1933 Act File No. 2-91090
1940 Act File No. 811-
4017
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 26 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X
Amendment No. 22 X
FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
4X on September 13, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of
Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
X filed the Notice required by that Rule on December 15,
1994; or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2),
need not file the Notice.
Copy to:
Charles H. Morin, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of Federated
Equity Funds (formerly, Federated Growth Trust), which is
comprised of three portfolios: (1) Federated Growth
Strategies Fund consisting of three classes of shares, (a)
Class A Shares, (b) Class B Shares, and (c) Class C Shares;
(2) Federated Small Cap Strategies Fund consisting of three
classes of shares, (a) Class A Shares, (b) Class B Shares,
and (c) Class C Shares; and (3) Federated Capital
Appreciation Fund consisting of three classes of shares, (a)
Class A Shares, (b) Class B Shares, and (c) Class C Shares
relates only to Federated Small Cap Strategies Fund and is
comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-3) Cover
Page.
Item 2. Synopsis (1-3) Summary of
Fund Expenses.
Item 3. Condensed Financial
Information (1) Financial
Highlights.
Item 4. General Description of
Registrant (1-3) Synopsis;
(1-3) Liberty Family of Funds;
(1,3) Federated LifeTrack
Program (Class A Shares and
Class C Shares); (1-3)
Investment Information; (1-3)
Investment Objective; (1-3)
Investment Policies; (1-3)
Investment Limitations; (1-3)
Performance Information;
(3a,3b,3c) Portfolio Turnover;
(3) Appendix.
Item 5. Management of the Fund (1-3)
Trust Information; (1-3)
Management of the Trust; (1-3)
Distribution of Shares; (1-3)
Administration of the Fund; (1-
3) Expenses of the Fund and
Class A Shares, Class B
Shares, and Class C Shares; (1-
3) Brokerage Transactions.
Item 6. Capital Stock and Other
Securities (1-2) Account
and Share Information; (1-3)
Shareholder Information; (1-3)
Voting Rights; (1-3)
Massachusetts Partnership Law;
(1-3) Tax Information; (1-3)
Federal Income Tax; (1-3)
Pennsylvania Corporate and
Personal Property Taxes.
Item 7. Purchase of Securities Being
Offered (1-3) Net Asset
Value; (1-3) Investing in the
Fund; (1-3) How to Purchase
Shares; (1-3) Investing in
Class A Shares; (1-3)
Investing in Class B Shares;
(1-3) Investing in Class C
Shares; (1-3) Special Purchase
Features; (1-3) Exchange
Privilege (1-3) Certificates
and Confirmations; (1-3)
Dividends; (1-3) Capital
Gains; (1-3) Accounts with Low
Balances.
Item 8. Redemption or Repurchase (1-3)
How to Redeem Shares; (1-3)
Special Redemption Features;
(1-3) Contingent Deferred
Sales Charge; (1-3)
Elimination of Contingent
Deferred Sales Charge.
Item 9. Pending Legal Proceedings
None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page (1-3) Cover
Page.
Item 11. Table of Contents (1-3)
Table of Contents.
Item 12. General Information and
History (1-3) General
Information About the Fund; (1-
3) About Federated Investors.
Item 13. Investment Objectives and
Policies (1-3) Investment
Objective and Policies.
Item 14. Management of the Fund (1-3)
Federated Equity Funds
Management.
Item 15. Control Persons and Principal
Holders of Securities (1-3)
Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-3) Investment
Advisory Services; (1-3))
Administrative Services; (1-3)
Transfer Agent and Dividend
Disbursing Agent; (1-3)
Distribution Plan and
Shareholder Services
Agreement.
Item 17. Brokerage Allocation (1-3)
Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-3) Purchasing
Shares; (1-3) Determining Net
Asset Value; (1-3) Redeeming
Shares; (1-3) Exchanging
Securities for Shares; (3)
Current Distributions.
Item 20. Tax Status (1-3) Tax
Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data (1-3) Total Return; (1-3)
Yield; (1-3) Performance
Comparisons; (2,3) Appendix.
Item 23. Financial Statements (1)
Included in Part B..
FEDERATED SMALL CAP STRATEGIES FUND
(A PORTFOLIO OF FEDERATED EQUITY FUNDS)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED PROSPECTUS
The shares of Federated Small Cap Strategies Fund (the
"Fund") represent
interests in a diversified portfolio of Federated Equity
Funds (the "Trust"), an
open-end management investment company (a mutual fund). The
investment objective
of the Fund is to provide capital appreciation. Any income
received from the
portfolio is entirely incidental. The Fund pursues its
investment objective by
investing primarily in a portfolio of common stocks of small
capitalization
companies.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and
know before you
invest in the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional
Information dated
September 13, 1995 with the Securities and Exchange
Commission. The information
contained in the Combined Statement of Additional
Information is incorporated by
reference into this prospectus. You may request a copy of
the Combined Statement
of Additional Information, which is in paper form only, or a
paper copy of this
prospectus, if you have received your prospectus
electronically, free of charge
by calling 1-800-235-4669. To obtain other information or to
make inquiries
about the Fund, contact your financial institution.
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 September 13, 1995
--------------------------------------------------------
TABLE OF CONTENTS
Summary of Fund
Expenses....................................................
...1
Synopsis....................................................
...................4
Liberty Family of
Funds.......................................................
.5
Investment
Information.................................................
........7
Investment
Objective...................................................
......7
Investment
Policies....................................................
......7
Investment
Limitations.................................................
.....13
Net Asset
Value.......................................................
........14
Investing in the
Fund........................................................
.15
How To Purchase
Shares......................................................
..16
Investing in Class A
Shares.................................................16
Investing in Class B
Shares.................................................18
Investing in Class C
Shares.................................................19
Special Purchase
Features...................................................2
0
Exchange
Privilege...................................................
.........21
How To Redeem
Shares......................................................
....23
Special Redemption
Features.................................................24
Contingent Deferred Sales
Charge............................................24
Elimination of Contingent Deferred
Sales
Charge......................................................
.......25
Account and Share
Information.................................................
26
Trust
Information.................................................
............27
Management of the
Trust.....................................................27
Distribution of
Shares......................................................
28
Administration of the
Fund..................................................30
Expenses of the Fund and Class A Shares,
Class B Shares, and Class C
Shares.......................................31
Brokerage
Transactions................................................
......31
Shareholder
Information.................................................
......32
Voting
Rights......................................................
.........32
Massachusetts Partnership
Law...............................................32
Tax
Information.................................................
..............33
Federal Income
Tax.........................................................
.33
Pennsylvania Corporate and Personal
Property
Taxes.......................................................
....33
Performance
Information.................................................
......34
-------------------------------------------------------
-----------------------------------
--------------------
SUMMARY OF FUND EXPENSES
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
CLASS A SHARES
SHAREHOLDER TRANSACTION
EXPENSES
<S>
<C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering
price).....................................
5.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering
price)..........................
None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or
redemption proceeds, as applicable)
(1)............................. 0.00%
Redemption Fee (as a percentage of amount redeemed, if
applicable)..............................................
None
Exchange Fee.................................
None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL CLASS A SHARES OPERATING
EXPENSES
(As a percentage of projected average net
assets)*
<S>
<C> <C>
Management Fee (after waiver)
(2)........................................ .0.00%
12b-1 Fee
(3).........................................................
.... 0.00%
Total Other Expenses (after expense
reimbursement)....................... .1.35%
Shareholder Services
Fee............................................. 0.25%
Total Class A Shares Operating Expenses
(4)................ 1.35%
</TABLE>
(1) Class A Shares purchased with the proceeds of a
redemption of shares of an
unaffiliated investment company purchased or redeemed
with a sales load and
not distribtued by Federated Securities Corp. may be
charged a contingent
deferred sales charge of 0.50 of 1.00% for redemptions
made within one full
year of purchase. See "Contingent Deferred Sales
Charge."
(2) The estimated management fee has been reduced to reflect
the anticipated
voluntary waiver of the management fee. The adviser can
terminate this
anticipated voluntary waiver at any time at its sole
discretion. The maximum
management fee is 0.75%.
(3) The Class A Shares have no present intention of paying
or accruing the 12b-1
fee during the fiscal year ending October 31, 1996. If
the Class A Shares
were paying or accruing the 12b-1 fee, the Class A
Shares would be able to
pay up to 0.25% of its average daily net assets for the
12b-1 fee. See
"Trust Information."
(4) The Total Class A Shares Operating Expenses are
estimated to be 5.40% absent
the anticipated voluntary waiver of the management fee
and the anticipated
voluntary reimbursement of certain other operating
expenses.
* Total Class A Shares Operating Expenses are estimated
based on average
expenses expected to be incurred during the period ending
October 31, 1995.
During the course of this period, expenses may be more or
less than the
average amount shown.
The purpose of this table is to assist an investor in
understanding the
various costs and expenses that a shareholder of Class A
Shares will bear,
either directly or indirectly. For more complete
descriptions of the various
costs and expenses, see "Investing in Class A Shares" and
"Trust Information."
Wire-transferred redemptions of less than $5,000 may be
subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
<S>
<C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5%
annual return and (2) redemption at the end of each time
period...................... $73 $95
You would pay the following expenses on the same investment,
assuming no
redemption...............
$68 $95
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS A SHARES'
FISCAL YEAR ENDING
OCTOBER 31, 1995.
-------------------------------------------------------
SUMMARY OF FUND EXPENSES
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
CLASS B SHARES
SHAREHOLDER TRANSACTION
EXPENSES
<S>
<C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering
price).....................................
None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering
price)..........................
None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or
redemption proceeds, as applicable)
(1)................................ 5.50%
Redemption Fee (as a percentage of amount redeemed, if
applicable).................. None
Exchange
Fee.........................................................
.................... None
ANNUAL CLASS B SHARES OPERATING
EXPENSES
(As a percentage of projected average
net assets)*
Management Fee (after
waiver)(2)..................................................
........0.00%
12b-1
Fee.........................................................
.................. 0.75%
Total Other Expenses (after expense
reimbursement)........................................1.35%
Shareholder Services
Fee.........................................................
0.25%
Total Class B Shares Operating Expenses
(3)(4)............................. 2.10%
</TABLE>
(1) The contingent deferred sales charge is 5.50% in the
first year declining to
1.00% in the sixth year and 0.00% thereafter. (See
"Contingent Deferred
Sales Charge.")
(2) The estimated management fee has been reduced to reflect
the anticipated
voluntary waiver of the management fee. The adviser can
terminate this
anticipated voluntary waiver at any time at its sole
discretion. The maximum
management fee is 0.75%.
(3) Class B Shares convert to Class A Shares (which pay
lower ongoing expenses)
approximately eight years after purchase.
(4) The Total Class B Shares Operating Expenses are
estimated to be 6.15% absent
the anticipated voluntary waiver of the management fee
and the anticipated
voluntary reimbursement of certain other operating
expenses.
* Total Class B Shares Operating Expenses are estimated
based on average
expenses expected to be incurred during the period ending
October 31, 1995.
During the course of this period, expenses may be more or
less than the
average amount shown.
The purpose of this table is to assist an investor in
understanding the
various costs and expenses that a shareholder of Class B
Shares will bear,
either directly or indirectly. For more complete
descriptions of the various
costs and expenses, see "Investing in Class B Shares" and
"Trust Information."
Wire-transferred redemptions of less than $5,000 may be
subject to additional
fees.
Long-term shareholders may pay more than the economic
equivalent of the
maximum front-end sales charges permitted under the rules of
the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
<S>
<C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5%
annual return and (2) redemption at the end of each time
period.... $78 $109
You would pay the following expenses on the same investment,
assuming no
redemption...............
$21 $ 66
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE CLASS B SHARES'
FISCAL YEAR ENDING
OCTOBER 31, 1995.
-------------------------------------------------------
SUMMARY OF FUND EXPENSES
FEDERATED SMALL CAP STRATEGIES FUND
<TABLE>
<CAPTION>
CLASS
C SHARES
SHAREHOLDER
TRANSACTION EXPENSES
<S>
<C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering
price).....................................
None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering
price)..........................
None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or
redemption proceeds, as applicable)
(1).................................................1.00%
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee.........................................................
.................... None
ANNUAL CLASS C SHARES
OPERATING EXPENSES
(As a percentage of projected
average net assets)*
Management Fee (after
waiver)(2)..................................................
........0.00%
12b-1
Fee.........................................................
................... 0.75%
Total Other Expenses (after expense
reimbursement)........................................1.35%
Shareholder Services
Fee.........................................................
0.25%
Total Class C Shares Operating Expenses
(3)................................ 2.10%
</TABLE>
(1) The contingent deferred sales charge assessed is 1.00%
of the lesser of the
original purchase price or the net asset value of Shares
redeemed within one
year of their purchase date. For a more complete
description, see
"Contingent Deferred Sales Charge."
(2) The estimated management fee has been reduced to reflect
the anticipated
voluntary waiver of the management fee. The adviser can
terminate this
anticipated voluntary waiver at any time at its sole
discretion. The maximum
management fee is 0.75%.
(3) The Total Class C Shares Operating Expenses are
estimated to be 6.15% absent
the anticipated voluntary waiver of the management fee
and the anticipated
voluntary reimbursement of certain other operating
expenses.
* Total Class C Shares Operating Expenses are estimated
based on average
expenses expected to be incurred during the period ending
October 31, 1995.
During the course of this period, expenses may be more or
less than the
average amount shown.
The purpose of this table is to assist an investor in
understanding the
various costs and expenses that a shareholder of Class C
Shares will bear,
either directly or indirectly. For more complete
descriptions of the various
costs and expenses, see "Investing in Class C Shares" and
"Trust Information."
Wire-transferred redemptions of less than $5,000 may be
subject to additional
fees.
Long-term shareholders may pay more than the economic
equivalent of the
maximum front-end sales charges permitted under the rules of
the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
<S>
<C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5%
annual return and (2) redemption at the end of each time
period................... .. $32 $66
You would pay the following expenses on the same investment,
assuming no
redemption...............
$21 $66
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE CLASS C SHARES'
FISCAL YEAR ENDING
OCTOBER 31, 1995.
-------------------------------------------------------
SYNOPSIS
The Trust was established as a Massachusetts business trust
under a Declaration
of Trust dated April 17, 1984 under the name "Federated
Growth Trust." The Trust
later changed its name to "Federated Equity Funds." The
Trust's address is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. The Declaration
of Trust permits the Trust to offer separate series of
shares of beneficial
interest representing interests in separate portfolios of
securities. As of the
date of this prospectus, the Board of Trustees (the
"Trustees") has established
three classes of shares for the Fund, known as Class A
Shares, Class B Shares,
and Class C Shares (individually and collectively as the
context requires,
"Shares").
Shares of the Fund are designed for individuals and
institutions seeking capital
appreciation by investing primarily in a portfolio of common
stocks of small
capitalization companies.
For information on how to purchase Shares of the Fund,
please refer to "How to
Purchase Shares." The minimum initial investment for Class A
Shares is $500. The
minimum initial investment for Class B Shares and Class C
Shares is $1500.
However, the minimum initial investment for a retirement
account in any class is
$50. Subsequent investments in any class must be in amounts
of at least $100,
except for retirement plans which must be in amounts of at
least $50.
In general, Class A Shares are sold at net asset value plus
an applicable sales
load and are redeemed at net asset value. However, a
contingent deferred sales
charge is imposed under certain circumstances. For a more
complete description,
see "How to Redeem Shares."
Class B Shares are sold at net asset value and are redeemed
at net asset value.
However, a contingent deferred sales charge is imposed on
certain Shares which
are redeemed within six full years of purchase. See "How to
Redeem Shares."
Class C Shares are sold at net asset value. A contingent
deferred sales charge
of 1.00% will be charged on assets redeemed within the first
12 months following
purchase. See "How to Redeem Shares."
In addition, the Fund also pays a shareholder services fee
at an annual rate not
to exceed 0.25% of average daily net assets.
Additionally, information regarding the exchange privilege
offered with respect
to the Fund and certain other funds for which affiliates of
Federated Investors
serve as investment adviser or principal underwriter (the
"Federated Funds") can
be found under "Exchange Privilege."
Federated Management is the investment adviser (the
"Adviser") to the Fund and
receives compensation for its services. The Adviser's
address is Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
Investors should be aware of the following general
observations. The Fund may
make certain investments and employ certain investment
techniques that involve
risks, including entering into repurchase agreements,
investing in when-issued
securities and put and call options, and lending portfolio
securities. These
risks are described under "Investment Policies."
The Fund's current net asset value and offering price can be
found in the mutual
funds section of local newspapers under "Federated Liberty
Funds."
-------------------------------------------------------
LIBERTY FAMILY OF FUNDS
This Fund is a member of a family of mutual funds,
collectively known as the
Liberty Family of Funds. The other funds in the Liberty
Family of Funds are:
American Leaders Fund, Inc., providing growth of capital
and income through
high-quality stocks;
Capital Growth Fund, providing appreciation of capital
primarily through equity
securities;
Federated Bond Fund, providing current income through high-
quality corporate
debt;
Federated Growth Strategies Fund, providing appreciation of
capital primarily
through equity securities of companies with prospects for
above-average growth
in earnings and dividends;
Fund for U.S. Government Securities, Inc., providing
current income through
long-term U.S. government securities;
International Equity Fund, providing long-term capital
growth and income
through international securities;
International Income Fund, providing a high level of
current income consistent
with prudent investment risk through high-quality debt
securities denominated
primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average
income and capital
appreciation through income producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current
income through
high-yielding, lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high
level of current
income exempt from federal regular income tax through
municipal bonds;
Liberty U.S. Government Money Market Trust, providing
current income consistent
with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and
long-term growth of
income, primarily through electric, gas, and communications
utilities;
Limited Term Fund, providing a high level of current income
consistent with
minimum fluctuation in principal value through investment
grade securities;
Limited Term Municipal Fund, providing a high level of
current income exempt
from federal regular income tax consistent with the
preservation of principal,
primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current
income exempt from
federal regular income tax and the personal income taxes
imposed by the state
of Michigan and Michigan municipalities, primarily through
Michigan municipal
securities;
Pennsylvania Municipal Income Fund, providing current
income exempt from
federal regular income tax and the personal income taxes
imposed by the
Commonwealth of Pennsylvania, primarily through
Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current
income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income
consistent with stability
of principal and exempt from federal income tax, through
high-quality,
short-term municipal securities; and
World Utility Fund, providing total return primarily
through securities issued
by domestic
and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to
Federated Securities
Corp.
Each of the funds may also invest in certain other types of
securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and
diversification for an
investor's long-term investment planning. It enables an
investor to meet the
challenges of changing market conditions by offering
convenient exchange
privileges which give access to various investment vehicles
and by providing the
investment services of proven, professional investment
advisers.
Shareholders of Class A Shares who have been designated as
Liberty Life Members
are exempt from sales loads on future purchases in and
exchanges between the
Class A Shares of any funds in the Liberty Family of Funds,
as long as they
maintain a $500 balance in one of the Liberty Funds.
-------------------------------------------------------
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide capital
appreciation. Any
income received from the portfolio is entirely incidental.
The investment
objective cannot be changed without approval of
shareholders. While there is no
assurance that the Fund will achieve its investment
objective, it endeavors to
do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing
primarily in a portfolio
of common stocks of small capitalization companies. Under
normal market
conditions, the Fund will invest at least 65% of its total
assets in common
stocks of small capitalization companies. Unless indicated
otherwise, the
investment policies of the Fund may be changed by the
Trustees without the
approval of shareholders. Shareholders will be notified
before any material
changes in these policies become effective.
ACCEPTABLE INVESTMENTS
The securities in which the Fund invests include, but are
not limited to:
common stock of U.S. companies which are either listed on
the New York or
American Stock Exchange or traded in over-the-counter
markets and are
considered by the Adviser to have potential for above-
average appreciation;
corporate securities and convertible securities;
securities of foreign issuers;
restricted and illiquid securities;
securities of other investment companies; and
securities issued or guaranteed by the U.S. government, its
agencies, or
instrumentalities.
SMALL CAPITALIZATION COMPANIES
Small capitalization companies are those companies that have
a market
capitalization of $1 billion or less at the time of
purchase. Small
capitalization companies are positioned for rapid growth in
revenues or earnings
and assets, characteristics which may provide for
significant capital
appreciation. Small companies often pay no dividends and
current income is not a
factor in the selection of stocks. Smaller companies often
have limited product
lines, markets, or financial resources, and they may be
dependent upon one or a
few key people for management. (See "Equity Investment Risk
Considerations".)
CORPORATE SECURITIES
The Fund may invest in preferred stocks, convertible
securities, notes or
debentures rated investment grade, i.e., Baa or better by
Moody's Investors
Service, Inc. ("Moody's"), or BBB or better by Standard &
Poor's Ratings Group
("S&P") or Fitch Investors Service, Inc. ("Fitch") (or, if
unrated, are deemed
to be of comparable quality by the Fund's Adviser), and
warrants of these
companies. Corporate fixed income securities are subject to
market and credit
risks. In addition, the prices of fixed income securities
fluctuate inversely to
the direction of interest rates. It should be noted that
securities receiving
the lowest investment grade rating are considered to have
some speculative
characteristics. Changes in economic conditions or other
circumstances are more
likely to lead to weakened capacity to make principal and
interest payments than
higher rated securities. In the event that a security which
had an eligible
rating when purchased is downgraded below Baa or BBB, the
Adviser will promptly
reassess whether continued holding of the security is
consistent with the Fund's
objective.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities which may
be converted at a
stated price within a specific period of time into a certain
quantity of the
common stock of the same or a different issuer. 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.
The Fund may invest in convertible securities rated Baa or
lower by Moody's or
BBB or lower by S&P or Fitch, or if unrated, are deemed to
be of comparable
quality by the Adviser.
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
security is converted
into equity. 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.
In general the market value of a convertible security is at
least the higher of
its "investment value" (i.e., its value as a fixed-income
security) or its
"conversion value" (i.e., its value upon conversion into its
underlying common
stock). As a fixed-income security, a convertible security
tends to increase in
market value when interest rates decline and tends to
decrease in value when
interest rates rise. However, the price of a convertible
security is also
influenced by the market value of the security's underlying
common stock. The
price of a convertible security tends to increase as the
market value of the
underlying stock rises, whereas it tends to decrease as the
market value of the
underlying stock declines. While no securities investment is
without some risk,
investments in convertible securities generally entail less
risk than
investments in the common stock of the same issuer.
The Fund will exchange or convert the convertible securities
held in its
portfolio into shares of the underlying common stock in
instances in which, in
the Adviser's opinion, the investment characteristics of the
underlying common
shares will assist the Fund in achieving its investment
objectives. Otherwise,
the Fund will hold or trade the convertible securities. In
selecting convertible
securities for the Fund, the 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
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.
SYNTHETIC CONVERTIBLES
A "synthetic convertible" is created by combining distinct
securities that
possess the two principal characteristics of a true
convertible: a fixed-income
component and a convertibility component. This combination
is achieved by
investing in nonconvertible fixed-income securities
(nonconvertible bonds,
preferred stocks, and money market instruments) and in
warrants or call options
traded on U.S. or foreign exchanges or in the over-the-
counter markets granting
the holder the right to purchase a specified quantity of
securities within a
specified period of time at a specified price or to receive
cash in the case of
stock index options.
Synthetic convertibles differ from true convertible
securities in several
respects. Unlike a true convertible, which is a single
security having a unitary
market value, a synthetic convertible is comprised of two
distinct securities,
each with its own market value. Therefore, the "market
value" of a synthetic
convertible is the sum of the values of its fixed-income
component and its
separate convertibility component. For this reason, the
values of a synthetic
convertible and a true convertible security will respond
differently to market
fluctuations.
A synthetic convertible may be more flexible than a
convertible security. For
example, a synthetic convertible may offer different issuers
in the fixed-income
component than are offered in the stock underlying the
convertibility component.
A synthetic convertible allows the Adviser to combine
components representing
distinct issuers, or to combine a fixed-income security with
a call option on a
stock index, when it determines that such a combination
would better promote the
Fund's investment objective and diversification. A synthetic
convertible may
also offer flexibility in that its two components may be
purchased separately.
For example, the Adviser may purchase a listed call option
for
inclusion in a synthetic convertible, but temporarily hold
short-term
investments while postponing purchase of a corresponding
bond pending
development of more favorable market conditions.
A holder of a synthetic convertible faces the risk that the
price of the stock,
or the level of the market index underlying the
convertibility component, will
decline, causing a decline in the value of the call option
or warrant. Should
the price of the stock or the level of the index fall below
the exercise price,
and remain there throughout the exercise period, the entire
amount paid for the
call option or warrant would be lost. Since a synthetic
convertible includes a
fixed-income component, the holder of a synthetic
convertible also faces the
risk that interest rates will rise, causing a decline in the
value of the
fixed-income instrument. Finally, a synthetic convertible
can be expected to
have greater transaction costs than a true convertible
security.
A combination of convertible securities and synthetic
convertibles may offer
certain advantages over an investment policy that allows for
only one of these
investment vehicles. Since convertible securities and
synthetic convertibles may
respond differently to varying market conditions, the
ability to invest in both
types of securities should afford greater flexibility in
managing the Fund's
portfolio.
RISK FACTORS RELATING TO INVESTING IN HIGH YIELD
SECURITIES
The convertible and synthetic convertible securities in
which the Fund invests
are usually not in the three highest rating categories of a
nationally
recognized statistical rating organization (AAA, AA, or A
for S&P or Fitch and
Aaa, Aa, or A for Moody's), but are in the lower rating
categories or are
unrated, but are of comparable quality and have speculative
characteristics or
are speculative. Lower-rated bonds or unrated bonds are
commonly referred to as
"junk bonds." There is no minimal acceptable rating for a
security to be
purchased or held in the Fund's portfolio, and the Fund may,
from time to time,
purchase or hold convertible and synthetic convertible
securities rated in the
lowest rating category. A description of the rating
categories is contained in
the Appendix to the Combined Statement of Additional
Information.
Debt obligations that are not determined to be investment
grade are high-yield,
high-risk bonds, typically subject to greater market
fluctuations and greater
risk of loss of income and principal due to an issuer's
default. To a greater
extent than investment-grade bonds, lower-rated bonds tend
to reflect short-term
corporate, economic, and market developments, as well as
investor perceptions of
the issuer's credit quality. In addition, lower-rated bonds
may be more
difficult to dispose of or to value than higher-rated, lower-
yielding bonds.
The Adviser attempts to reduce the risks described above
through diversification
of the portfolio and by credit analysis of each issuer as
well as by monitoring
broad economic trends and corporate and legislative
developments.
SECURITIES OF FOREIGN ISSUERS
The Fund 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 depositary receipts ("American Depositary
Receipts" or "ADRs").
In addition, the Fund may invest in other securities of
foreign issuers. There
may be certain risks associated with investing in foreign
securities. These
include risks of adverse political and economic developments
(including
possible governmental seizure or nationalization of assets),
the possible
imposition of exchange controls or other governmental
restrictions, less
uniformity in accounting and reporting requirements, and the
possibility that
there will be less information on such securities and their
issuers available
to the public. In addition, there are restrictions on
foreign investments in
other jurisdictions and there tends to be difficulty in
obtaining judgments
from abroad and affecting repatriation of capital invested
abroad. Delays could
occur in settlement of foreign transactions, which could
adversely affect
shareholder equity. Foreign securities may be subject to
foreign taxes, which
reduce yield, and may be less marketable than comparable
United States
securities. As a matter of practice, the Fund will not
invest in the securities
of a foreign issuer if any risk identified above appears to
the Adviser to be
substantial. The Fund will not invest more than 20% of its
assets in foreign
securities.
PUT AND CALL OPTIONS
The Fund may purchase put options on its portfolio
securities. A put option
gives the Fund, 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. These options will be used as a hedge to attempt to
protect securities
which the Fund holds against decreases in value. The Fund
may also write covered
call options on all or any portion of its portfolio to
generate income. As a
writer of a call option, the Fund has the obligation upon
exercise of the option
during the option period to deliver the underlying security
upon payment of the
exercise price. The Fund will 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 or U.S.
government securities
in the amount of any additional consideration.
The Fund may purchase and write over-the-counter options on
portfolio securities
in negotiated transactions with the buyers or writers of the
options when
options on the portfolio securities held by the Fund are not
traded on an
exchange. The Fund purchases and writes options only with
investment dealers and
other financial institutions (such as commercial banks or
savings and loan
associations) deemed creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price
and terms negotiated
between buyer and seller. In contrast, exchange-traded
options are third-party
contracts with standardized strike prices and expiration
dates and are purchased
from a clearing corporation. Exchange-traded options have a
continuous liquid
market while over-the-counter options may not. The Fund will
not buy call
options or write put options, other than to close out open
option positions,
without further notification to shareholders.
FUTURES AND OPTIONS ON FUTURES
The Fund may purchase and sell futures contracts to hedge
against the effects of
changes in the value of portfolio securities due to
anticipated changes in
interest rates and market conditions. Futures contracts call
for the delivery of
particular instruments at a certain time in the future. The
seller of the
contract agrees to make delivery of the type of instrument
called for in the
contract, and the buyer agrees to take delivery of the
instrument at the
specified future time.
Stock index futures contracts are based on indexes that
reflect the market value
of common stock of the firms included in the indexes. An
index futures contract
is an agreement pursuant to which two parties agree to take
or make delivery of
an amount of cash equal to the differences between the value
of the index at the
close of the last trading day of the contract and the price
at which the index
contract was originally written.
The Fund may also write call options and purchase put
options on futures
contracts as a hedge to attempt to protect its portfolio
securities against
decreases in value. When the Fund writes a call option on a
futures contract,
it is undertaking the obligation of selling a futures
contract at a fixed price
at any time during a specified period if the option is
exercised. Conversely,
as purchaser of a put option on a futures contract, the Fund
is entitled (but
not obligated) to sell a futures contract at the fixed price
during the life of
the option.
The Fund may also write put options and purchase call
options on futures
contracts as a hedge against rising purchase prices of
portfolio securities. The
Fund will use these transactions to attempt to protect its
ability to purchase
portfolio securities in the future at price levels existing
at the time it
enters into the transactions. When the Fund writes a put
option on a futures
contract, it is undertaking to buy a particular futures
contract at a fixed
price at any time during a specified period if the option is
exercised. As a
purchaser of a call option on a futures contract, the Fund
is entitled (but not
obligated) to purchase a futures contract at a fixed price
at any time during
the life of the option.
The Fund may not purchase or sell futures contracts or
related options if
immediately thereafter the sum of the amount of margin
deposits on the Fund's
existing futures positions and premiums paid for related
options would exceed 5%
of the market value of the Fund's total assets. When the
Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to
the underlying
commodity value of the futures contracts (less any related
margin deposits),
will be deposited in a segregated account with the custodian
(or the broker, if
legally permitted) to collateralize the position and thereby
insure that the use
of such futures contracts are unleveraged. When the Fund
sells futures
contracts, it will either own or have the right to receive
the underlying future
or security, or will make deposits to collateralize the
position as discussed
above.
RISKS
When the Fund uses financial futures and options on futures
as hedging devices,
there is a risk that the prices of the securities subject to
the futures
contracts may not correlate perfectly with the prices of the
securities in the
Fund's portfolio. This may cause the futures contract and
any related options to
react differently than the portfolio securities to market
changes. In addition,
the Adviser could be incorrect in its expectations about the
direction or extent
of market factors such as stock price movements. In these
events, the Fund may
lose money on the futures contract or option.
It is not certain that a secondary market for positions in
futures contracts or
for options will exist at all times. Although the Adviser
will consider
liquidity before entering into these transactions, there is
no assurance that a
liquid secondary market on an exchange or otherwise will
exist for any
particular futures contract or option at any particular
time. The Fund's ability
to establish and close out futures and options positions
depends on this
secondary market.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted
securities are any
securities in which the Fund may otherwise invest pursuant
to its investment
objective and policies, but which are subject to
restrictions on resale under
federal securities law. However, the Fund will limit
investments in illiquid
securities, including certain restricted securities not
determined by the
Trustees to be liquid, non-negotiable time deposits, over-
the-counter options,
and repurchase agreements providing for settlement in more
than seven days after
notice, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed
delivery basis.
These transactions are arrangements in which the Fund
purchases securities with
payment and delivery scheduled for a future time. The
seller's failure
to complete these transactions may cause the Fund to miss a
price or yield
considered to be advantageous. Settlement dates may be a
month or more after
entering into these transactions and the market values of
the securities
purchased may vary from purchase prices. Accordingly, the
Fund may pay more or
less than the market value of the securities on the
settlement date.
The Fund may dispose of a commitment prior to settlement if
the Adviser deems it
appropriate to do so. In addition, the Fund may enter into
transactions to sell
its purchase commitments to third parties at current market
values and
simultaneously acquire other commitments to purchase similar
securities at later
dates. The Fund may realize short-term profits or losses
upon the sale of such
commitments.
TEMPORARY INVESTMENTS
In such proportions as, in the judgment of its Adviser,
prevailing market
conditions warrant, the Fund 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
Repurchase agreements are arrangements in which banks,
broker/dealers, and other
recognized financial institutions sell U.S. government
securities or other
securities to the Fund 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 Fund, the Fund could
receive less than
the repurchase price on any sale of such securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT
COMPANIES
The Fund may invest in the securities of other investment
companies, but it will
not own more than 3% of the total outstanding voting stock
of any investment
company, invest more than 5% of its total assets in any one
investment company,
or invest more than 10% of its total assets in investment
companies in general.
The Fund will invest in other investment companies primarily
for the purpose of
investing short-term cash which has not yet been invested in
other portfolio
instruments. It should be noted that investment companies
incur certain expenses
such as management fees and, therefore, any investment by
the Fund in shares of
another investment company would be subject to such
duplicate expenses. The
Adviser will waive its investment advisory fee on assets
invested in securities
of open-end investment companies.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend
portfolio securities
on a short-term or a long-term basis, to broker/dealers,
banks, or other
institutional borrowers of securities. The Fund will only
enter into loan
arrangements with broker/dealers, banks, or other
institutions which the 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 at all times.
There is the risk that when lending portfolio securities,
the securities may not
be available to the Fund on a timely basis and the Fund may,
therefore, lose the
opportunity to sell the securities at a desirable price. In
addition, in the
event that a borrower of securities would file for
bankruptcy or become
insolvent, disposition of the securities may be delayed
pending court action.
DERIVATIVE CONTRACTS AND SECURITIES
The term "derivative" has traditionally been applied to
certain contracts
(including, futures, forward, option, and swap contracts)
that "derive" their
value from changes in the value of an underlying security,
currency, commodity,
or index. Certain types of securities that incorporate the
performance
characteristics of these contracts are also referred to as
"derivatives." The
term has also been applied to securities "derived" from the
cash flows from
underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or
increase the
volatility of an investment portfolio's total performance.
While the response of
certain derivative contracts and securities to market
changes may differ from
traditional investments, such as stock and bonds,
derivatives do not necessarily
present greater market risks than traditional investments.
The Fund will only
use derivative contracts for the purposes disclosed in the
applicable prospectus
sections above. To the extent that the Fund invests in
securities that could be
characterized as derivatives, it will only do so in a manner
consistent with its
investment objectives, policies, and limitations.
EQUITY INVESTMENT RISK CONSIDERATIONS
As with other mutual funds that invest primarily in equity
securities, the Fund
is subject to market risks. That is, the possibility exists
that common stocks
will decline over short or even extended periods of time,
and the United States
equity market tends to be cyclical, experiencing both
periods when stock prices
generally increase and periods when stock prices generally
decrease. However,
because the Fund invests primarily in small capitalization
stocks, there are
some additional risk factors associated with investments in
the Fund. In
particular, stocks in the small capitalization sector of the
United States
equity market have historically been more volatile in price
than larger
capitalization stocks, such as those included in the
Standard & Poor's 500
Composite Stock Price Index ("Standard & Poor's 500 Index").
This is because,
among other things, small companies have less certain growth
prospects than
larger companies; have a lower degree of liquidity in the
equity market; and
tend to have a greater sensitivity to changing economic
conditions. Further, in
addition to exhibiting greater volatility, the stocks of
small companies may, to
some degree, fluctuate independently of the stocks of large
companies. That is,
the stocks of small companies may decline in price as the
prices of large
company stocks rise or vice versa. Therefore, investors
should expect that the
Fund will be more volatile than, and may fluctuate
independently of, broad stock
market indices such as the Standard & Poor's 500 Index.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase
agreements (arrangements in
which the Fund sells a portfolio instrument for a
percentage of its cash value
with an agreement to buy it back on a set date) or pledge
securities except,
under certain circumstances, the Fund may borrow up to one-
third of the value
of its total assets and pledge its assets to secure such
borrowings; or
with respect to 75% of its total assets, invest more than
5% of the value of
its total assets in securities of any one issuer (other
than cash, cash items,
or securities issued or guaranteed by the U.S. government
and its agencies or
instrumentalities, and repurchase agreements collateralized
by such securities)
or acquire more than 10% of the outstanding voting
securities of any one
issuer.
The above investment limitations cannot be changed without
shareholder approval.
-------------------------------------------------------
NET ASSET VALUE
The Fund's net asset value per Share fluctuates. The net
asset value for Shares
is determined by adding the interest of each class of Shares
in the market value
of all securities and other assets of the Fund, subtracting
the interest of each
class of Shares in the liabilities of the Fund and those
attributable to each
class of Shares, and dividing the remainder by the total
number of each class of
Shares outstanding. The net asset value for each class of
Shares may differ due
to the variance in daily net income realized by each class.
Such variance will
reflect only accrued net income to which the shareholders of
a particular class
are entitled.
The net asset value of each class of Shares of the Fund is
determined as of the
close of trading (normally 4:00 p.m., Eastern time) on the
New York Stock
Exchange, Monday through Friday, except on: (i) days on
which there are not
sufficient changes in the value of the Fund'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.
-------------------------------------------------------
INVESTING IN THE FUND
The Fund offers investors three classes of Shares that carry
sales loads and
contingent deferred sales charges in different forms and
amounts and which bear
different levels of expenses.
CLASS A SHARES
An investor who purchases Class A Shares pays a maximum
sales load of 5.50% at
the time of purchase. Certain purchases of Class A Shares
are not subject to a
sales load. See "Investing in Class A Shares." As a result,
Class A Shares are
not subject to any charges when they are redeemed (except
for special programs
offered under "Purchases with Proceeds From Redemptions of
Unaffiliated
Investment Companies"). Certain purchases of Class A Shares
qualify for reduced
sales loads. See "Reducing or Eliminating the Sales Load."
Class A Shares have
no conversion feature.
CLASS B SHARES
Class B Shares are sold without an initial sales load, but
are subject to a
contingent deferred sales charge of up to 5.50% if redeemed
within six full
years following purchase. Class B Shares also bear a higher
12b-1 fee than Class
A Shares. Class B Shares will automatically convert into
Class A Shares, based
on relative net asset value, on or around the fifteenth of
the month eight full
years after the purchase date. Class B Shares provide an
investor the benefit of
putting all of the investor's dollars to work from the time
the investment is
made, but (until conversion) will have a higher expense
ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee.
CLASS C SHARES
Class C Shares are sold without an initial sales load, but
are subject to a
1.00% contingent deferred sales charge on assets redeemed
within the first 12
months following purchase. Class C Shares provide an
investor the benefit of
putting all of the investor's dollars to work from the time
the investment is
made, but will have a higher expense ratio and pay lower
dividends than Class A
Shares due to the higher 12b-1 fee. Class C Shares have no
conversion feature.
-------------------------------------------------------
HOW TO PURCHASE SHARES
Shares of the Fund are sold on days on which the New York
Stock Exchange is
open. Shares of the Fund may be purchased as described
below, either through a
financial institution (such as a bank or broker/dealer which
has a sales
agreement with the distributor) or by wire or by check
directly to the Fund,
with a minimum initial investment of $500 for Class A Shares
and $1,500 for
Class B Shares and Class C Shares. Additional investments
can be made for as
little as $100. The minimum initial and subsequent
investment for retirement
plans is only $50. (Financial institutions may impose
different minimum
investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may
from time to time
offer certain items of nominal value to any shareholder or
investor. The Fund
reserves the right to reject any purchase request. An
account must be
established at a financial institution or by completing,
signing, and returning
the new account form available from the Fund before Shares
can be purchased.
INVESTING IN CLASS A SHARES
Class A Shares are sold at their net asset value next
determined after an order
is received, plus a sales load as follows:
<TABLE>
<CAPTION>
SALES LOAD AS DEALER
SALES LOAD AS A PERCENTAGE
CONCESSION
A PERCENTAGE OF NET AS A
PERCENTAGE
AMOUNT OF OF OFFERING AMOUNT OF
PUBLIC
TRANSACTION PRICE INVESTED OFFERING
PRICE
<S> <C> <C> <C>
Less than
$50,000 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000 2.50% 2.56% 2.25%
$500,000 but
less than
$1 million 2.00% 2.04% 1.80%
$1 million or
greater 0.00% 0.00% 0.25%*
</TABLE>
*See sub-section entitled "Dealer Concession."
No sales load is imposed for Class A Shares purchased
through bank trust
departments, investment advisers registered under the
Investment Advisers Act of
1940, as amended, or retirement plans where the third party
administrator has
entered into certain arrangements with Federated Securities
Corp. or its
affiliates, or to shareholders designated as Liberty Life
Members. However,
investors who purchase Shares through a trust department,
investment adviser, or
retirement plan may be charged an additional service fee by
the institution.
Additionally, no sales load is imposed for Class A Shares
purchased through
"wrap accounts" or similar programs, under which clients pay
a fee or fees for
services.
DEALER CONCESSION
For sales of Class A Shares, a dealer will normally receive
up to 90% of the
applicable sales load. Any portion of the sales load which
is not paid to a
dealer will be retained by the distributor. However, the
distributor may offer
to pay dealers up to 100% of the sales load retained by it.
Such payments may
take the form of cash or promotional incentives, such as
reimbursement of
certain expenses of qualified employees and their spouses to
attend
informational meetings about the Fund or other special
events at
recreational-type facilities, or items of material value. In
some instances,
these incentives will be made available only to dealers
whose employees have
sold or may sell a significant amount of Shares. On
purchases of $1 million or
more, the investor pays no sales load; however, the
distributor will make twelve
monthly payments to the dealer totaling 0.25% of the public
offering price over
the first year following the purchase. Such payments are
based on the original
purchase price of Shares outstanding at each month end.
The sales load for Shares sold other than through registered
broker/dealers will
be retained by Federated Securities Corp. Federated
Securities Corp. may pay
fees to banks out of the sales load in exchange for sales
and/or administrative
services performed on behalf of the bank's customers in
connection with the
initiation of customer accounts and purchases of Shares.
Effective as of the date of this prospectus, and until
further notice, the
entire amount of the applicable sales load will be reallowed
to dealers. In
addition, the distributor will pay dealers additional bonus
payments in an
amount equal to 0.50 of 1.00% of the public offering price
of Shares sold.
REDUCING OR ELIMINATING
THE SALES LOAD
The sales load can be reduced or eliminated on the purchase
of Class A Shares
through:
quantity discounts and accumulated purchases;
concurrent purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
purchases with proceeds from redemptions of unaffiliated
investment company
shares.
QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES
As shown in the table above, larger purchases reduce the
sales load paid. The
Fund will combine purchases of Class A Shares made on the
same day by the
investor, the investor's spouse, and the investor's children
under age 21 when
it calculates the sales load. In addition, the sales load,
if applicable, is
reduced for purchases made at one time by a trustee or
fiduciary for a single
trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the
Fund will consider the
previous purchases still invested in the Fund. For example,
if a shareholder
already owns Class A Shares having a current value at the
public offering price
of $30,000 and he purchases $20,000 more at the current
public offering price,
the sales load on the additional purchase according to the
schedule now in
effect would be 4.50%, not 5.50%.
To receive the sales load reduction, Federated Securities
Corp. must be notified
by the shareholder in writing or by his financial
institution at the time the
purchase is made that Class A Shares are already owned or
that purchases are
being combined. The Fund will reduce the sales load after it
confirms the
purchases.
CONCURRENT PURCHASES
For purposes of qualifying for a sales load reduction, a
shareholder has the
privilege of combining concurrent purchases of two or more
funds in the Liberty
Family of Funds, the purchase price of which includes a
sales load. For example,
if a shareholder concurrently invested $30,000 in one of the
other funds in the
Liberty Family of Funds with a sales load, and $20,000 in
this Fund, the sales
load would be reduced.
To receive this sales load reduction, Federated Securities
Corp. must be
notified by the shareholder in writing or by his financial
institution at the
time the concurrent purchases are made. The Fund will reduce
the sales load
after it confirms the purchases.
LETTER OF INTENT
If a shareholder intends to purchase at least $50,000 of
shares of the funds in
the Liberty Family of Funds (excluding money market funds)
over the next 13
months, the sales load may be reduced by signing a letter of
intent to that
effect. This letter of intent includes a provision for a
sales load adjustment
depending on the amount actually purchased within the 13-
month period and a
provision for the custodian to hold up to 5.50% of the total
amount intended to
be purchased in escrow (in Shares) until such purchase is
completed.
The Shares held in escrow in the shareholder's account will
be released upon
fulfillment of the letter of intent or the end of the 13-
month period, whichever
comes first. If the amount specified in the letter of intent
is not purchased,
an appropriate number of escrowed Shares may be redeemed in
order to realize the
difference in the sales load.
While this letter of intent will not obligate the
shareholder to purchase
Shares, each purchase during the period will be at the sales
load applicable to
the total amount intended to be purchased. At the time a
letter of intent is
established, current balances in accounts in any Class A
Shares of any fund in
the Liberty Family of Funds, excluding money market
accounts, will be aggregated
to provide a purchase credit towards fulfillment of the
letter of intent. Prior
trade prices will not be adjusted.
REINVESTMENT PRIVILEGE
If Class A Shares in the Fund have been redeemed, the
shareholder has the
privilege, within 120 days, to reinvest the redemption
proceeds at the
next-determined net asset value without any sales load.
Federated Securities
Corp. must be notified by the shareholder in writing or by
his financial
institution of the reinvestment in order to eliminate a
sales load. If the
shareholder redeems his Class A Shares in the Fund, there
may be tax
consequences.
PURCHASES WITH PROCEEDS FROM
REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES
Investors may purchase Class A Shares at net asset value,
without a sales load,
with the proceeds from the redemption of shares of an
unaffiliated investment
company that were purchased or sold with a sales load or
commission and were not
distributed by Federated Securities Corp. The purchase must
be made within 60
days of the redemption, and Federated Securities Corp. must
be notified by the
investor in writing, or by his financial institution, at the
time the purchase
is made. From time to time, the Fund may offer dealers a
payment of .50 of 1.00%
for Shares purchased under this program. If Shares are
purchased in this manner,
fund purchases will be subject to a contingent deferred
sales charge for one
year from the date of purchase. Shareholders will be
notified prior to the
implementation of any special offering as described above.
INVESTING IN CLASS B SHARES
Class B Shares are sold at their net asset value next
determined after an order
is received. While Class B Shares are sold without an
initial sales load, under
certain circumstances described under "Contingent Deferred
Sales Charge--Class B
Shares," a contingent deferred sales charge may be applied
by the distributor at
the time Class B Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A
Shares on or around the
fifteenth of the month eight full years after the purchase
date, except as noted
below, and will no longer be subject to a distribution
services fee (see
"Distribution of Shares"). Such conversion will be on the
basis of the relative
net asset values per share, without the imposition of any
sales load, fee or
other charge. Class B Shares acquired by exchange from Class
B Shares of another
fund in the Liberty Family of Funds will convert into Class
A Shares based on
the time of the initial purchase. For purposes of conversion
to Class A Shares,
Shares purchased through the reinvestment of dividends and
distributions paid on
Class B Shares will be considered to be held in a separate
sub-account. Each
time any Class B Shares in the shareholder's account (other
than those in the
sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B
Shares in the sub-account will also convert to Class A
Shares. The conversion of
Class B Shares to Class A Shares is subject to the
continuing availability of a
ruling from the Internal Revenue Service or an opinion of
counsel that such
conversions will not constitute taxable events for federal
tax purposes. There
can be no assurance that such ruling or opinion will be
available, and the
conversion of Class B Shares to Class A Shares will not
occur if such ruling or
opinion is not available. In such event, Class B Shares
would continue to be
subject to higher expenses than Class A Shares for an
indefinite period.
Orders for $250,000 or more of Class B Shares will
automatically be invested in
Class A Shares.
INVESTING IN CLASS C SHARES
Class C Shares are sold at net asset value next determined
after an order is
received. A contingent deferred sales charge of 1.00% will
be charged on assets
redeemed within the first full 12 months following purchase.
For a complete
description of this charge, see "Contingent Deferred Sales
Charge--Class C
Shares."
PURCHASING SHARES THROUGH A FINANCIAL
INSTITUTION
An investor may call his financial institution (such as a
bank or an investment
dealer) to place an order to purchase Shares. Orders placed
through a financial
institution are considered received when the Fund is
notified of the purchase
order or when payment is converted into federal funds.
Purchase orders through a
registered broker/dealer must be received by the broker
before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the
Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at
that day's price.
Purchase orders through other financial institutions must be
received by the
financial institution and transmitted to the Fund before
4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's
price. It is the
financial institution's responsibility to transmit orders
promptly. Financial
institutions may charge additional fees for their services.
The financial institution which maintains investor accounts
in Class B Shares or
Class C Shares with the Fund must do so on a fully disclosed
basis unless it
accounts for share ownership periods used in calculating the
contingent deferred
sales charge (see "Contingent Deferred Sales Charge"). In
addition, advance
payments made to financial institutions may be subject to
reclaim by the
distributor for accounts transferred to financial
institutions which do not
maintain investor accounts on a fully disclosed basis and do
not account for
share ownership periods.
PURCHASING SHARES BY WIRE
Once an account has been established, Shares may be
purchased by wire by calling
the Fund. All information needed will be taken over the
telephone, and the order
is considered received immediately. Payment for purchases
which are subject to a
sales load must be received within three business days
following the order.
Payment for purchases on which no sales load is imposed 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; Attn: EDGEWIRE; For Credit to: (Fund Name)
(Fund Class); (Fund
Number); Account Number; Trade Date and Order Number; Group
Number or Dealer
Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be
purchased by wire on holidays when wire transfers are
restricted.
PURCHASING SHARES BY CHECK
Once an account has been established, Shares may be
purchased by sending a check
made payable to the name of the Fund (designate class of
Shares and account
number) to: Federated Services Company, P.O. Box 8600,
Boston, Massachusetts
02266-8600. Orders by mail are considered received when
payment by check is
converted into federal funds (normally the business day
after the check is
received).
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to
their investment
on a regular basis in a minimum amount of $100. Under this
program, funds may
be automatically withdrawn periodically from the
shareholder's checking account
at an Automated Clearing House ("ACH") member and invested
in the Fund at the
net asset value next determined after an order is received
by the Fund, plus
the sales load, if applicable. Shareholders should contact
their financial
institution or the Fund to participate in this program.
RETIREMENT PLANS
Fund Shares can be purchased as an investment for retirement
plans or IRA
accounts. For further details, contact the Fund and consult
a tax adviser.
-------------------------------------------------------
EXCHANGE PRIVILEGE
CLASS A SHARES
Class A shareholders may exchange all or some of their
Shares for Class A Shares
of other funds in the Liberty Family of Funds at net asset
value. Shareholders
of Class A Shares may also exchange into certain other
Federated Funds (as
defined in the "Synopsis" of this prospectus) which are sold
with a sales load
different from that of the Fund's or with no sales load, and
which are advised
by subsidiaries or affiliates of Federated Investors. These
exchanges are made
at net asset value plus the difference between the Fund's
sales load already
paid and any sales load of the Federated Fund into which the
Shares are to be
exchanged, if higher. Neither the Fund nor any of the funds
in the Liberty
Family of Funds imposes any additional fees on exchanges.
Shareholders in
certain other Federated Funds may exchange their shares in
the Federated Funds
for Class A Shares.
CLASS B SHARES
Class B shareholders may exchange all or some of their
Shares for Class B Shares
of other funds in the Liberty Family of Funds. (Not all
funds in the Liberty
Family of Funds currently offer Class B Shares. Contact your
financial
institution regarding the availability of other Class B
Shares in the Liberty
Family of Funds.) Exchanges are made at net asset value
without being assessed a
contingent deferred sales charge on the exchanged Shares. To
the extent that a
shareholder exchanges Shares for Class B Shares in other
funds in the Liberty
Family of Funds, the time for which the exchanged-for Shares
are to be held will
be added to the time for which exchanged-from Shares were
held for purposes of
satisfying the applicable holding period. For more
information, see "Contingent
Deferred Sales Charge."
CLASS C SHARES
Class C shareholders may exchange all or some of their
Shares for Class C Shares
in other funds in the Liberty Family of Funds at net asset
value without a
contingent deferred sales charge. (Not all funds in the
Liberty Family of Funds
currently offer Class C Shares. Contact your financial
institution regarding the
availability of other Class C Shares in the Liberty Family
of Funds.) To the
extent that a shareholder exchanges Shares for Class C
Shares in other funds in
the Liberty Family of Funds, the time for which the
exchanged-for Shares are to
be held will be added to the time for which exchanged-from
Shares were held for
purposes of satisfying the applicable holding period. For
more information, see
"Contingent Deferred Sales Charge."
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares
having a net asset value
equal to the minimum investment requirements of the fund
into which the exchange
is being made. Before the exchange, the shareholder must
receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any
state in which the
Shares being acquired may be sold. Upon receipt of proper
instructions and
required supporting documents, Shares submitted for exchange
are redeemed and
proceeds invested in the same class of Shares of the other
fund. The exchange
privilege may be modified or terminated at any time.
Shareholders will be
notified of the modification or termination of the exchange
privilege.
Further information on the exchange privilege and
prospectuses for the Liberty
Family of Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale
for federal income
tax purposes. Depending upon the circumstances, a capital
gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds
or certain Federated
Funds (where applicable) may be given in writing or by
telephone. Written
instructions may require a signature guarantee. Shareholders
of the Fund may
have difficulty in making exchanges by telephone through
brokers and other
financial institutions during times of drastic economic or
market changes. If a
shareholder cannot contact his broker or financial
institution by telephone, it
is recommended that an exchange request be made in writing
and sent by overnight
mail to Federated Services Company, 500 Victory Road--2nd
Floor, Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried
out only if a
telephone authorization form completed by the investor is on
file with the Fund.
If the instructions are given by a broker, a telephone
authorization form
completed by the broker must be on file with the Fund. If
reasonable procedures
are not followed by the Fund, it may be liable for losses
due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged
between two funds by
telephone only if the two funds have identical shareholder
registrations.
Any Shares held in certificate form cannot be exchanged by
telephone but must be
forwarded to Federated Services Company, P.O. Box 8600,
Boston, Massachusetts
02266-8600 and deposited to the shareholder's account before
being exchanged.
Telephone exchange instructions are recorded and will be
binding upon the
shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time)
and must be received by the Fund before that time for Shares
to be exchanged the
same day. Shareholders exchanging into a fund will begin
receiving dividends
the following business day. This privilege may be modified
or terminated at any
time.
-------------------------------------------------------
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value, less any
applicable contingent
deferred sales charge, next determined after the Fund
receives the redemption
request. Redemptions will be made on days on which the Fund
computes its net
asset value. Redemption requests must be received in proper
form and can be made
as described below.
REDEEMING SHARES THROUGH
A FINANCIAL INSTITUTION
Shares of the Fund may be redeemed by calling your financial
institution to
request the redemption. Shares will be redeemed at the net
asset value, less any
applicable contingent deferred sales charge next determined
after the Fund
receives the redemption request from the financial
institution. Redemption
requests through a registered broker/dealer must be received
by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by
the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to
be redeemed at that
day's net asset value. Redemption requests through other
financial institutions
(such as banks) must be received by the financial
institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares
to be redeemed at
that day's net asset value. The financial institution is
responsible for
promptly submitting redemption requests and providing proper
written redemption
instructions. Customary fees and commissions may be charged
by the financial
institution for this service.
REDEEMING SHARES BY TELEPHONE
Shares may be redeemed in any amount by calling the Fund
provided the Fund has a
properly completed authorization form. These forms can be
obtained from
Federated Securities Corp.
Proceeds will be mailed in the form of a check, to the
shareholder's address of
record or by wire transfer to the shareholder's account at a
domestic commercial
bank that is a member of the Federal Reserve System. The
minimum amount for a
wire transfer is $1,000. Proceeds from redeemed Shares
purchased by check or
through ACH will not be wired until that method of payment
has cleared.
Telephone instructions will be recorded. If reasonable
procedures are not
followed by the Fund, it may be liable for losses due to
unauthorized or
fraudulent telephone instructions. In the event of drastic
economic or market
changes, a shareholder may experience difficulty in
redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be
considered. If at any time the
Fund shall determine it necessary to terminate or modify the
telephone
redemption privilege, shareholders would be promptly
notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written
request to: Federated
Services Company, Fund Name, Fund Class, P.O. Box 8600,
Boston, Massachusetts
02266-8600.
The written request should state: Fund Name and the Class
designation; the
account name as registered with the Fund; the account
number; and the number of
Shares to be redeemed or the dollar amount requested. All
owners of the account
must sign the request exactly as the Shares are registered.
It is recommended
that any share certificates be sent by registered or
certified mail with the
written request.
If you are requesting a redemption of any amount to be sent
to an address other
than that on record with the Fund, or a redemption payable
to a third party,
then all signatures appearing on the written request must be
guaranteed by a
bank which is a member of the Federal Deposit Insurance
Corporation, a trust
company, a member firm of a domestic stock exchange, or any
other "eligible
guarantor institution," as defined by the Securities and
Exchange Act of 1934,
as amended. The Fund does not accept signatures guaranteed
by a notary public.
The Fund and its transfer agent have adopted standards for
accepting signature
guarantees from the above institutions. The Fund may elect
in the future to
limit eligible signature guarantors to institutions that are
members of a
signature guarantee program. The Fund and its transfer agent
reserve the right
to amend these standards at any time without notice.
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.
SPECIAL REDEMPTION FEATURES
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a
predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal
Program. Under this
program, Shares are redeemed to provide for periodic
withdrawal payments in an
amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the
amount of dividends
paid and capital gains distributions with respect to Shares,
and the
fluctuation of the net asset value of Shares redeemed under
this program,
redemptions may reduce, and eventually deplete, the
shareholder's investment in
the Fund. For this reason, payments under this program
should not be considered
as yield or income on the shareholder's investment in the
Fund. To be eligible
to participate in this program, a shareholder must have an
account value of at
least $10,000. A shareholder may apply for participation in
this program
through his financial institution. Due to the fact that
Class A Shares are sold
with a sales load, it is not advisable for shareholders to
continue to purchase
Class A Shares while participating in this program. A
contingent deferred sales
charge may be imposed on Class B Shares and Class C Shares.
CONTINGENT DEFERRED SALES CHARGE
Shareholders may be subject to a contingent deferred sales
charge upon
redemption of their Shares under the following
circumstances:
CLASS A SHARES
Class A Shares purchased under a periodic special offering
with the proceeds of
a redemption of Shares of an unaffiliated investment company
purchased or
redeemed with a sales load and not distributed by Federated
Securities Corp. may
be charged a contingent deferred sales charge of .50 of
1.00% for redemptions
made within one full year of purchase. Any applicable
contingent deferred sales
charge will be imposed on the lesser of the net asset value
of the redeemed
Shares at the time of purchase or the net asset value of the
redeemed Shares at
the time of redemption.
CLASS B SHARES
Shareholders redeeming Class B Shares from their Fund
accounts within six full
years of the purchase date of those Shares will be charged a
contingent deferred
sales charge by the Fund's distributor. Any applicable
contingent deferred sales
charge will be imposed on the lesser of the net asset value
of the redeemed
Shares at the time of purchase or the net asset value of the
redeemed Shares at
the time of redemption in accordance with the following
schedule:
<TABLE>
<CAPTION>
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First 5.50%
Second 4.75%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
</TABLE>
CLASS C SHARES
Shareholders redeeming Class C Shares from their Fund
accounts within one full
year of the purchase date of those Shares will be charged a
contingent deferred
sales charge by the Fund's distributor of 1.00%. Any
applicable contingent
deferred sales charge will be imposed on the lesser of the
net asset value of
the redeemed Shares at the time of purchase or the net asset
value of the
redeemed Shares at the time of redemption.
CLASS A SHARES, CLASS B SHARES, AND
CLASS C SHARES
The contingent deferred sales charge will be deducted from
the redemption
proceeds otherwise payable to the shareholder and will be
retained by the
distributor. The contingent deferred sales charge will not
be imposed with
respect to: (1) Shares acquired through the reinvestment of
dividends or
distributions of long-term capital gains; and (2) Shares
held for more than six
full years from the date of purchase with respect to Class B
Shares and one full
year from the date of purchase with respect to Class C
Shares and applicable
Class A Shares. Redemptions will be processed in a manner
intended to maximize
the amount of redemption which will not be subject to a
contingent deferred
sales charge. In computing the amount of the applicable
contingent deferred
sales charge, redemptions are deemed to have occurred in the
following order:
(1) Shares acquired through the reinvestment of dividends
and long-term capital
gains; (2) Shares held for more than six full years from the
date of
purchase with respect to Class B Shares and one full year
from the date of
purchase with respect to Class C Shares and applicable Class
A Shares; (3)
Shares held for fewer than six years with respect to Class B
Shares and one full
year from the date of purchase with respect to Class C
Shares and applicable
Class A Shares on a first-in, first-out basis. A contingent
deferred sales
charge is not assessed in connection with an exchange of
Fund Shares for Shares
of other funds in the Liberty Family of Funds in the same
class (see "Exchange
Privilege"). Any contingent deferred sales charge imposed at
the time the
exchanged-for Shares are redeemed is calculated as if the
shareholder had held
the Shares from the date on which he became a shareholder of
the exchanged-from
Shares. Moreover, the contingent deferred sales charge will
be eliminated with
respect to certain redemptions (see "Elimination of
Contingent Deferred Sales
Charge").
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will not be charged in
connection with
exchanges of Shares for Class A Shares in other Liberty
Family Funds.
The contingent deferred sales charge will be eliminated with
respect to the
following redemptions: (1) redemptions following the death
or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of
a shareholder; (2) redemptions representing minimum required
distributions from
an Individual Retirement Account or other retirement plan to
a shareholder who
has attained the age of 70-1/2; and (3) involuntary
redemptions by the Fund of
Shares in shareholder accounts that do not comply with the
minimum balance
requirements. No contingent deferred sales charge will be
imposed on redemptions
of Shares held by Trustees, employees and sales
representatives of the Fund, the
distributor, or affiliates of the Fund or distributor;
employees of any
financial institution that sells Shares of the Fund pursuant
to a sales
agreement with the distributor; and spouses and children
under the age of 21 of
the aforementioned persons. Finally, no contingent deferred
sales charge will be
imposed on the redemption of Shares originally purchased
through a bank trust
department, an investment adviser registered under the
Investment Advisers Act
of 1940, as amended, or retirement plans where the third
party administrator has
entered into certain arrangements with Federated Securities
Corp. or its
affiliates, or any other financial institution, to the
extent that no payments
were advanced for purchases made through such entities. The
Trustees reserve the
right to discontinue elimination of the contingent deferred
sales charge.
Shareholders will be notified of such elimination. Any
Shares purchased prior to
the termination of such waiver would have the contingent
deferred sales charge
eliminated as provided in the Fund's prospectus at the time
of the purchase of
the Shares. If a shareholder making a redemption qualifies
for an elimination of
the contingent deferred sales charge, the shareholder must
notify Federated
Securities Corp. or the transfer agent in writing that he is
entitled to such
elimination.
-------------------------------------------------------
ACCOUNT AND SHARE
INFORMATION
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company
maintains a share
account for each shareholder. Share certificates are not
issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are
sent to each
shareholder. Monthly confirmations are sent to report
dividends paid during that
month.
DIVIDENDS
Dividends are declared and paid quarterly to all
shareholders invested in the
Fund on the record date. Dividends and distributions are
automatically
reinvested in additional Shares of the Fund on payment dates
at the ex-dividend
date net asset value without a sales load, unless
shareholders request cash
payments on the new account form or by contacting the
transfer agent. All
shareholders on the record date are entitled to the
dividend. If Shares are
redeemed or exchanged prior to the record date or purchased
after the record
date, those Shares are not entitled to that quarter's
dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any,
will be distributed at
least once every twelve months.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low
balances, the Fund may
redeem Shares in any account, except retirement plans, and
pay the proceeds to
the shareholder if the account balance falls below the Class
A Share required
minimum value of $500 or the required minimum value of
$1,500 for Class B Shares
and Class C Shares. This requirement does not apply,
however, if the balance
falls below the required minimum value because of changes in
the net asset value
of the respective Share Class. 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.
-------------------------------------------------------
-----------------------------------
--------------------
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees
are responsible for
managing the Trust's business affairs and for exercising all
the Trust's powers
except those reserved for the shareholders. An Executive
Committee of the Board
of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated
Management, the Fund's
investment adviser, subject to direction by the Trustees.
The Adviser
continually conducts investment research and supervision for
the Fund and is
responsible for the purchase or sale of portfolio
instruments, for which it
receives an annual fee from the Fund.
ADVISORY FEES
The Adviser receives an annual investment advisory fee equal
to 0.75 of 1% of
the Fund's average daily net assets. The fee paid by the
Fund, while higher than
the advisory fee paid by other mutual funds in general, is
comparable to fees
paid by other mutual funds with similar objectives and
policies. 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 Fund 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
Fund for operating
expenses in excess of limitations established by certain
states.
ADVISER'S BACKGROUND
Federated Management, a Delaware business trust organized on
April 11, 1989, is
a registered investment adviser under the Investment
Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A
(voting) Shares of
Federated Investors are owned by a trust, the Trustees of
which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr.
Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President
and Trustee of
Federated Investors.
Federated Management and other subsidiaries of Federated
Investors serve as
investment advisers to a number of investment companies and
private accounts.
Certain other subsidiaries also provide administrative
services to a number of
investment companies. With over $72 billion invested across
more than 260 funds
under management and/or administration by its subsidiaries,
as of December 31,
1994, Federated Investors is one of the largest mutual fund
investment managers
in the United States. With more than 1,750 employees,
Federated continues to be
led by the management who founded the company in 1955.
Federated funds are
presently at work in and through 4,000 financial
institutions nationwide. More
than 100,000 investment professionals have selected
Federated funds for their
clients.
James E. Grefenstette has been the Fund's portfolio manager
since its inception.
Mr. Grefenstette joined Federated Investors in 1992 and has
been an Assistant
Vice President of the Fund's investment adviser since
October 1994. From 1992
until 1994, Mr. Grefenstette acted as an investment analyst.
Mr. Grefenstette
was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an
investment officer at Pittsburgh National Bank from 1987
until
1990. Mr. Grefenstette received his M.S.I.A. from Carnegie
Mellon University.
Both the Trust and the Adviser have adopted strict codes of
ethics governing the
conduct of all employees who manage the Fund and its
portfolio securities. These
codes recognize that such persons owe a fiduciary duty to
the Fund's
shareholders and must place the interests of shareholders
ahead of the
employees' own interest. Among other things, the codes:
require preclearance and
periodic reporting of personal securities transactions;
prohibit personal
transactions in securities being purchased or sold, or being
considered for
purchase or sale, by the Fund; prohibit purchasing
securities in initial public
offerings; and prohibit taking profits on securities held
for less than sixty
days. Violations of the codes are subject to review by the
Board of Trustees,
and could result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for
Shares of the Fund.
Federated Securities Corp. is located at Federated Investors
Tower, Pittsburgh,
Pennsylvania 15222-3779. 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.
The distributor may offer to pay financial institutions an
amount equal to 1% of
the net asset value of Class C Shares purchased by their
clients or customers at
the time of purchase. These payments will be made directly
by the distributor
from its assets, and will not be made from assets of the
Fund. Financial
institutions may elect to waive the initial payment
described above; such waiver
will result in the waiver by the Fund of the otherwise
applicable contingent
deferred sales charge.
The distributor will pay dealers an amount equal to 5.5% of
the net asset value
of Class B Shares purchased by their clients or customers.
These payments will
be made directly by the distributor from its assets, and
will not be made from
the assets of the Fund. Dealers may voluntarily waive
receipt of all or any
portion of these payments. The distributor may pay a portion
of the distribution
fee discussed below to financial institutions that waive all
or any portion of
the advance payments.
DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES
Under a distribution plan adopted in accordance with
Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid
a fee in an amount
computed at an annual rate of up to .25% for Class A Shares
and up to .75% for
Class B Shares and Class C Shares of the average daily net
assets of each class
of Shares to finance any activity which is principally
intended to result in the
sale of Shares subject to the Distribution Plan. The Fund
does not currently
make payments to the distributor or charge a fee under the
Distribution Plan for
Class A Shares, and shareholders of Class A Shares will be
notified if the Fund
intends to charge a fee under the Distribution Plan. For
Class A Shares and
Class C Shares, the distributor may select financial
institutions such as banks,
fiduciaries, custodians for public funds, investment
advisers, and
broker/dealers to provide sales services or distribution-
related support
services as agents for their clients or customers. With
respect to Class B
Shares, because distribution fees to be paid by the Fund to
the distributor may
not exceed an annual rate of .75% of each class of Shares'
average daily net
assets, it will take the distributor a number of years to
recoup the expenses it
has incurred for its sales services and distribution-related
support services
pursuant to the Plan.
The Distribution Plan is a compensation type plan. As such,
the Fund makes no
payments to the distributor except as described above.
Therefore, the Fund does
not pay for unreimbursed expenses of the distributor,
including amounts expended
by the distributor in excess of amounts received by it from
the Fund, interest,
carrying or other financing charges in connection with
excess amounts expended,
or the distributor's overhead expenses. However, the
distributor may be able to
recover such amounts or may earn a profit from future
payments made by Shares
under the Plan.
In addition, the Fund has entered into a Shareholder
Services Agreement with
Federated Shareholder Services, a subsidiary of Federated
Investors, under which
the Fund may make payments up to 0.25 of 1% of the average
daily net asset value
of Class A Shares, Class B Shares, and Class C Shares to
obtain certain personal
services for shareholders and for the maintenance of
shareholder accounts
("Shareholder Services"). Under the Shareholder Services
Agreement, Federated
Shareholder Services will either perform shareholder
services directly or will
select financial institutions to perform shareholder
services. Financial
institutions will receive fees based upon Shares owned by
their clients or
customers. The schedules of such fees and the basis upon
which such fees will be
paid will be determined from time to time by the Fund and
Federated Shareholder
Services.
In addition to payments made pursuant to the Distribution
Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated
Shareholder
Services, from their own assets, may pay financial
institutions supplemental
fees for the performance of sales services, distribution-
related support
services, or shareholder services.
The Glass-Steagall Act prohibits a depository institution
(such as a commercial
bank or savings association) from being an underwriter or
distributor of most
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 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 laws.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
Federated Securities Corp. will pay financial institutions,
at the time of
purchase of Class A Shares, an amount equal to .50 of 1% of
the net asset value
of Class A Shares purchased by their clients or customers
under certain
qualified retirement plans as approved by Federated
Securities Corp. (Such
payments are subject to a reclaim from the financial
institution should the
assets leave the program within 12 months after purchase.)
Furthermore, with respect to Class A Shares, Class B Shares,
and Class C Shares,
the distributor may offer to pay a fee from its own assets
to financial
institutions as financial assistance for providing
substantial marketing and
sales support. The support may include sponsoring sales,
educational and
training seminars for their employees, providing sales
literature, and
engineering computer software programs that emphasize the
attributes of the
Fund. Such assistance will be predicated upon the amount of
Shares the financial
institution sells or may sell, and/or upon the type and
nature of sales or
marketing support furnished by the financial institution.
Any payments made by
the distributor may be reimbursed by the Fund's Adviser or
its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated
Investors, provides
administrative personnel and services (including certain
legal and financial
reporting services) necessary to operate the Fund. Federated
Administrative
Services provides these at an annual rate which relates to
the average aggregate
daily net assets of all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million
</TABLE>
The administrative fee received during any fiscal year shall
be at least
$125,000 per portfolio and $30,000 per each additional class
of Shares.
Federated Administrative Services may choose voluntarily to
waive a portion of
its fee.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8600, Boston,
Massachusetts
02266-8600, is custodian for the securities and cash of the
Fund.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600, is
transfer agent for the Shares of the Fund, and dividend
disbursing agent for the
Fund.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP,
One Oxford Centre,
Pittsburgh, Pennsylvania 15219.
EXPENSES OF THE FUND AND CLASS A SHARES, CLASS B SHARES, AND
CLASS C SHARES
Holders of Class A Shares, Class B Shares, and Class C
Shares pay their
allocable portion of Trust and portfolio expenses.
The Trust expenses for which holders of Class A Shares,
Class B Shares, and
Class C Shares pay their allocable portion include, but are
not limited to: the
cost of organizing the Trust and continuing its existence;
registering the Trust
with federal and state securities authorities; Trustees'
fees; auditors' fees;
the cost of meetings of Trustees; legal fees of the Trust;
association
membership dues; and such non-recurring and extraordinary
items as may arise
from time to time.
The portfolio expenses for which holders of Class A Shares,
Class B Shares, and
Class C Shares pay their allocable portion include, but are
not limited to:
registering the portfolio and Class A Shares, Class B
Shares, and Class C Shares
of the portfolio; investment advisory services; taxes and
commissions; custodian
fees; insurance premiums; auditors' fees; and such non-
recurring and
extraordinary items as may arise from time to time.
At present, the only expenses which are allocated
specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are
expenses under the
Trust's Distribution Plan and fees for Shareholder Services.
However, the
Trustees reserve the right to allocate certain other
expenses to holders of
Class A Shares, Class B Shares and Class C Shares as they
deem appropriate
("Class Expenses"). In any case, Class Expenses would be
limited to:
distribution fees; transfer agent fees as identified by the
transfer agent as
attributable to holders of Class A Shares, Class B Shares,
and Class C Shares;
printing and postage expenses related to preparing and
distributing materials
such as shareholder reports, prospectuses and proxies to
current shareholders;
registration fees paid to the Securities and Exchange
Commission and to state
securities commissions; expenses related to administrative
personnel and
services as required to support holders of Class A Shares,
Class B Shares, and
Class C Shares; legal fees relating solely to Class A
Shares, Class B Shares, or
Class C Shares; and Trustees' fees incurred as a result of
issues related solely
to Class A Shares, Class B Shares, or Class C Shares.
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 Fund 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.
-------------------------------------------------------
-----------------------------------
--------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in
Trustee elections and
other matters submitted to shareholders for vote. All Shares
of each Fund or
class in the Trust have equal voting rights, except that in
matters affecting
only a particular Fund or class, only Shares of that Fund or
class are entitled
to 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 or the Fund'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 of all series entitled to vote.
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 Fund 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.
The Fund will be treated as a single, separate entity for
federal income tax
purposes so that income (including capital gains) and losses
realized by the
Trust's other portfolios will not be combined for tax
purposes with those
realized by the Fund.
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 and distributions
are received in cash
or as additional Shares. Distributions representing long-
term capital gains, if
any, will be taxable to shareholders as long-term capital
gains no matter how
long the shareholders have held the 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 Fund advertises its total return and
yield for each class
of Shares.
Total return represents the change, over a specific period
of time, in the value
of an investment in each class of Shares after reinvesting
all income and
capital gains distributions. It is calculated by dividing
that change by the
initial investment and is expressed as a percentage.
The yield of each class of Shares is calculated by dividing
the net investment
income per share (as defined by the Securities and Exchange
Commission) earned
by each class of Shares over a thirty-day period by the
maximum offering price
per share of each class 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 each class of Shares and,
therefore, may not correlate
to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of non-
recurring charges, such
as the maximum sales load or contingent deferred sales
charges, which, if
excluded, would increase the total return and yield.
Total return and yield will be calculated separately for
Class A Shares, Class B
Shares, and Class C Shares. Expense differences among Class
A Shares, Class B
Shares, and Class C Shares may affect the performance of
each class.
From time to time, advertisements for Class A Shares, Class
B Shares, and Class
C Shares of the Fund may refer to ratings, rankings, and
other information in
certain financial publications and/or compare the
performance of Class A Shares,
Class B Shares, and Class C Shares to certain indices.
FEDERATED SMALL CAP
STRATEGIES FUND
(A PORTFOLIO OF
FEDERATED EQUITY FUNDS)
CLASS A SHARES,
CLASS B SHARES,
CLASS C SHARES
COMBINED PROSPECTUS
An Open-End,
Diversified
Management
Investment Company
September 13, 1995
FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Cusip 314172404
Cusip 314172503
Cusip 314172602
G01228-04 (9/95)
Federated Small Cap Strategies Fund
(A Portfolio of Federated Equity Funds)
Class A Shares
Class B Shares
Class C Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information
should be read with the combined prospectus for Class
A Shares, Class B Shares, and Class C Shares, and the
stand-alone prospectus for Class A Shares of Federated
Small Cap Strategies Fund (the "Fund") dated September
13, 1995. This Statement is not a prospectus itself. To
receive a copy of either prospectus, write or call the
Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated September 13, 1995
FEDERATED SECURITIES
CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Administrative Services 13
Fund 1 Transfer Agent and Dividend
Investment Objective and Policies1 Disbursing Agent 13
Corporate Debt Securities 1 Brokerage Transactions 13
Warrants 1 Purchasing Shares 13
Restricted and Illiquid Distribution Plan and
Securities 1 Shareholder Services Agreement13
Futures and Options Conversion to Federal Funds 14
Transactions 1 Purchases by Sales
Futures Contracts 2 Representatives, Trustees, and
"Margin"in Futures Employees of the Fund 14
Transactions 2 Determining Net Asset Value 14
Put Options on Financial Determining Market Value of
Futures Contracts 2 Securities 14
Stock Index Options 3 Redeeming Shares 14
Call Options on Financial and Redemption in Kind 15
Stock Index Futures Contracts 3 Exchanging Securities for Shares15
Purchasing Put and Call Options Tax Consequences 15
on Portfolio Securities 3 Tax Status 15
Writing Covered Put and Call The Fund's Tax Status 15
Options on Portfolio Shareholders' Tax Status 15
Securities 3 Total Return 16
Over-the-Counter Options 4 Yield 16
When-Issued and Delayed Performance Comparisons 16
Delivery Transactions 4 About Federated Investors 18
Lending of Portfolio Securities4 Appendix 19
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Portfolio Turnover 4
Investment Limitations 4
Federated Equity Funds Management7
Fund Ownership 11
Trustees Compensation 11
Trustee Liability 12
Investment Advisory Services 12
Adviser to the Fund 12
Advisory Fees 12
Other Related Services 13
General Information About the Fund
The Fund is a portfolio of Federated Equity Funds (the
"Trust"). The Trust was established as a Massachusetts
business trust under a Declaration of Trust dated April 17,
1984 under the name Federated Growth Trust. The Trust
later changed its name to Federated Equity Funds. The
Declaration of Trust permits the Trust to offer separate
series and classes of shares. Shares of the Fund are
offered in three classes known as Class A Shares, Class B
Shares, and Class C Shares (individually and collectively
referred to as "Shares" as the context may require). This
Combined Statement of Additional Information relates to all
three classes of Shares.
Investment Objective and Policies
The investment objective of the Fund is to provide capital
appreciation. Any income realized from the portfolio is
entirely incidental. The Fund pursues its investment
objective by investing primarily in a portfolio of common
stocks of small capitalization companies. The investment
objective cannot be changed without approval of
shareholders.
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).
Warrants
The Fund may invest in warrants. Warrants are basically
options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a
year to twenty years or may be perpetual. However, most
warrants have expiration dates after which they are
worthless. In addition, if the market price of the common
stock does not exceed the warrant's exercise price during
the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or
decrease in the market price of the warrant may tend to be
greater than the percentage increase or decrease in the
market price of the optioned common stock.
Restricted and Illiquid Securities
The ability of the Baord of Trustees (the "Trustees") to
determine the liquidity of certain restricted securities is
permitted under a Securities and Exchange Commission ("SEC")
staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule").
The Rule is a non-exclusive safe-harbor for certain
secondary market transactions involving registration for
resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Fund believes that
the staff of the SEC has left the question of determining
the liquidity of all restricted securities to the Trustees.
The Trustees may consider the following criteria in
determining the liquidity of certain restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the
security and the number of other potential buyers;
dealer undertakings to make a market in the security;
and
the nature of the security and the nature of the
marketplace trades.
The Fund may invest in commercial paper issued in reliance
on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933 and treats such commercial
paper as liquid. Section 4(2) commercial paper is
restricted as to disposition under federal securities law
and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the
Fund through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
Futures and Options Transactions
As a means of reducing fluctuations in the net asset value
of shares of the Fund, the Fund may attempt to hedge all or
a portion of its portfolio by buying and selling financial
futures contracts, buying put and call options on portfolio
securities and put options on financial futures contracts,
and writing call options on futures contracts. The Fund may
also write covered call options on its portfolio securities
and covered put options to attempt to increase its current
income. The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An
option position on financial futures contracts may be closed
out over-the-counter or on a nationally recognized exchange
which provides a secondary market for options of the same
series.
Futures Contracts
The Fund may purchase and sell financial futures contracts
to hedge against the effects of changes in the value of
portfolio securities due to anticipated changes in interest
rates and market conditions without necessarily buying or
selling the securities. The Fund also may purchase and sell
stock index futures to hedge against changes in prices. The
Fund will not engage in futures transactions for speculative
purposes.
A futures contract is a firm commitment by two parties: the
seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going
long") at a certain time in the future. For example, in the
fixed income securities market, prices move inversely to
interest rates. A rise in rates means a drop in price.
Conversely, a drop in rates means a rise in price. In order
to hedge its holdings of fixed income securities against a
rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline
during the Fund's anticipated holding period. The Fund would
"go long" (agree to purchase securities in the future at a
predetermined price) to hedge against a decline in market
interest rates.
Stock index futures contracts are based on indices that
reflect the market value of common stock of the firms
included in the indices. An index futures contract is an
agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences
between the value of the index at the close of the last
trading day of the contract and the price at which the index
contract was originally written.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not
pay or receive money upon the purchase or sale of a futures
contract. Rather, the Fund is required to deposit an amount
of "initial margin" in cash or U.S. Treasury bills with its
custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from
that of margin in securities transactions in that initial
margin in futures transactions does not involve the
borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the
official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
variation margin, equal to the daily change in value of
the futures contract. This process is known as marking to
market. Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund
and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset
value, the Fund will mark to market its open futures
positions.
The Fund is also required to deposit and maintain margin
when it writes call options on futures contracts.
Put Options on Financial Futures Contracts
The Fund may purchase listed put options on financial
futures contracts to protect portfolio securities against
decreases in value resulting from market factors, such as an
anticipated increase in interest rates. Unlike entering
directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to
decide on or before a future date whether to assume a short
position at the specified price.
Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures
contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally
close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Fund upon
the sale of the second option will be large enough to offset
both the premium paid by the Fund for the original option
plus the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close
out the position. To do so, it would simultaneously enter
into a futures contract of the type underlying the option
(for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures
contract in return for payment of the strike price. If the
Fund neither closes out nor exercises an option, the option
will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
Stock Index Options
The Fund may purchase put options on stock indices listed on
national securities exchanges or traded in the over-the-
counter market. A stock index fluctuates with changes in the
market values of the stocks included in the index.
The effectiveness of purchasing stock index options will
depend upon the extent to which price movements in the
Fund's portfolio correlate with price movements of the stock
index selected. Because the value of an index option depends
upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a
gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indices,
in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful use
by the Fund of options on stock indices will be subject to
the ability of the Adviser to predict correctly movements in
the directions of the stock market generally or of a
particular industry. This requires different skills and
techniques than predicting changes in the price of
individual stocks.
Call Options on Financial and Stock Index Futures Contracts
In addition to purchasing put options on futures, the Fund
may write listed and over-the-counter call options on
financial and stock index futures contracts (including cash-
settled stock index options) to hedge its portfolio against
an increase in market interest rates or a decrease in stock
prices. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of assuming a
short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option
if the option is exercised. As stock prices fall or market
interest rates rise, causing the prices of futures to go
down, the Fund's obligation under a call option on a future
(to sell a futures contract) costs less to fulfill, causing
the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down
below the strike price, the buyer of the option has no
reason to exercise the call, so that the Fund keeps the
premium received for the option. This premium can
substantially offset the drop in value of the Fund's
portfolio securities.
Prior to the expiration of a call written by the Fund, or
exercise of it by the buyer, the Fund may close out the
option by buying an identical option. If the hedge is
successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The
net premium income of the Fund will then substantially
offset the decrease in value of the hedged securities.
The Fund will not maintain open positions in futures
contracts it has sold or call options it has written on
futures contracts if, in the aggregate, the value of the
open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted
for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is
exceeded at any time, the Fund will take prompt action to
close out a sufficient number of open contracts to bring its
open futures and options positions within this limitation.
Purchasing Put and Call Options on Portfolio Securities
The Fund may purchase put and call options on portfolio
securities to protect against price movements in particular
securities in its portfolio. A put option gives the Fund, 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. A call option gives the Fund, in
return for a premium, the right to buy the underlying
securities from the seller.
Writing Covered Put and Call Options on Portfolio Securities
The Fund may also write covered put and call options to
generate income and thereby protect against price movements
in particular securities in the Fund's portfolio. As the
writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver
the underlying security upon payment of the exercise price.
As the writer of a put option, the Fund has the obligation
to purchase a security from the purchaser of the option upon
the exercise of the option.
The Fund may only write 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 additional
consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value
equal to or greater than the exercise price of the
underlying securities.
Over-the-Counter Options
The Fund may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the
buyers or writers of the options when options on the
portfolio securities held by the Fund are not traded on an
exchange.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to
be an advantageous price or yield for the Fund. No fees or
other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to
make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until
the transaction has been settled. The Fund does not intend
to engage in when-issued and delayed delivery transactions
to an extent that would cause the segregation of more than
20% of the total value of its assets.
Lending of Portfolio Securities
The collateral received when the Fund 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 Fund. During the time portfolio
securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the
borrower. The Fund 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
Fund 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 Fund 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 Fund might
be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody
of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such
securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the
Fund's investment adviser to be creditworthy pursuant to
guidelines established by the Trustees.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements.
These transactions are similar to borrowing cash. In a
reverse repurchase agreement, the Fund 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 Fund
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 Fund
to 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 Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets
of the Fund, 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 Fund 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 Fund's
investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its
annual rate of portfolio turnover exceeding 100%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase
any securities on margin, other than in connection with
buying stock index futures contracts, put options on
stock index futures, put options on financial futures
and portfolio securities, and writing covered call
options, but may obtain such short-term credits as are
necessary for the clearance of purchases and sales of
portfolio securities. The deposit or payment by the
Fund of initial or variation margin in connection with
financial futures contracts or related options
transactions is not considered the purchase of a
security on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities, except that
the Fund may borrow money directly or through reverse
repurchase agreements in amounts up to one-third of the
value of its total assets, including the amount
borrowed. The Fund 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 Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not
purchase any securities while any borrowings in excess
of 5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. For
purposes of this limitation, the following will not be
deemed to be pledges of the Fund's assets: margin
deposits for the purchase and sale of financial futures
contracts and related options, and segregation or
collateral arrangements made in connection with options
activities or the purchase of securities on a when-
issued basis.
Concentration of Investments
The Fund will not invest 25% or more of the value of
its total assets in any one industry, except that the
Fund may invest 25% or more of the value of its total
assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, and
repurchase agreements collateralized by such
securities.
Investing in Commodities
The Fund will not purchase or sell commodities,
commodity contracts, or commodity futures contracts.
However, the Fund may purchase put options on stock
index futures, put options on financial futures, stock
index futures contracts, and put options on portfolio
securities, and may write covered call options.
Investing in Real Estate
The Fund will not buy or sell real estate, including
limited partnership interests, 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.
Lending Cash or Securities
The Fund will not lend any of its assets, except
portfolio securities. This shall not prevent the Fund
from purchasing or holding U.S. government obligations,
money market instruments, variable rate demand notes,
bonds, debentures, notes, certificates of indebtedness,
or other debt securities, entering into repurchase
agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies,
and limitations or the Trust's Declaration of Trust.
Underwriting
The Fund 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.
Diversification of Investments
With respect to securities comprising 75% of the value
of its total assets, the Fund will not purchase
securities issued by any one issuer (other than cash,
cash items, or securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such
securities) if, as a result, more than 5% of the value
of its total assets would be invested in the securities
of that issuer, and will not acquire more than 10% of
the outstanding voting securities of any one issuer.
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 Fund will limit its investment in other investment
companies to no more than 3% of the total outstanding
voting stock of any investment company, invest no more
than 5% of its total assets in any one investment
company, and invest no more than 10% of its total
assets in investment companies in general. The Fund
will purchase securities of investment companies only
in open-market transactions involving only customary
broker's commissions. However, these limitations are
not applicable if the securities are acquired in a
merger, consolidation, or acquisition of assets.
Investing in Illiquid Securities
The Fund 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, non-negotiable fixed time
deposits with maturities over seven days, over-the-
counter options, and certain restricted securities not
determined by the Trustees to be liquid.
Investing in New Issuers
The Fund will not invest more than 5% of the value of
its total assets in securities of issuers with records
of less than three years of continuous operations,
including the operation of any predecessor.
Investing in Issuers Whose Securities are Owned by
Officers and Trustees of the Trust
The Fund will not purchase or retain the securities of
any issuer if the officers and Trustees of the Trust or
the Fund's 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.
Investing in Restricted Securities
The Fund will not invest more than 5% of the value of
its total assets in securities subject to restrictions
on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted
securities which meet the criteria for liquidity as
established by the Trustees.
Investing in Minerals
The Fund 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.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for
the purpose of exercising control or management.
Investing in Options
The Fund will not purchase put or call options on
securities or futures contracts, if more than 5% of the
value of the Fund's total assets would be invested in
premiums on open option positions.
Writing Covered Call Options
The Fund will not write call options on securities
unless the securities are held in the Fund's portfolio
or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash
in the amount of any further payment.
Investing in Warrants
The Fund will not invest more than 5% of the value of
its net assets in warrants. No more than 2% of the
Fund's net assets, to be included within the overall 5%
limit on investments in warrants, may be warrants which
are not listed on the New York or American Stock
Exchanges. For purposes of this investment restriction,
warrants acquired by the Fund in units with or attached
to securities may be deemed to be without value.
For purposes of its policies and limitations, the Fund
considers certificates of deposit and demand and time
deposits issued by a U.S. branch of a domestic bank or
savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment
to be "cash items."
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 Fund has no present intent to borrow money, pledge
securities, or invest in reverse repurchase agreements in
excess of 5% of the value of its total assets in the coming
fiscal year. In addition, the Fund expects to lend not more
than 5% of its total assets in the coming fiscal year.
To comply with registration requirements in certain states,
the Fund (1) will limit the aggregate value of the assets
underlying covered call options or put options written by
the Fund to not more than 25% of its net assets, (2) will
limit the premiums paid for options purchased by the Fund to
5% of its net assets, and (3) will limit the margin deposits
on futures contracts entered into by the Fund to 5% of its
net assets. (If state requirements change, these
restrictions may be revised without shareholder
notification.)
Federated Equity Funds Management
Officers and Trustees are listed with their addresses,
birthdates, present positions with Federated Equity Funds,
and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research;
Chairman and Director, Federated Research Corp. and
Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds.
Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, Florida
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-
President, John R. Wood and Associates, Inc., Realtors;
President, Northgate Village Development Corporation;
Partner or Trustee in private real estate ventures in
Southwest Florida; Director, Trustee, or Managing General
Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, Pennsylvania
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael
Baker, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes,
Inc.
James E. Dowd
571 Hayward Mill Road
Concord, Pennsylvania
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
Director, Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, Pennsylvania
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees,
University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center;
formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director, Trustee, or
Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center Suite 674
Pittsburgh, Pennsylvania
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and
Flaherty; Director, Eat'N Park Restaurants, Inc., and
Statewide Settlement Agency, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Peter E. Madden
70 Westcliff Road
Westin, Massachusetts
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of
Massachusetts; Director, Trustee, or Managing General
Partner of the Funds; formerly, President, State Street Bank
and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center Suite 674
Pittsburgh, Pennsylvania
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and
Flaherty; Chairman, Meritcare, Inc.; Director, Eat'N Park
Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, Pennsylvania
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting
Partner, Mollica, Murray and Hogue; Director, Trustee or
Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, Pennsylvania
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant;
Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., and U.S.
Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; founding
Chairman, National Advisory Council for Environmental Policy
and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, Pennsylvania
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Conference
Coordinator, Non-profit entities; Director, Trustee, or
Managing General Partner of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of
some of the Funds; staff member, Federated Securities Corp.
and Federated Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research;
President and Director, Federated Research Corp. and
Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Administrative Services,
Federated Services Company, and Federated Shareholder
Services; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of
the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors;
Vice President, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., Federated
Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.;
Trustee, Federated Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services; Trustee or
Director of some of the Funds; Executive Vice President or
President of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and
Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.
; Trustee, Federated Services Company; Executive Vice
President, Secretary, and Trustee, Federated Administrative
Services; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Vice
President and Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors;
Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee
of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated
Investors; Controller, Federated Advisers, Federated
Management, Federated Research, Federated Research Corp.,
and Passport Research, Ltd.; Vice President, Federated
Shareholder Services; Senior Vice President, Federated
Administrative Services; Treasurer of the Funds.
* This Trustee is deemed to be an "interested person" as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee
of the Board of Trustees handles the responsibilities of
the Board of Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.;
Annuity Management Series; Arrow Funds; Automated Government
Money Trust; Blanchard Funds; Blanchard Precious Metals,
Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund:
3-5 Years; First Priority Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.; Fund for U.S. Government Securities, Inc.; Government
Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; The Shawmut 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; The Virtus Funds; and
World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's
outstanding Shares.
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST* FROM FUND COMPLEX +
John F. Donahue $ 0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
John T. Conroy, Jr. $ 1,566 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $ 1,566 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
James E. Dowd $ 1,566 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $ 1,419 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $ 1,566 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $ 1,419 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $ 1,419 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October
31, 1994.
+The information is provided for the last calendar year.
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST* FROM FUND COMPLEX +
John E. Murray, Jr. $ 0 $0 for the Trust and
Trustee 69 other investment companies in the Fund
Complex
Wesley W. Posvar $ 1,419 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $ 1,419 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October
31, 1994.
+The information is provided for the last calendar year.
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
Adviser to the Fund
The Fund's investment adviser is Federated Management (the
"Adviser"). It is a subsidiary of Federated Investors. All
the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife,
and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Trust, the Fund, or
any shareholder of the Fund 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 each
prospectus.
State Expense Limitations
The Adviser has undertaken to comply with the expense
limitations established by certain states for
investment companies whose shares are registered for
sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but
not including brokerage commissions, interest, taxes,
and extraordinary expenses) exceed 2-1/2% per year of
the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and
1-1/2% per year of the remaining average net assets,
the Adviser will reimburse the Fund for its expenses
over the limitation.
If the Fund's monthly projected operating expenses
exceed this limitation, the investment advisory fee
paid will be reduced by the amount of the excess,
subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by
the Adviser will be limited, in any single fiscal year,
by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract
and may be amended or rescinded in the future.
Other Related Services
Affiliates of the Adviser may, from time to time, provide
certain electronic equipment and software to institutional
customers in order to facilitate the purchase of shares of
funds offered by Federated Securities Corp.
Administrative Services
Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to
the Fund for a fee described in each prospectus. Dr. Henry
J. Gailliot, an officer of Federated Management, the Adviser
to the Fund, holds approximately 20% of the outstanding
common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and
dividend disbursing agent for the Fund. The fee paid to the
transfer agent is based upon the size, type, and number of
accounts and transactions made by shareholders.
Federated Services Company also maintains the Fund's
accounting records. The fee paid for this service is based
upon the level of the Fund's average net assets for the
period plus out-of-pocket expenses.
Brokerage Transactions
The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be
furnished directly to the Fund or to the Adviser and may
include:
advice as to the advisability of investing in
securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
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 relation 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.
Purchasing Shares
Except under certain circumstances described in each
prospectus, Shares are sold at their net asset value (plus a
sales load on Class A Shares only) on days the New York
Stock Exchange is open for business. The procedure for
purchasing Shares is explained in each prospectus under "How
To Purchase Shares."
Distribution Plan and Shareholder Services Agreement
These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder
Services as appropriate, to stimulate distribution
activities and to cause services to be provided to
shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These
activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and
automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, the Trustees expect that
the Class A Shares, Class B Shares and Class C Shares of the
Fund will be able to achieve a more predictable flow of cash
for investment purposes and to meet redemptions. This will
facilitate more efficient portfolio management and assist
the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in
rates of redemptions and sales.
Other benefits, which may be realized under either
arrangement, may include: (1) providing personal services to
shareholders; (2) investing shareholder assets with a
minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning
their accounts.
Conversion to Federal Funds
It is the Fund'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 before shareholders begin to
earn dividends. Federated Services Company acts as the
shareholder's agent in depositing checks and converting them
to federal funds.
Purchases by Sales Representatives, Trustees, and Employees
of the Fund
Trustees, employees, and sales representatives of the Fund,
Federated Management, and Federated Securities Corp. or
their affiliates, or any investment dealer who has a sales
agreement with Federated Securities Corp. and their spouses
and children under 21, may buy Class A Shares at net asset
value without a sales load. Shares may also be sold without
a sales load to trusts or pension or profit-sharing plans
for these people.
These sales are made with the purchaser's written assurance
that the purchase is for investment purposes and that the
securities will not be resold except through redemption by
the Fund.
Determining Net Asset Value
Net asset value generally changes each day. The days on
which net asset value is calculated by the Fund are
described in each prospectus.
Determining Market Value of Securities
Market values of the Fund'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.
Redeeming Shares
The Fund redeems Shares at the next computed net asset
value, less any applicable contingent deferred sales charge,
after the Fund receives the redemption request. Redemption
procedures are explained in each prospectus under "How To
Redeem Shares." Although the transfer agent 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.
Class B Shares redeemed within one to six years of purchase
and Class C Shares and applicable Class A Shares redeemed
within one year of purchase may be subject to a contingent
deferred sales charge. The amount of the contingent deferred
sales charge is based upon the amount of the administrative
fee paid at the time of purchase by the distributor to the
financial institution for services rendered, and the length
of time the investor remains a shareholder in the Fund.
Should financial institutions elect to receive an amount
less than the administrative fee that is stated in the
prospectus for servicing a particular shareholder, the
contingent deferred sales charge and/or holding period for
that particular shareholder will be reduced accordingly.
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 respective Fund's portfolio. 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, as amended, under which the
Fund is obligated to redeem Shares for any one shareholder
in cash only up to the lesser of $250,000 or 1% of the
respective class's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash
unless the Trustees determine that payments should be in
kind. In such a case, the Fund will pay all or a portion of
the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset
value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption.
If redemption is made in kind, shareholders receiving their
securities and selling them before their maturity could
receive less than the redemption value of their securities
and could incur certain transaction costs.
Exchanging Securities for Shares
Investors may exchange securities they already own for
Shares, or they may exchange a combination of securities and
cash for Shares. An investor should forward the securities
in negotiable form with an authorized letter of transmittal
to Federated Securities Corp. The Fund will notify the
investor of its acceptance and valuation of the securities
within five business days of their receipt by State Street
Bank.
The Fund values securities in the same manner as the Fund
values its assets. The basis of the exchange will depend
upon the net asset value of Shares on the day the securities
are valued. One Share of the Fund 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 Fund, 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 Shares, a gain or loss may
be realized by the investor.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects
to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, applicable to regulated
investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this
treatment, the Fund 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 Fund 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 Fund Shares.
Total Return
The average annual total return for each class of Shares of
the Fund 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 net
asset value 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, less any applicable sales load adjusted over
the period by any additional Shares, assuming the quarterly
reinvestment of all dividends and distributions.
Any applicable contingent deferred sales charge is deducted
from the ending value of the investment based on the lesser
of the original purchase price or the net asset value of
Shares redeemed.
Yield
The yield for each class of Shares of the Fund is determined
by dividing the net investment income per share (as defined
by the Securities and Exchange Commission) earned by any
class of Shares over a thirty-day period by the maximum
offering price per share of the respective class 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 12-month period and is
reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of
certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the
dividends or other distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in
conjunction with an investment in any class of Shares, the
performance will be reduced for those shareholders paying
those fees.
Performance Comparisons
The performance of each of the classes of Shares 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 the Fund's or any class of Shares' expenses;
and
various other factors.
The Fund's performance fluctuates on a daily basis largely
because net earnings and offering price per Share fluctuate
daily. Both net earnings and offering price per Share are
factors in the computation of yield and total return.
Investors may use financial publications and/or indices to
obtain a more complete view of the Fund's performance. When
comparing performance, investors should consider all
relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities
and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may
include:
Russell 2000 Small Stock Index is a broadly diversified
index consisting of approximately 2,000 small
capitalization common stocks that can be used to
compare to the total returns of funds whose portfolios
are invested primarily in small capitalization common
stocks.
Standard & Poor's Daily Stock Price Index of 500 Common
Stocks (S&P 500), 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 S & P 500
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 600 Small Capitalization Index S&P
Small Cap 600 is an unmanaged index of 600 small
capitalization common stocks with a market
capitalization generally ranging between $80 million
and $600 million. The index, monitored by Standard &
Poor's Corporation, is cited as an indicator of small
capitalization stock performance.
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 Fund will quote its Lipper ranking in
the "small company growth funds" category in
advertising and sales literature.
Lipper Small Company Growth Fund Average is an average
of the total returns for 312 growth funds tracked by
Lipper Analytical Services, Inc., an independent mutual
fund rating service.
Lipper Small Company Growth Fund Index is an average of
the net asset-valuated total returns for the top 30
small company 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.
Wilshire 5000 Equity Index consists of nearly 5,000
common equity securities, covering all stocks in the
U.S. for which daily pricing is available, and can be
used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks.
Strategic Insight Small Company Growth Funds Index
consists of mutual funds that invest primarily in
companies below $750 million in total market
capitalization.
Value Line Composite Index consists of approximately
1,700 common equity securities. It is based on a
geometric average of relative price changes of the
component stocks and does not include income.
Value Line Mutual Fund Survey, published by Value Line
Publishing, Inc., analyzes price, yield, risk, and
total return for equity and fixed income mutual funds.
The highest rating is One, and ratings are effective
for two weeks.
Mutual Fund Source Book, published by Morningstar,
Inc., analyzes price, yield, risk, and total return for
equity and fixed income funds.
Financial publications: The Wall Street Journal,
Business Week, Changing Times, Financial World, Forbes,
Fortune, and Money Magazines, among others--provide
performance statistics over specified time periods.
CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc., analyzes price, current yield,
risk, total return, and average rate of return (average
annual compounded growth rate) over specified time
periods for the mutual fund industry.
Strategic Insight Mutual Fund Research and Consulting,
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 Fund will quote
its Strategic Insight ranking in the "small company
growth funds" category in advertising and sales
literature.
Advertisements and other sales literature for any class of
Shares 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 any class of Shares based on quarterly reinvestment of
dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may
advertise the performance of any class of Shares using
charts, graphs, and descriptions, compared to federally
insured bank products including certificates of deposit and
time deposits and to money market funds using the Lipper
Analytical Services money market instruments average. In
addition, advertising and sales literature for the Fund may
use charts and graphs to illustrate the principles of dollar-
cost averaging and may disclose the amount of dividends paid
by the Fund over certain periods of time.
Advertisements may quote performance information which does
not reflect the effect of the sales load on Class A Shares.
About Federated Investors
Federated Investors ("Federated") is dedicated to meeting
investor needs which is reflected in its investment decision
making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a
range of competitive investment products that have gained
the confidence of thousands of clients and their customers.
The company's disciplined security selection process is
firmly rooted in sound methodologies backed by fundamental
and technical research. Investment decisions are made and
executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the equity sector, Federated has more than 25 years'
experience. As of December 31, 1994, Federated managed 15
equity funds totaling approximately $4 billion in assets
across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated's value-
oriented management style combines quantitative and
qualitative analysis and features a structured, computer-
assisted composite modeling system that was developed in the
1970s.
J. Thomas Madden, Executive Vice President, oversees
Federated's equity and high yield corporate bond management
while William D. Dawson, Executive Vice President, oversees
Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management
of Federated's international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing
their financial goals through mutual funds. These investors,
as well as businesses and institutions, have entrusted over
$2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes
mutual funds for a variety of investment applications.
Specific markets include:
Institutional
Federated meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate
accounts and mutual funds for a variety of applications,
including defined benefit and defined contribution programs,
cash management, and asset/liability management.
Institutional clients include corporations, pension funds,
tax-exempt entities, foundations/endowments, insurance
companies, and investment and financial advisors. The
marketing effort to these institutional clients is headed
by John B. Fisher, President, Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with
more than 1,500 banks and trust organizations. Virtually
all of the trust divisions of the top 100 bank holding
companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing &
Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated mutual funds are available to consumers through
major brokerage firms nationwide--including 200 New York
Stock Exchange firms--supported by more wholesalers than any
other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President,
Broker/Dealer Division.
_____________
*source: Investment Company Institute
Appendix
Standard and Poor's Ratings Group Long Term Debt Rating
Definitions
AAA--Debt rated AAA has the highest rating assigned by
Standard & Poor's Ratings Group. Capacity to pay interest
and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues
only in small degree.
A--Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
BB--Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the
event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.
CC--The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC
debt rating.
C--The rating C typically is applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt
rating. The C rating may be used to cover a situation where
a bankruptcy petition has been filed, but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no
interest is being paid.
D--Debt rated D is in payment default. The D rating
category is used when interest payments or principal
payments are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's
Ratings Group believes that such payments will be made
during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Moody's Investors Service, Inc. Long Term Bond Rating
Definitions
Aaa--Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered as medium
grade obligations, (i.e., they are neither highly protected
nor poorly secured). Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba--Bonds which are Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca--Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Fitch Investors Service, Inc. Long-Term Debt Rating
Definitions
AAA--Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and
financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in
this class are currently meeting debt service requirements,
the probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
CCC--Bonds have certain indentifiable characteristics which,
if not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic
environment.
CC--Bonds are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C--Bonds are in imminent default in payment of interest or
principal.
DDD, DD, and D--Bonds are in default on interest and/or
principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery
value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
Moody's Investors Service, Inc. Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earning coverage of fixed financial
charges and high internal cash generation.
- Well established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-
term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity
is maintained.
Standard and Poor's Ratings Group Commercial Paper Ratings
A-1--This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree
of safety is not as high as for issues designated A-1.
Fitch Investors Service, Inc. Commercial Paper Rating
Definitions
FITCH-1--(Highest Grade) Commercial paper assigned this
rating is regarded as having the strongest degree of
assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
Cusip 314172404
Cusip 314172503
Cusip 314172602
G01228-06 (9/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and
Exhibits:
(a) Financial Statements (Filed in Part B -
Federated Growth Strategies Fund)
(b) Exhibits:
(1) Conformed copy of Declaration
of Trust of the
Registrant (1);
(2) Copy of By-Laws of the
Registrant as amended (1.);
(i) Copy of Amendment
No. 2 to By-Laws effective February 2, 1987
(3.);
(ii) Copy of Amendment
No. 3 to By-Laws effective August 25, 1988
(4.);
(3) Not applicable;
(4) (i) Copy of Specimen
Certificate for Shares of Beneficial Interest
of the Registrant (Federated Small Cap
Strategies Fund) (7.);
(ii) Copy of Specimen
Certificate for Shares of Beneficial Interest
of the Registrant (Federated Growth
Strategies Fund) (8.);
(iii) Copy of Specimen
Certificate for Shares of Beneficial Interest
of the Registrant (Federated Capital
Appreciation Fund) (9.);
(5) (i) Conformed copy of
Investment Advisory Contract on behalf of
Federated Growth Trust (5.);
(ii) Conformed copy of
Investment Advisory Contract on behalf of
Federated Equity Funds, which includes
exhibits for Federated Small Cap Strategies
Fund and Federated Capital Appreciation Fund;
+
1. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed July 9, 1984.
(File Nos. 2-91090 and 811-4017)
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on Form N-1A filed July 21, 1987.
(File Nos. 2-91090 and 811-4017)
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 on Form N-1A filed December 31,
1988. (File Nos. 2-91090 and 811-4017)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 11 on Form N-1A filed October 23,
1989. (File Nos. 2-91090 and 811-4017)
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 21 on Form N-1A filed June 30, 1995.
(File Nos. 2-91090 and 811-4017)
8. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 22 on Form N-1A filed July 17, 1995.
(File Nos. 2-91090 and 811-4017)
9. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 25 on Form N-1A filed August 31,
1995. (File Nos. 2-91090 and 811-4017)
+ All exhibits have been filed electronically.
(6) (i) Conformed copy of
Distributor's Contract on behalf of Federated
Growth Trust (5.);
(ii) Conformed copy of
Distributor's Contract on behalf of Federated
Equity Funds, which includes exhibits for
Federated Small Cap Strategies Fund and
Federated Capital Appreciation Fund; +
(iii) The Registrant
hereby incorporates the conformed copy of the
specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement;
and Plan Trustee/Mutual Funds Service
Agreement from Item 24(b)(6) of the Cash
Trust Series II Registration Statement on
Form N-1A, filed with the Commission on July
24, 1995. (File No. 33-38550 and 811-6269).
(7) Not applicable;
(8) Conformed Copy of the
Custodian Agreement of the Registrant; (6.)
(9) (i) Conformed copy of
Shareholder Services Agreement of the
Registrant; (6.)
(ii) Conformed copy of
Administrative Services Agreement of the
Registrant; (6.)
(iii) Conformed Copy of
Agreement for Fund Accounting, Shareholder
Recordkeeping, and Custody Services
Procurement; (6.)
(iv) The responses and
exhibits described in Item 24(6) are hereby
incorporated by reference.
(10) Conformed copy of the Opinion
and Consent of Counsel regarding legality of
shares being registered; (6.)
(11) Not applicable;
(12) Not applicable;
(13) Conformed copy of Initial
Capital Understanding; (2.)
(14) Not applicable;
(15) Conformed Copy of
Distribution Plan; +
(16) Copy of Schedule for
Computation of Fund Performance Data for
Federated Growth Trust, the predecessor to
Federated Growth Strategies Fund; (6.)
(17) Not applicable;
(18) Multiple Class Plan; (to be
filed by amendment)
(19) Conformed copy of Power
of Attorney (7.).
2. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed February 28,
1985. (File Nos. 2-91090 and 811-4017)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 11 on Form N-1A filed October 23,
1989. (File Nos. 2-91090 and 811-4017)
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 20 on Form N-1A filed December 29,
1994. (File Nos. 2-91090 and 811-4017)
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 21 on Form N-1A filed June 30, 1995.
(File Nos. 2-91090 and 811-4017)
+ All exhibits have been filed electronically.
Item 25. Persons Controlled by or Under
Common Control with
Registrant:
None
Item 26. Number of Holders of
Securities:
Number of
Record Holders
Title of Class as of August 25,
1995
Shares of Beneficial Interest
(no par value)
Federated Growth Strategies Fund
Class A Shares 5,314
Class B Shares 306
Class C Shares 306
Federated Small Cap Strategies Fund
Class A Shares (not
effective)
Class B Shares (not
effective)
Class C Shares (not
effective)
Number of
Record Holders
Title of Class as of August 31,
1995
Shares of Beneficial Interest
(no par value)
Federated Capital Appreciation
Fund
Class A Shares (not
effective)
Class B Shares (not
effective)
Class C Shares (not
effective)
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections
of Investment Adviser:
For a description of the other business of the
investment adviser, see the section entitled "Trust
Information - Management of the Trust" in Part A. The
affiliations with the Registrant of four of the
Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration
Statement under "Federated Equity Funds Management -
Officers and Trustees." The remaining Trustee of the
investment adviser, his position with the investment
adviser, and, in parentheses, his principal occupation
is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 West Market Street, Georgetown, Delaware
19947.
1. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed July 9, 1984.
(File Nos. 2-91090 and 811-4017)
The remaining Officers of the investment adviser are:
William D. Dawson, Henry A. Frantzen, J. Thomas Madden,
and Mark L. Mallon, Executive Vice Presidents; Henry J.
Gailliot, Senior Vice President-Economist; Peter R.
Anderson, and J. Alan Minteer, Senior Vice Presidents;
J. Scott Albrecht, Randall A. Bauer, David A. Briggs,
Jonathan C. Conley, Deborah A. Cunningham, Michael P.
Donnelly, Mark E. Durbiano, Kathleen M. Foody-Malus,
Thomas M. Franks, Edward C. Gonzales, Jeff A.
Kozemchak, Marian R. Marinack, John W. McGonigle, Susan
M. Nason, Mary Jo Ochson. Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D.
Roberge, Sandra L. Weber, and Christopher H. Wiles,
Vice Presidents; Edward C. Gonzales, Treasurer; and
John W. McGonigle, Secretary. The business address of
each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a
majority of the investment advisers to the Funds listed
in Part B of this Registration Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for
shares of the Registrant, also acts as principal
underwriter for the following open-end investment
companies: Alexander Hamilton Funds; American
Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust;
BayFunds; The Biltmore Funds; The Biltmore
Municipal Funds; Cash Trust Series, Inc.; Cash
Trust Series II; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust;
Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series,
Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3
Years; Federated U.S. Government Securities Fund: 3-
5 Years;First Priority Funds; First Union Funds;
Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fountain Square Funds; Fund for U.S. Government
Securities, Inc.; Government Income Securities,
Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insurance Management Series;
Intermediate Municipal Trust; International Series
Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust;
Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; Newpoint Funds; 111
Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Sunburst Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; Tower Mutual Funds;
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; The Virtus Funds; Vision
Fiduciary Funds, Inc.; Vision Group of Funds, Inc.;
and World Investment Series, Inc.
Federated Securities Corp. also acts as
principal underwriter for the following closed-end
investment company: Liberty Term Trust, Inc.-
1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
Richard B. Fisher Director, Chairman, Chief Vice
President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive
Vice
Federated Investors Tower President, and Treasurer, President
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Executive
Vice
Federated Investors Tower President, and Assistant President
and
Pittsburgh, PA 15222-3779 Secretary, Federated Secretary
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated
Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated
Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph L. Epstein Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. LaVersa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated
Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant
Federated Investors Tower Federated Securities Corp. Secretary
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and
Records:
All accounts and records required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as
amended, and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following
locations:
Registrant Federated Investors
Tower
Federated Services Company Pittsburgh, PA 15222-
3779
(Transfer Agent and Dividend
Disbursing Agent)
Federated Administrative Services
(Administrator)
Federated Management
(Adviser)
State Street Bank and Trust Company P.O. Box 8600
(Custodian) Boston, MA 02266-8600
Item 31. Management Services: Not
applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrants latest annual report to shareholders, upon
request and without charge.
Registrant hereby undertakes to file a post-effective
amendment on behalf of Federated Small Cap Strategies
Fund, using financial statements for Federated Small
Cap Strategies Fund, which need not be certified,
within four to six months from the effective date of
Post-Effective Amendment No. 21.
Registrant hereby undertakes to file a post-effective
amendment on behalf of Federated Capital Appreciation
Fund, using financial statements for Federated Capital
Appreciation Fund, which need not be certified, within
four to six months from the effective date of Post-
Effective Amendment No. 25.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant, FEDERATED EQUITY FUNDS (formerly,
Federated Growth Trust), certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 12th day
of September, 1995.
FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)
BY: /s/ Robert C. Rosselot
Robert C. Rosselot, Assistant Secretary
Attorney in Fact for John F. Donahue
September 12, 1995
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to its Registration
Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Robert C. Rosselot Attorney In Fact
September 12, 1995
Robert C. Rosselot For the Persons
ASSISTANT SECRETARY Listed Below
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
Edward C. Gonzales* Executive Vice President
David M. Taylor* Treasurer (Principal Financial
and Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Page
Exhibit 5(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
INVESTMENT ADVISORY CONTRACT
This Contract is made this September 1, 1995, between
Federated Management, a Delaware business trust having its
principal place of business in Pittsburgh, Pennsylvania (the
"Adviser"), and Federated Equity Funds (formerly, Federated
Growth Trust), a Massachusetts business trust having its
principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS the Trust is an open-end management investment
company as that term is defined in the Investment Company
Act of 1940, as amended, and is registered as such with the
Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment
Adviser for each of the portfolios ("Funds") of the Trust which
executes an exhibit to this Contract, and Adviser accepts the
appointments. Subject to the direction of the Trustees of the
Trust, Adviser shall provide investment research and supervision
of the investments of the Funds and conduct a continuous program
of investment evaluation and of appropriate sale or other
disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each
of the Funds will be guided by each of the Fund's investment
objective and policies and the provisions and restrictions
contained in the Declaration of Trust and By-Laws of the Trust
and as set forth in the Registration Statements and exhibits as
may be on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own
expenses and its allocable share of Trust expenses, including,
without limitation, the expenses of organizing the Trust and
continuing its existence; fees and expenses of Trustees and
officers of the Trust; fees for investment advisory services and
administrative personnel and services; expenses incurred in the
distribution of its shares ("Shares"), including expenses of
administrative support services; fees and expenses of preparing
and printing its Registration Statements under the Securities
Act of 1933 and the Investment Company Act of 1940, as amended,
and any amendments thereto; expenses of registering and
qualifying the Trust, the Funds, and Shares of the Funds under
federal and state laws and regulations; expenses of preparing,
printing, and distributing prospectuses (and any amendments
thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of
Share certificates), purchase, repurchase, and redemption of
Shares, including expenses attributable to a program of periodic
issue; charges and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents, and
registrars; printing and mailing costs, auditing, accounting,
and legal expenses; reports to shareholders and governmental
officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance
expenses; association membership dues and such nonrecurring
items as may arise, including all losses and liabilities
incurred in administering the Trust and the Funds. Each Fund
will also pay its allocable share of such extraordinary expenses
as may arise including expenses incurred in connection with
litigation, proceedings, and claims and the legal obligations of
the Trust to indemnify its officers and Trustees and agents with
respect thereto.
4. Each of the Funds shall pay to Adviser, for all
services rendered to each Fund by Adviser hereunder, the fees
set forth in the exhibits attached hereto.
5. The net asset value of each Fund's Shares as used
herein will be calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods
as it deems appropriate reduce its compensation (and, if
appropriate, assume expenses of one or more of the Funds) to the
extent that any Fund's expenses exceed such lower expense
limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
7. This Contract shall begin for each Fund as of the date
of execution of the applicable exhibit and shall continue in
effect with respect to each Fund presently set forth on an
exhibit (and any subsequent Funds added pursuant to an exhibit
during the initial term of this Contract) for two years from the
date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for
termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least
annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party cast in person
at a meeting called for that purpose; and (b) Adviser shall not
have notified a Fund in writing at least sixty (60) days prior
to the anniversary date of this Contract in any year thereafter
that it does not desire such continuation with respect to that
Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as
to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this
Contract by the Trustees and thereafter for successive periods
of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may
be terminated at any time with respect to any Fund, without the
payment of any penalty, by the Trustees of the Trust or by a
vote of the shareholders of that Fund on sixty (60) days'
written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser
may employ or contract with such other person, persons,
corporation, or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out this
Contract.
10. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or
duties under this Contract on the part of Adviser, Adviser shall
not be liable to the Trust or to any of the Funds or to any
shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses
that may be sustained in the purchase, holding, or sale of any
security.
11. This Contract may be amended at any time by agreement
of the parties provided that the amendment shall be approved
both by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at
a meeting called for that purpose, and, where required by
Section 15(a)(2) of the Act, on behalf of a Fund by a majority
of the outstanding voting securities of such Fund as defined in
Section 2(a)(42) of the Act.
12. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations pursuant to
this Contract of a particular Fund and of the Trust with respect
to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any
such obligation from any other Fund, the shareholders of any
Fund, the Trustees, officers, employees or agents of the Trust,
or any of them.
13. The parties hereto acknowledge that Federated
Investors, has reserved the right to grant the non-exclusive use
of the name "Federated" or any derivative thereof to any other
investment company, investment company portfolio, investment
adviser, distributor or other business enterprise, and to
withdraw from the Trust and one or more of the Funds the use of
the name "Federated". The name "Federated" will continue to be
used by the Trust and each Fund so long as such use is mutually
agreeable to Federated Investors and the Trust.
14. This Contract shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
15. This Contract will become binding on the parties
hereto upon their execution of the attached exhibits to this
Contract.
EXHIBIT A
to the
Investment Advisory Contract
Federated Small Cap Strategies Fund
For all services rendered by Adviser hereunder, the above-
named Fund of the Trust shall pay to Adviser and Adviser agrees
to accept as full compensation for all services rendered
hereunder, an annual investment advisory fee equal to .75 of 1%
of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of 1/365th
of .75 of 1% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this September 1, 1995.
Attest: Federated Management
/s/Stephen A. Keen By: /s/J. Thomas Madden
Secretary Executive Vice President
Attest: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/Robert C. Rosselot By: /s/Richard B. Fisher
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
Federated Capital Appreciation Fund
For all services rendered by Adviser hereunder, the above-
named Fund of the Trust shall pay to Adviser and Adviser agrees
to accept as full compensation for all services rendered
hereunder, an annual investment advisory fee equal to .75 of 1%
of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of 1/365th
of .75 of 1% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this September 1, 1995.
Attest: Federated Management
/s/Stephen A. Keen By: /s/J. Thomas Madden
Secretary Executive Vice President
Attest: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/Robert C. Rosselot By: /s/Richard B. Fisher
Assistant Secretary Vice President:
Page
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)
DISTRIBUTOR'S CONTRACT
AGREEMENT made this September 1, 1995 by and between
Federated Equity Funds (formerly, Federated Growth Trust)
(the "Trust"), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
Corporation.
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties
hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell
and distribute shares of the Trust which may be
offered in one or more series (the "Funds")
consisting of one or more classes (the "Classes") of
shares (the "Shares"), as described and set forth on
one or more exhibits to this Agreement, at the
current offering price thereof as described and set
forth in the current Prospectuses of the Trust. FSC
hereby accepts such appointment and agrees to
provide such other services for the Trust, if any,
and accept such compensation from the Trust, if any,
as set forth in the applicable exhibits to this
Agreement.
2. The sale of any Shares may be suspended without
prior notice whenever in the judgment of the Trust
it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by
the Trust to give any information or to make any
representation relative to any Shares other than
those contained in the Registration Statement,
Prospectuses, or Statements of Additional
Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from
time to time, or in any supplemental information to
said Prospectuses or SAIs approved by the Trust. FSC
agrees that any other information or representations
other than those specified above which it or any
dealer or other person who purchases Shares through
FSC may make in connection with the offer or sale of
Shares, shall be made entirely without liability on
the part of the Trust. No person or dealer, other
than FSC, is authorized to act as agent for the
Trust for any purpose. FSC agrees that in offering
or selling Shares as agent of the Trust, it will, in
all respects, duly conform to all applicable state
and federal laws and the rules and regulations of
the National Association of Securities Dealers,
Inc., including its Rules of Fair Practice. FSC will
submit to the Trust copies of all sales literature
before using the same and will not use such sales
literature if disapproved by the Trust.
4. This Agreement is effective with respect to each
Class as of the date of execution of the applicable
exhibit and shall continue in effect with respect to
each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit
during the initial term of this Agreement for one
year from the date set forth above, and thereafter
for successive periods of one year if such
continuance is approved at least annually by the
Trustees of the Trust including a majority of the
members of the Board of Trustees of the Trust who
are not interested persons of the Trust and have no
direct or indirect financial interest in the
operation of any Distribution Plan relating to the
Trust or in any related documents to such Plan
("Disinterested Trustees") cast in person at a
meeting called for that purpose. If a Class is added
after the first annual approval by the Trustees as
described above, this Agreement will be effective as
to that Class upon execution of the applicable
exhibit and will continue in effect until the next
annual approval of this Agreement by the Trustees
and thereafter for successive periods of one year,
subject to approval as described above.
5. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the
payment of any penalty, by the vote of a majority of
the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund
or Class on not more than sixty (60) days' written
notice to any other party to this Agreement. This
Agreement may be terminated with regard to a
particular Fund or Class by FSC on sixty (60) days'
written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall
automatically terminate in the event of an
assignment by FSC as defined in the Investment
Company Act of 1940, as amended, provided, however,
that FSC may employ such other person, persons,
corporation or corporations as it shall determine in
order to assist it in carrying out its duties under
this Agreement.
7. FSC shall not be liable to the Trust 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 by this Agreement.
8. This Agreement may be amended at any time by mutual
agreement in writing of all the parties hereto,
provided that such amendment is approved by the
Trustees of the Trust including a majority of the
Disinterested Trustees of the Trust cast in person
at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of
Pennsylvania.
10. (a) Subject to the conditions set forth below,
the Trust agrees to indemnify and hold harmless
FSC and each person, if any, who controls FSC
within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the
Securities Act of 1934, as amended, against any
and all loss, liability, claim, damage and
expense whatsoever (including but not limited
to any and all expenses whatsoever reasonably
incurred in investigating, preparing or
defending against any litigation, commenced or
threatened, or any claim whatsoever) arising
out of or based upon any untrue statement or
alleged untrue statement of a material fact
contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time
amended and supplemented) or the omission or
alleged omission therefrom of a material fact
required to be stated therein or necessary to
make the statements therein not misleading,
unless such statement or omission was made in
reliance upon and in conformity with written
information furnished to the Trust about FSC by
or on behalf of FSC expressly for use in the
Registration Statement, any Prospectuses and
SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any
controlling person thereof with respect to
which indemnity may be sought against the Trust
pursuant to the foregoing paragraph, FSC shall
promptly notify the Trust in writing of the
institution of such action and the Trust shall
assume the defense of such action, including
the employment of counsel selected by the Trust
and payment of expenses. FSC or any such
controlling person thereof shall have the right
to employ separate counsel in any such case,
but the fees and expenses of such counsel shall
be at the expense of FSC or such controlling
person unless the employment of such counsel
shall have been authorized in writing by the
Trust in connection with the defense of such
action or the Trust shall not have employed
counsel to have charge of the defense of such
action, in any of which events such fees and
expenses shall be borne by the Trust. Anything
in this paragraph to the contrary
notwithstanding, the Trust shall not be liable
for any settlement of any such claim of action
effected without its written consent. The Trust
agrees promptly to notify FSC of the
commencement of any litigation or proceedings
against the Trust or any of its officers or
Trustees or controlling persons in connection
with the issue and sale of Shares or in
connection with the Registration Statement,
Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the
Trust, each of its Trustees, each of its
officers who have signed the Registration
Statement and each other person, if any, who
controls the Trust within the meaning of
Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions,
if any, made in the Registration Statement or
any Prospectus, SAI, or any amendment or
supplement thereof in reliance upon, and in
conformity with, information furnished to the
Trust about FSC by or on behalf of FSC
expressly for use in the Registration Statement
or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be
brought against the Trust or any other person
so indemnified based on the Registration
Statement or any Prospectus, SAI, or any
amendment or supplement thereof, and with
respect to which indemnity may be sought
against FSC, FSC shall have the rights and
duties given to the Trust, and the Trust and
each other person so indemnified shall have the
rights and duties given to FSC by the
provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to
protect any person against liability to the
Trust or its shareholders to which such person
would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in
the performance of the duties of such person or
by reason of the reckless disregard by such
person of the obligations and duties of such
person under this Agreement.
(d) Insofar as indemnification for liabilities may
be permitted pursuant to Section 17 of the
Investment Company Act of 1940, as amended, for
Trustees, officers, FSC and controlling persons
of the Trust by the Trust pursuant to this
Agreement, the Trust is aware of the position
of the Securities and Exchange Commission as
set forth in the Investment Company Act Release
No. IC-11330. Therefore, the Trust undertakes
that in addition to complying with the
applicable provisions of this Agreement, in the
absence of a final decision on the merits by a
court or other body before which the proceeding
was brought, that an indemnification payment
will not be made unless in the absence of such
a decision, a reasonable determination based
upon factual review has been made (i) by a
majority vote of a quorum of non-party
Disinterested Trustees, or (ii) by independent
legal counsel in a written opinion that the
indemnitee was not liable for an act of willful
misfeasance, bad faith, gross negligence or
reckless disregard of duties. The Trust further
undertakes that advancement of expenses
incurred in the defense of a proceeding (upon
undertaking for repayment unless it is
ultimately determined that indemnification is
appropriate) against an officer, Trustee, FSC
or controlling person of the Trust will not be
made absent the fulfillment of at least one of
the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the
Trust is insured against losses arising by
reason of any lawful advances; or (iii) a
majority of a quorum of non-party Disinterested
Trustees or independent legal counsel in a
written opinion makes a factual determination
that there is reason to believe the indemnitee
will be entitled to indemnification.
11.FSC is hereby expressly put on notice of the
limitation of liability as set forth in the
Declaration of Trust and agrees that the obligations
assumed by the Trust pursuant to this Agreement
shall be limited in any case to the Trust and its
assets and FSC shall not seek satisfaction of any
such obligation from the shareholders of the Trust,
the Trustees, officers, employees or agents of the
Trust, or any of them.
12.If at any time the Shares of any Fund are offered in
two or more Classes, FSC agrees to adopt compliance
standards as to when a class of shares may be sold
to particular investors.
13.This Agreement will become binding on the parties
hereto upon the execution of the attached exhibits
to the Agreement.
Exhibit A
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class A Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds (formerly, Federated
Growth Trust) and Federated Securities Corp. with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement,
a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of
the Shares held during the month. For the month
in which this Agreement becomes effective or
terminates, there shall be an appropriate
proration of any fee payable on the basis of the
number of days that the Agreement is in effect
during the month.
3. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to
the extent any Class' expenses exceed such lower
expense limitation as FSC may, by notice to the
Trust, voluntarily declare to be effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of Trustees
of the Trust on a quarterly basis showing amounts
expended hereunder including amounts paid to
Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds (formerly, Federated Growth Trust)
and Federated Securities Corp., Federated Equity Funds
(formerly, Federated Growth Trust) executes and delivers
this Exhibit on behalf of the Federated Small Cap
Strategies Fund, and with respect to the Class A Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By:/s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit B
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class B Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds (formerly, Federated
Growth Trust) and Federated Securities Corp. with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds (formerly, Federated Growth Trust)
and Federated Securities Corp., Federated Equity Funds
(formerly, Federated Growth Trust) executes and delivers
this Exhibit on behalf of the Federated Small Cap
Strategies Fund, and with respect to the Class B Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By:/s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit C
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class C Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds (formerly, Federated
Growth Trust) and Federated Securities Corp. with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds (formerly, Federated Growth Trust)
and Federated Securities Corp., Federated Equity Funds
(formerly, Federated Growth Trust) executes and delivers
this Exhibit on behalf of the Federated Small Cap
Strategies Fund, and with respect to the Class C Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By: /s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit D
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
Federated Growth Strategies Fund
Class A Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds (formerly, Federated Growth Trust)
and Federated Securities Corp., Federated Equity Funds
(formerly, Federated Growth Trust) executes and delivers
this Exhibit with respect to the Class A Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By:/s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit E
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
Federated Growth Strategies Fund
Class B Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds (formerly, Federated
Growth Trust) and Federated Securities Corp. with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995
between Federated Equity Funds (formerly, Federated Growth
Trust) and Federated Securities Corp., Federated Equity
Funds (formerly, Federated Growth Trust) executes and
delivers this Exhibit with respect to the Class B Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By: /s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit F
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
(Formerly, Federated Growth Trust)
FEDERATED GROWTH STRATEGIES FUND
Class C Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds (formerly, Federated
Growth Trust) and Federated Securities Corp. with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds (formerly, Federated Growth Trust)
and Federated Securities Corp., Federated Equity Funds
(formerly, Federated Growth Trust) executes and delivers
this Exhibit with respect to the Class C Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
(formerly, Federated Growth
Trust)
/s/John W. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit G
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
Federated Capital Appreciation Strategies Fund
Class A Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds and Federated
Securities Corp. with respect to the Class of shares set
forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .25 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds and Federated Securities Corp.,
Federated Equity Funds executes and delivers this Exhibit
with respect to the Class A Shares thereof, first set
forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
/s/John W. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit H
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
Federated Capital Appreciation Strategies Fund
Class B Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds and Federated
Securities Corp. with respect to the Class of shares set
forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds and Federated Securities Corp.,
Federated Equity Funds executes and delivers this Exhibit
with respect to the Class B Shares thereof, first set
forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
/s/John G. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Exhibit I
to the
Distributor's Contract
FEDERATED EQUITY FUNDS
Federated Capital Appreciation Strategies Fund
Class C Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated September 1,
1995, between Federated Equity Funds and Federated
Securities Corp. with respect to the Class of shares set
forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the
sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial
institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as
described and set forth in the respective
prospectuses of the Trust.
2. During the term of this Agreement, the Trust
will pay FSC for services pursuant to this
Agreement, a monthly fee computed at the annual
rate of .75 of 1% of the average aggregate net
asset value of the Shares held during the month.
For the month in which this Agreement becomes
effective or terminates, there shall be an
appropriate proration of any fee payable on the
basis of the number of days that the Agreement
is in effect during the month.
3. FSC may from time-to-time and for such periods
as it deems appropriate reduce its compensation
to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice
to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements
with various firms to provide certain of the
services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial
Institutions a periodic fee in respect of Shares
owned from time to time by their clients or
customers. The schedules of such fees and the
basis upon which such fees will be paid shall be
determined from time to time by FSC in its sole
discretion.
5. FSC will prepare reports to the Board of
Trustees of the Trust on a quarterly basis
showing amounts expended hereunder including
amounts paid to Financial Institutions and the
purpose for such expenditures.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated September 1, 1995 between
Federated Equity Funds and Federated Securities Corp.,
Federated Equity Funds executes and delivers this Exhibit
with respect to the Class C Shares thereof, first set
forth in this Exhibit.
Witness the due execution hereof this 1st day of
September, 1995.
ATTEST: Federated Equity Funds
/s/John W. McGonigle By: /s/Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/Byron F. Bowman By:/s/Edward C. Gonzales
Secretary Executive Vice President
(SEAL)
Page
Exhibit 15 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
FEDERATED EQUITY FUNDS
(formerly, Federated Growth Trust)
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of
September 1, 1995, by the Board of Trustees of Federated
Equity Funds (formerly, Federated Growth Trust), (the
"Trust"), a Massachusetts business trust with respect to
certain classes of shares ("Classes") of the portfolios of
the Trust (the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended
("Act"), so as to allow the Trust to make payments
as contemplated herein, in conjunction with the
distribution of Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of
Federated Securities Corp. ("FSC") principally
intended to result in the sale of Shares to include:
(a) providing incentives to financial institutions
("Financial Institutions") to sell Shares; (b)
advertising and marketing of Shares to include
preparing, printing and distributing prospectuses
and sales literature to prospective shareholders and
with Financial Institutions; and (c) implementing
and operating the Plan. In compensation for services
provided pursuant to this Plan, FSC will be paid a
fee in respect of the following Classes set forth on
the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will
be made pursuant to the "Distributor's Contract"
entered into by the Trust and FSC. Any payments made
by FSC to Financial Institutions with funds received
as compensation under this Plan will be made
pursuant to the "Financial Institution Agreement"
entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole
discretion, the Financial Institutions to
participate in the Plan and (ii) to terminate
without cause and in its sole discretion any
Financial Institution Agreement.
5. Quarterly in each year that this Plan remains in
effect, FSC shall prepare and furnish to the Board
of Trustees of the Trust, and the Board of Trustees
shall review, a written report of the amounts
expended under the Plan and the purpose for which
such expenditures were made.
6. This Plan shall become effective with respect to
each Class (i) after approval by majority votes of:
(a) the Trust's Board of Trustees; (b) the members
of the Board of the Trust who are not interested
persons of the Trust and have no direct or indirect
financial interest in the operation of the Trust's
Plan or in any related documents to the Plan
("Disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on the
Plan; and (c) the outstanding voting securities of
the particular Class , as defined in Section
2(a)(42) of the Act and (ii) upon execution of an
exhibit adopting this Plan with respect to such
Class.
7. This Plan shall remain in effect with respect to
each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit
during the initial year of this Plan for the period
of one year from the date set forth above and may be
continued thereafter if this Plan is approved with
respect to each Class at least annually by a
majority of the Trust's Board of Trustees and a
majority of the Disinterested Trustees, cast in
person at a meeting called for the purpose of voting
on such Plan. If this Plan is adopted with respect
to a Class after the first annual approval by the
Trustees as described above, this Plan will be
effective as to that Class upon execution of the
applicable exhibit pursuant to the provisions of
paragraph 6(ii) above and will continue in effect
until the next annual approval of this Plan by the
Trustees and thereafter for successive periods of
one year subject to approval as described above.
8. All material amendments to this Plan must be
approved by a vote of the Board of Trustees of the
Trust and of the Disinterested Trustees, cast in
person at a meeting called for the purpose of voting
on it.
9. This Plan may not be amended in order to increase
materially the costs which the Classes may bear for
distribution pursuant to the Plan without being
approved by a majority vote of the outstanding
voting securities of the Classes as defined in
Section 2(a)(42) of the Act.
10.This Plan may be terminated with respect to a
particular Class at any time by: (a) a majority vote
of the Disinterested Trustees; or (b) a vote of a
majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of
the Act; or (c) by FSC on 60 days' notice to the
Trust.
11.While this Plan shall be in effect, the selection
and nomination of Disinterested Trustees of the
Trust shall be committed to the discretion of the
Disinterested Trustees then in office.
12.All agreements with any person relating to the
implementation of this Plan shall be in writing and
any agreement related to this Plan shall be subject
to termination, without penalty, pursuant to the
provisions of Paragraph 10 herein.
13.This Plan shall be construed in accordance with and
governed by the laws of the Commonwealth of
Pennsylvania.
EXHIBIT A
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class A Shares
This Distribution Plan is adopted by Federated Equity
Funds (formerly, Federated Growth Trust) with respect to
the Class of Shares of the portfolio of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net
asset value of the Class A Shares of Federated Small Cap
Strategies Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT B
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class B Shares
This Distribution Plan is adopted by Federated Equity
Funds (formerly, Federated Growth Trust) with respect to
the Class of Shares of the portfolio of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class B Shares of Federated Small Cap
Strategies Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT C
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Small Cap Strategies Fund
Class C Shares
This Distribution Plan is adopted by Federated Equity
Funds (formerly, Federated Growth Trust) with respect to
the Class of Shares of the portfolio of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class C Shares of Federated Small Cap
Strategies Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT D
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Growth Strategies Fund
Class B Shares
This Distribution Plan is adopted by Federated Equity
Funds (formerly, Federated Growth Trust) with respect to
the Class of Shares of the Trust set forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class B Shares of Federated Growth
Strategies Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT E
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Growth Strategies Fund
Class C Shares
This Distribution Plan is adopted by Federated Equity
Funds (formerly, Federated Growth Trust) with respect to
the Class of Shares of the Trust set forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class C Shares of Federated Growth
Strategies Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT F
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Capital Appreciation Fund
Class A Shares
This Distribution Plan is adopted by Federated Equity
Funds with respect to the Class of Shares of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net
asset value of the Class A Shares of Federated Capital
Appreciation Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT G
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Capital Appreciation Fund
Class B Shares
This Distribution Plan is adopted by Federated Equity
Funds with respect to the Class of Shares of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class B Shares of Federated Capital
Appreciation Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
EXHIBIT H
to the
Distribution Plan
Federated Equity Funds
(formerly, Federated Growth Trust)
Federated Capital Appreciation Fund
Class C Shares
This Distribution Plan is adopted by Federated Equity
Funds with respect to the Class of Shares of the Trust set
forth above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net
asset value of the Class C Shares of Federated Capital
Appreciation Fund held during the month.
Witness the due execution hereof this 1st day of
September, 1995.
Federated Equity Funds
(formerly, Federated Growth
Trust)
By: /s/Glen R. Johnson
President
