on stock index
futures and financial futures. However, the Trust will not engage in these
transactions until (1) an amendment to its Registration Statement is filed with
the Securities and Exchange Commission and becomes effective; and (2) ten days
after a supplement to the prospectus disclosing this change in policy has been
mailed to the shareholders.
TEMPORARY INVESTMENTS
The Trust may also invest in temporary investments from time to time for
defensive purposes.
MONEY MARKET INSTRUMENTS
The Trust may invest in the following money market instruments:
- instruments of domestic and foreign banks and savings and loans if they
have capital, surplus, and undivided profits of over $100,000,000, or
if the principal amount of the instrument is insured in full by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC"), or the Savings Association Insurance
Fund, which is administered by the FDIC; and
- prime commercial paper (rated A-1 by Standard and Poor's Corporation,
Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch Investors
Service, Inc.).
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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:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Federal Farm Credit Banks;
- Federal Home Loan Banks;
- Federal National Mortgage Association;
- Student Loan Marketing Association; and
- Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The Trust engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Trust's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Trust. 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.
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 at the trade date. These securities
are marked to market daily and are maintained until the transaction is settled.
The Trust may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Trust lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Trust. During the time
portfolio securities are on loan, the borrower pays the Trust any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Trust or the borrower. The Trust may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Trust does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REPURCHASE AGREEMENTS
The Trust or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. 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 investment
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees (the "Trustees").
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Trust
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Trust will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Trust to
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avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Trust will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Trust, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
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, 1993,
and 1992, the portfolio turnover rates were 57% and 46%, respectively.
INVESTMENT LIMITATIONS
CONCENTRATION OF INVESTMENTS
The Trust will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry.
However, the Trust may at times invest 25% or more of the value of its
total assets in cash or cash items (not including certificates of
deposit), securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or repurchase agreements secured by such
instruments.
INVESTING IN COMMODITIES
The Trust will not purchase or sell commodities. The Trust reserves the
right to hedge the portfolio by purchasing financial futures and put
options on stock index futures and on financial futures.
INVESTING IN REAL ESTATE
The Trust will not purchase or sell real estate, although it may invest
in the securities of companies whose business involves the purchase or
sale of real estate, or in securities which are secured by real estate or
interests in real estate.
BUYING ON MARGIN
The Trust will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of transactions and
may make margin payments in connection with buying financial futures, put
options on stock index futures, and put options on financial futures.
SELLING SHORT
The Trust will not sell securities short unless:
- during the time the short position is open, it owns an equal amount of
the securities sold or securities convertible into or exchangeable,
without payment of additional consideration, for securities of the same
issuer as, and equal in amount to, the securities sold short; and
- not more than 10% of the Trust's net assets (taken at current value) is
held as collateral for such sales at any one time.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Trust will not issue senior securities, except as permitted by its
investment objective and policies, and except that the Trust may borrow
money and engage in reverse repurchase agreements only in amounts up to
one-third of the value of its net assets, including the amounts borrowed.
The Trust will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure, or to facilitate management of the
portfolio by enabling the Trust to meet redemption requests where the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Trust will not purchase any securities while any
such borrowings (including reverse repurchase agreements) are
outstanding.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets except portfolio securities.
This shall not prevent the purchase or holding of corporate or government
bonds, debentures, notes, certificates of indebtedness, or other debt
securities of an issuer, repurchase agreements, or other transactions
which are permitted by the Trust's investment objective and policies or
Declaration of Trust.
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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 MINERALS
The Trust will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such programs.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust will not purchase securities of other investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 10% of the value of
its total assets would be invested in such securities, or except as part
of a merger, consolidation, or other acquisition. (It should be noted
that investment companies incur certain expenses such as management fees
and, therefore, any investment by the Trust in shares of another
investment company would be subject to such duplicate expenses.)
INVESTING IN ILLIQUID SECURITIES
The Trust will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of the value of its total assets
in securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Trust will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate any assets, except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the borrowing.
PURCHASING PUT OPTIONS
The Trust will not purchase put options on securities unless the
securities are held in the Trust's portfolio and not more than 5% of the
value of the Trust's total assets would be invested in premiums on open
put options.
WRITING COVERED CALL OPTIONS
The Trust will not write call options on securities unless the securities
are held in the Trust's portfolio or unless the Trust is entitled to them
in deliverable form without further payment or after segregating cash in
the amount of any further payment.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase the securities of any issuer (other than the
U.S. government, its agencies, or instrumentalities, or instruments
secured by securities of such issuers, such as repurchase agreements) if,
as a result, more than 5% of the value of its total assets would be
invested in the securities of such issuer or acquire more than 10% of any
class of voting securities of any issuer. For these purposes, the Trust
takes all common stock and all preferred stock of an issuer, each as a
single class, regardless of priorities, series, designations, or other
differences.
ACQUIRING SECURITIES
The Trust will not purchase securities of a company for the purpose of
exercising control or management. However, the Trust may invest in up to
10% of the voting securities of any one issuer and may exercise its
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voting powers consistent with the best interests of the Trust. In
addition, the Trust, other companies advised by the Trust's investment
adviser, and other affiliated companies may together buy and hold
substantial amounts of voting stock of a company and may vote together in
regard to such company's affairs. In some such cases, the Trust and its
affiliates might collectively be considered to be in control of such
company. In some cases, Trustees and other persons associated with the
Trust and its affiliates might possibly become directors of companies in
which the Trust holds stock.
INVESTING IN WARRANTS
The Trust will not invest more than 5% of the value of its total assets
in warrants. No more than 2% of this 5% may be warrants which are not
listed on the New York or American Stock Exchange. Warrants acquired in
units or attached to securities may be deemed to be without value for
purposes of this policy.
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, sell securities short, or invest in
reverse repurchase agreements 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.
In addition to the limitations set forth above, the Trust will not purchase or
sell real estate limited partnership interests or oil, gas, or other mineral
leases, except that the Trust may purchase or sell securities of companies which
invest in or hold the foregoing.
TRUST MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Administrative
Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
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John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Trustee Trustee, Federated Advisers, Federated Management, and
Tower Federated Research; Director, AEtna Life and Casualty
Pittsburgh, PA Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President of the
Trust.
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</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate ventures
Associates, Inc., in Southwest Florida; Director, Trustee, or Managing
Realtors General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Property Management, Inc.
Naples, FL
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William J. Copeland Trustee Director and Member of the Executive Committee, Michael
One PNC Plaza Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC
Pittsburgh, PA Bank, N.A, and PNC Bank Corp; and Director, Ryan Homes,
Inc.
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James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the
Concord, MA Funds; formerly, Director, Blue Cross of Massachusetts,
Inc.
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</TABLE>
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<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
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Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
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Edward L. Flaherty, Jr.+ Trustee Attorney-at-Law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc., and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
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Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State Street
Bank & Trust Company and State Street Boston Corporation
and Trustee, Lahey Clinic Foundation, Inc.
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Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the
Funds; formerly, Vice Chairman, Horizon Financial, F.A.
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Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee; Carnegie Endowment for International Peace, and
Learning RAND Corporation, Online Computer Library Center, Inc., and
University of Pittsburgh U.S. Space Foundation; Chairman Czecho Slovak Management
Pittsburgh, PA Center; Director, Trustee, or Managing General Partner of
the Funds; President Emeritus, University of Pittsburgh;
formerly, Chairman, National Advisory Council for
Environmental
Policy & Technology.
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Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee,
4905 Bayard Street or Managing General Partner of the Funds.
Pittsburgh, PA
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J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and Federated
Tower Research; President and Director, Federated Administrative
Pittsburgh, PA Services, Inc.; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of
the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
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Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Chairman and Director, Federated Securities Corp.;
Tower President or Vice President of the Funds; Director or
Pittsburgh, PA Trustee of some of the Funds.
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Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated
Federated Investors and Treasurer Investors; Vice President and Treasurer, Federated
Tower Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Chairman, Treasurer, and
Director, Federated Administrative Services, Inc.; Trustee
or Director of some of the Funds; Vice President and
Treasurer of the Funds.
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Glen R. Johnson President Trustee, Federated Investors; President and/or Trustee of
Federated Investors some of the Funds; staff member, Federated Securities Corp.
Tower and Federated Administrative Services, Inc.
Pittsburgh, PA
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</TABLE>
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<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
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John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors and Secretary Federated Investors; Vice President, Secretary, and
Tower Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Executive Vice President, Secretary,
and Director, Federated Administrative Services, Inc.;
Director and Executive Vice President, Federated Securities
Corp.; Vice President and Secretary of the Funds.
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John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive
Federated Investors Vice President, Federated Securities Corp.; President and
Tower Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
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</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series,
Inc; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; FT
Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; 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; Mark Twain Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust; New
York Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust;
Signet Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares. As of
November 29, 1993, no shareholder of record owned 5% or more of the outstanding
shares of the Trust.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be 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
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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. John F. Donahue, Chairman and Trustee
of Federated Management, is Chairman and Trustee of Federated Investors and
Chairman and Trustee of the Trust. John A. Staley, IV, President and Trustee of
Federated Management, is Vice President and Trustee of Federated Investors,
Executive Vice President of Federated Securities Corp.; and Vice President of
the Trust. J. Christopher Donahue, Trustee of Federated Management, is President
and Trustee of Federated Investors; President and Director of Federated
Administrative Services, Inc.; and Vice President of the Trust. John W.
McGonigle, Vice President, Secretary, and Trustee of Federated Management, is
Trustee, Vice President, Secretary, and General Counsel of Federated Investors;
Director, Executive Vice President, and Secretary of Federated Administrative
Services, Inc.; Executive Vice President and Director of Federated Securities
Corp.; and Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
October 31, 1993, 1992, and 1991, the Trust's Adviser earned $3,288,904,
$2,594,945, and $1,579,396, respectively, which was reduced by $0, $0, and
$204,714, respectively.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitation
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 on the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Trust for its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee. This arrangement is not part of the advisory contract and
may be amended or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE ARRANGEMENTS
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For the fiscal year ended October 31, 1993, the distributor paid $202,675 to
brokers and dealers for distribution and administrative services and to
administrators for administrative services. The administrative services include,
but are not limited to, providing office space, equipment, telephone facilities,
and various personnel, including clerical, supervisory, and computer, as is
necessary or beneficial to establish and maintain shareholders' accounts and
records; processing purchase and redemption transactions; processing automatic
investments of client account cash balances; answering routine client inquiries
regarding the Trust; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Trust may
reasonably request.
ADMINISTRATIVE SERVICES
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Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust at approximate cost.
For the fiscal years ended October 31, 1993, 1992, and 1991, the Trust incurred
costs for administrative services of $597,926, $515,312, and $442,276,
respectively. John A. Staley, IV, an officer of the Trust, and Dr. Henry J.
Gailliot, an officer of Federated Management, the Adviser to the Trust, each
hold approximately 15% and 20%, respectively, of the outstanding common stock
and serve as directors of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative Services, Inc.
For the fiscal years ended October 31, 1993, 1992, and 1991, Federated
Administrative Services, Inc., paid $165,431, $189,741, and $187,677,
respectively, for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
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The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
Adviser and may include:
- - 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.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising other accounts. To the extent that
receipt of these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
For the fiscal years ended October 31, 1993, 1992, and 1991, the Trust paid
total brokerage commissions of $336,988, $604,078, and $311,540, respectively.
PURCHASING SHARES
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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
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Net asset value generally changes each day. The days on which 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, other than options, are
determined as follows:
- - according to the last sale price on a national securities exchange, if
available;
- - 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;
- - for unlisted equity securities, the latest bid prices; or
- - for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service or at fair value as determined
in good faith by the Board of Trustees.
Options are valued at the market values established by the exchanges at the
close of option trading unless the Trustees determine in good faith that another
method of valuing option positions is necessary to appraise their fair value.
REDEEMING SHARES
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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
Although the Trust intends to redeem shares in cash, it reserves the right,
under certain circumstances, to pay the redemption price in whole or in part by
a distribution of securities from the Trust's portfolio.
- --------------------------------------------------------------------------------
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable. To the extent available, such
securities will be readily marketable.
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 Trust's net
asset value during any 90-day period.
EXCHANGING SECURITIES FOR TRUST SHARES
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Investors may exchange 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, as amended,
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:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - 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. No portion of any income dividend paid by
the Trust is eligible for the dividends received deduction available to
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 return for the one-year and five-year periods
ended October 31, 1993, and for the period from August 23, 1984 (effective date
of the Trust's registration statement), to October 31, 1993, were 15.06%,
13.80%, and 16.48%, respectively.
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, 1993, was 0.63%.
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 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 twelve-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
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The Trust's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in Trust expenses; and
- - 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.
From time to time, the Trust may advertise its performance compared to similar
funds or portfolios using certain indices, reporting services, and financial
publications. These may include the following:
- - 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 specified period of time.
From time to time, the Trust will quote its Lipper ranking in the "growth
funds" category in advertising and sales literature.
- - DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index representing share
prices of major industrial corporations, public utilities, and transportation
companies. Produced by the Dow Jones & Company, it is cited as a principal
indicator of market conditions.
- - STANDARD & POOR'S LOW-PRICED INDEX compares a group of approximately twenty
actively traded stocks priced under $25 for one month periods and
year-to-date.
- - 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 the Standard & Poor's figures.
- - STANDARD & POOR'S 500 (S&P 500) is an unmanaged index of common stocks in
industry, transportation, finance, and public utilities denoting general
market performance, as monitored by Standard & Poor's Corporation.
- - LIPPER GROWTH FUND AVERAGE is an average of the total returns for 251 growth
funds tracked by Lipper Analytical Services, Inc., an independent mutual fund
rating service.
- - LIPPER GROWTH FUND INDEX is an average of the net asset-valuated total returns
for the top 30 growth funds tracked by Lipper Analytical Services, Inc., an
independent mutual fund rating service.
- - 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 use such indices or reporting services in addition to the Trust's
prospectus to obtain a more complete view of the Trust's performance before
investing. Of course, when comparing Trust performance to any index, factors
such as composition of the index and prevailing market conditions should be
considered in assessing the significance of such comparisons.
When comparing funds using reporting services, or total return and yield,
investors should take into consideration any relevant differences in funds such
as permitted portfolio compositions and methods used to value portfolio
securities and compute offering price.
- --------------------------------------------------------------------------------
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.
8112804B (12/93)
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION & ANALYSIS:
---------------------------------------------------------------------------
Federated Growth Trust (the "Trust") was established in 1984 to
provide an investor the opportunity for investment in a diversified
portfolio of stocks which have prospects for substantial capital
appreciation. The stock selection process for the Trust utilizes investment
disciplines which the Federated organization has used successfully for
several years. The investment emphasis is placed on stocks that have
favorable price and earnings momentum characteristics. The Trust may also
invest in companies that are candidates for corporate restructuring or
acquisition. Managed to participate fully in up markets, the Trust offers
the potential for significant capital appreciation over time.
Over the 12 months ended October 31, 1993, U.S. stocks have registered
excellent results. Driven by the recovery in corporate profits, falling
interest rates, and large flows of money into mutual funds, the S&P 500
Index recorded a total return of 14.92% for the year ended October 31,
1993. Small capitalization stocks were the standout, however, as the
Russell 2000 Index had a total return of 32.41% for the same period.
Perhaps the most important factor was the decline in interest rates. The
yield on the 30-year U.S. Treasury bond dropped from 6.7% to 5.7% between
May and September.
In addition to the relative value that growth stocks currently
possess, the current macroeconomic conditions also favor investments in
growth equities. As the workforce grows and domestic businesses continue to
increase productivity, the circumstances exist which should provide for
continued moderate economic growth and low relative interest rates through
the end of the decade. The recent changes in the federal tax laws also
increase the relative attractiveness of growth stocks, which produce more
of their total returns in the form of capital gains than do other stocks.
We believe these circumstances should produce the appropriate environment
to provide continued reasonable returns to growth equities in the 1990s.
The Trust's value overlay results in a concentration on medium to high
capitalization companies using the best available investment vehicles.
These may include convertible and/or putable bonds, Liquid Yield Option
Notes, and Preferred Equity Redemption Certificates, which tend to reduce
the inherent volatility of the Trust.
The Trust's disciplined stock selection approach, with its
concentration on reasonably priced stocks exhibiting positive relative
earnings and price momentum, is designed to allow the Trust to take
advantage of market opportunities. We believe the Trust is well-suited in
the current environment to pursue a goal of strong performance not only in
up markets, but over market cycles as well.
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 PURCHASE
IN FEDERATED GROWTH TRUST, STANDARD & POORS 500 INDEX+,
AND LIPPER GROWTH FUND INDEX+.
"Graphic representation "A" omitted. See Appendix."
Past performance is not indicative of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
This annual report incorporates by reference and accompanies the prospectus
dated December 31, 1993.
* Reflects operations of Federated Growth Trust from the start of business on
8/23/84, through 10/31/93.
** The Trust's performance assumes the reinvestment of all dividends and
distributions. The Standard & Poors 500 Index and the Lipper Growth Fund
Index are adjusted to reflect reinvestment of dividends on securities in
the indices.
+ The Standard & Poors 500 Index and the Lipper Growth Fund Index are not
adjusted to reflect sales loads, expenses, or other fees that the SEC
requires to be reflected in the Trust's performance.
FEDERATED SECURITIES CORP.
(LOGO)
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Distributor
3110810-ARS (12/93)
APPENDIX
A. The graphic presentation here displayed consists of a
boxed legend in the bottom center indicating the components
of the corresponding line graph. Federated Growth Trust
(the "Trust") is represented by a broken line followed by
two periods. The Standard & Poors 500 Index is represented
by a broken line followed by one period. The Lipper Growth
Fund Index is represented by a series of broken lines. The
line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the
Trust and the Standard & Poors 500 Index, and the Lipper
Growth Fund Index. The "x" axis reflects the cost of the
investment. The "y" axis reflects computation periods from
the Trust's start of business, 8/23/84, through 10/31/93.
The right margin reflects the ending value of the
hypothetical investment in the Trust as compared to the
Standard & Poors 500 Index and the Lipper Growth Fund Index;
the ending values are $40,627, $38,407, and $35,684 ,
respectively. There is also a legend in the upper left
quadrant of the graphic presentation which indicates the
Average Annual Total Return for the period ended October 31,
1993; beginning with the since inception date of the Trust
(8/23/84), and the one-year and five-year periods
thereafter, the Average Annual Total Returns were 16.48%,
15.06%, and 13.80, respectively.
