[LOGO OF FEDERATED INVESTORS]
Federated Growth
Strategies Fund
(formerly, Federated
Growth Trust)
Annual Report
October 31, 1995
Established 1984
Equity
President's Message
Dear Shareholder:
I am pleased to present the Annual Report for Federated Growth Strategies Fund
which covers the twelve-month period ended October 31, 1995. This report begins
with an interview with portfolio manager Jim Grefenstette, Assistant Vice
President, Federated Research Corp. Following this interview, there are four
additional items of shareholder interest: a breakdown of the voting results
from the Special Meeting of the Trust shareholders held on August 14, 1995, a
complete listing of the fund's stock holdings, a series of graphs showing
investment performance, and the fund's financial statements.
Federated Growth Strategies Fund is managed to pursue long-term growth through
a highly diversified portfolio. The fund's portfolio includes common stocks and
convertible securities from more than 70 issuers representing key business
sectors. Among the fund's holdings are familiar names such as Coca-Cola, Nike,
Intel Corp., Johnson & Johnson, American Standard, Safeway, and Delta Air
Lines.
Consistant with a favorable stock market environment, your fund recorded strong
performance during the reporting period. In fact, the fund's net asset value
increased by approximately 23% in Class A Shares between the first and last day
of the reporting period. Dividends earned per Class A Shares during the
reporting period totaled $0.94. Total return based on net asset value for the
period was 29.03% for Class A Shares.* On October 31, 1995 total net assets
stood at $250.5 million.
We encourage you to reinvest your earnings automatically in shares of Federated
Growth Strategies Fund. It's a convenient way to increase your opportunity to
participate in the growth of American companies. We trust you were pleased with
the positive performance of your investment. As always, we welcome your
comments and suggestions.
Sincerely,
J. Christopher Donahue
President
December 15, 1995
* Performance quoted reflects past performance. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Total returns for the period
(based on offering price) for Class A Shares were 21.92%.
Investment Review
- -------------------------------------------------------------------------------
Jim Grefenstette
Assistant Vice President
Federated Research Corp.
Q
The stock market climbed to new heights during the period. Can you comment?
A
This year saw the confluence of a large number of positive situations come
together to drive the value of equities to new highs: a sharp drop in interest
rates, strong growth in Standard & Poor's 500 Stock Index ("S&P 500") earnings
(aided by a weaker U.S. dollar), strong cash flows into mutual funds, and a
huge net reduction in the market value of equities outstanding (as the result
of mergers and acquisitions of public companies paid for with cash). While we
believe that cash flows into mutual funds will stay strong and that interest
rates will probably drift lower over time, we are not sure that we can count on
a similar reduction in the market value of equities, and we think that S&P 500
earnings growth will be much lower over the next year or two.
Q
In this favorable environment, how did Federated Growth Stategies Fund perform?
A
Federated Growth Strategies Fund had a very strong year. As of October 31,
1995, the fund's total return was 29.03%,* which ranked it 83 out of 558 growth
funds among the top 15% in the Lipper Growth Fund Universe for the period ended
- -
October 31, 1995, according to Lipper Analytical Services, Inc.**
Q
What sectors drove the fund's performance? Looking forward, do these sectors
continue to offer high growth potential?
A
The strongest performing sectors in our fund were Technology, Health Care, and
Finance. These sectors offered the highest relative and absolute growth rates
in our universe last year and we believe that most of the fundamental
situations are in place for these sectors to repeat as high growers and strong
performers in 1996.
* Performance quoted reflects past performance. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
**Past performance is not indicative of future results. Lipper rankings are
based on total return and do not take sales charges into account. During the
ranking periods, certain Fund expenses were waived and/or advanced; otherwise,
total return would have been lower. For the period ended October 31, 1995, the
fund's five-year Lipper ranking was 91 out of 234 growth funds. For the
period ended October 31, 1995, the fund's ten-year Lipper ranking was 51
out of 150 growth funds.
- -------------------------------------------------------------------------------
Q
Can you review some of your current top holdings, along with a brief
commentary on each?
A
Loral Corp.: This conglomerate of high-quality defense contractors generates a
large amount of cash flow per share. Loral also has an exciting ownership
interest in Globalstar, a company with plans to encircle the globe with
low-orbit telecommunication satellities.
MBNA Corp.: This firm is the second largest credit card provider in the U.S.
and #1 issuer of cards to common interest groups, which are also known as
affinity groups. MBNA should benefit from lower rates, the secular increase in
credit card usage, and the increasing penetration into the universe of affinity
groups.
SunAmerica, Inc.: A provider of fixed and variable annuities, SunAmerica is one
of the most leveraged beneficiaries of the shift towards increased savings in
the U.S.
Potash Corporation of Saskatchewan, Inc.: As a leading producer of potash, a
valuable ingredient in certain types of fertilizer, Potash should benefit from
an expected increase in the demand for fertilizers both domestically and
abroad.
Johnson & Johnson: This leading diversified provider of pharmaceuticals and
health care products should experience strong sales growth from a mix of
successful new products and increasing margins from the continued cost cutting
of currently decentralized operations.
Q
With prices of large-company stocks at such high levels, where are you
looking for fairly priced growth potential?
A
We will favor those sectors mentioned above (Health Care, Technology, and
Finance), but we will look for those names that are attractive more in the
mid-cap area. So much money moved into the market last year, that many
large-fund managers had to invest in the large-cap names because they needed
the liquidity that these stocks offered. Consequently, better-priced growth may
now be found in mid-cap stocks.
- -------------------------------------------------------------------------------
Q
What is your outlook for growth stocks as we enter 1996?
A
At least relative to more value-driven stocks, we are very positive on growth
stocks. We anticipate a slower growing economy over the next twelve to eighteen
months, which should bode well for stocks that can offer secular earnings
growth. Investors should rotate away from more economically sensitive companies
and pay premiums for those companies that can grow earnings despite the slower
nature of the economy.
Shareholder Voting Results
- -------------------------------------------------------------------------------
A Special Meeting of the Trust shareholders was held on August 14, 1995. On
August 14, 1995, the record date for shareholders voting at the meeting, there
were 10,339,661.120 total outstanding shares. The following items were
considered by shareholders and the results of their voting were as follows:
Agenda BROKER
Item FOR AGAINST ABSTAIN NON-VOTE
1. Election of three new Trustees*.
John T. Conroy 7,701,279.894 27,714.332 16,786.000 0
Peter E. Madden 7,701,279.894 27,714.332 16,786.000 0
John E. Murray 7,701,279.894 27,714.332 16,786.000 0
2. Approval of an amendment to the Trust's Declaration of Trust to allow the
Trustees to make changes to the name of the Trust without shareholder approval.
6,837,313.623 216,948.146 277,735.457 413,783.000
3. Approval of amendments to the Trust's Declaration of Trust to allow the
Trust to establish and designate separate series and classes of shares.
6,760,295.674 236,103.867 329,923.685 419,457.000
4. Approval of an amendment to the Trust's Declaration of Trust to allow a sale
and conveyance of any individual portfolio of the trust or any of the Trust's
assets to another open-end management investment company by majority vote.
6,582,752.847 426,339.487 317,230.892 419,457.000
5. Approval of an amendment to the Trust's Declaration of Trust to allow the
trustees to liquidate and dissolve any individual portfolio of the trust or the
entire trust without shareholder approval if they deem such action to be in the
best interest of the shareholders.
6,341,431.599 667,740.897 317,149.730 419,458.000
*The following Directors of the Fund Continued their terms as Trustees of the
Trust: John F. Donahue, Thomas G. Bigley, Jr., William J. Copeland, James E.
Dowd, Lawrence D. Ellis, M.D., Edward L. Flaherty, Jr., Gregor F. Meyer,
Wesley W. Posvar, Marjorie P. Smuts.
Two Ways You May Seek to Invest for Success in
Federated Growth Strategies Fund
- -------------------------------------------------------------------------------
Initial Investment:
If you had made an initial investment of $12,000 in the Class A Shares of
Federated Growth Strategies Fund on 8/23/84, reinvested dividends and capital
gains, and didn't redeem any shares, your account would be worth $54,442 on
10/31/95. You would have earned a 14.47%* average annual total return for the
11-year investment life span.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of 9/30/95, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 24.97%, 13.47%, and 15.00%, respectively. Class B
Shares' total return since inception on (8/15/95) was -0.94%. Class C Shares'
total return since inception on (8/15/95) was 3.53%.
[GRAPH GOES HERE-SEE APPENDIX]
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.5%
sales charge applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so an investor's shares,
when redeemed, may be worth more or less than their original cost.
Federated Growth Strategies Fund
- -------------------------------------------------------------------------------
One Step at a Time:
$1,000 invested each year for 11 years (reinvesting all dividends and capital
gains) grew to $24,362.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
Growth Stra-tegies Fund on 8/23/84, reinvested your dividends and capital
gains, and didn't redeem any shares, you would have invested only $12,000, but
your account would have reached a total value of $24,362* by 10/31/95. You
would have earned an average annual total return of 11.81%.
A practical investment plan helps you pursue long-term performance from growth
oriented stocks. Through systematic investing, you buy shares on a regular
basis and reinvest all earnings. An investment plan works for you when you
invest only $1,000 annually. You can take it one step at a time. Put time and
compounding to work!
[GRAPH GOES HERE-SEE APPENDIX]
*No method of investing can guarantee a profit or protect against loss
in down markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Federated Growth Strategies Fund
-
Hypothetical Investor Profile: Investing for a College Education
- -------------------------------------------------------------------------------
David and Joan Rice are a fictitious couple who, like many shareholders, are
searching for a way to make their money grow over time.
David and Joan are planning for the college education of their child in 10
years. On October 31, 1985, they invested $5,000 in the Class A Shares of
Federated Growth Strategies Fund. Since then, David and Joan have made
additional investments of $250 every month.
As this chart shows, over 10 years, the original $5,000 investment along with
their additional monthly $250 investments totaling $35,000 has grown to
$70,507. This represents an 11.88% average annual total return. For the Rices,
a dedicated program of monthly investment really paid off.
[GRAPH GOES HERE-SEE APPENDIX]
This hypothetical scenario is provided for illustrative purposes only and does
not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated Growth Strategies Fund
-
Serving A Wide Range of Investors
- -------------------------------------------------------------------------------
Federated Growth Strategies Fund appeals to a broad range of investors seeking
long-term growth through growth oriented stocks.
The fund invests primarily in a diversified portfolio of stocks issued by some
of America's leading corporations. Fund shares are not guaranteed, and the
value of your investment may fluctuate. Mutual funds involve risk, including
possible loss of principal.
[GRAPH GOES HERE-SEE APPENDIX]
Federated Growth Strategies Fund
-
Portfolio Update
- -------------------------------------------------------------------------------
[GRAPH GOES HERE-SEE APPENDIX]
Federated Growth Strategies Fund
-
(Class A Shares)
- -------------------------------------------------------------------------------
Growth of $10,000 Invested in Federated Growth Strategies Fund (Class A Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Growth Strategies Fund (Class A Shares) (the "Fund") from October 31,
1985 to October 31, 1995 compared to the Standard and Poor's 500 Index (S&P
500)+ and the Lipper Growth Fund Index (LGFI).+
[GRAPH GOES HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $10,000 in the Fund with no sales
charge. As of August 15, 1995, the maximum sales charge was 5.50%. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 and the LGFI have been adjusted to reflect reinvestment of dividends
on securities in the indices.
**Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LGFI is
not adjusted to reflect sales charges. The indices are unmanaged.
Federated Growth Strategies Fund
-
(Class B Shares)
- -------------------------------------------------------------------------------
Growth of $10,000 Invested in Federated Growth Strategies Fund (Class B Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Growth Strategies Fund (Class B Shares) (the "Fund") from August 15,
1995 (start of performance) to October 31, 1995 compared to the Standard &
Poor's 500 Index (S&P 500)+ and the Lipper Growth Fund Index (LGFI).+
[GRAPH GOES HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 5.50% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500
and the LGFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
**Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LGFI is
not adjusted to reflect sales charges. The indices are unmanaged.
Federated Growth Strategies Fund
-
(Class C Shares)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Federated Growth Strategies Fund (Class C Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Growth Strategies Fund (Class C Shares) (the "Fund") from August 15,
1995 (start of performance) to October 31, 1995 compared to the Standard and
Poor's 500 Index (S&P 500)+ and the Lipper Growth Fund Index (LGFI).+
[GRAPH GOES HERE-SEE APPENDIX]
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 1.00% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500
and the LGFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
**Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LGFI is
not adjusted to reflect sales charges. The indices are unmanaged.
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Portfolio of Investments
- --------------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
EQUITIES--90.6%
- ------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--1.9%
---------------------------------------------------------------------------------
28,100 (a)Corrections Corp. America $ 1,531,450
---------------------------------------------------------------------------------
81,500 Olsten Corp. 3,137,750
--------------------------------------------------------------------------------- --------------
Total 4,669,200
--------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--1.3%
---------------------------------------------------------------------------------
164,500 Brunswick Corp. 3,207,750
--------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--7.8%
---------------------------------------------------------------------------------
47,500 Coca-Cola Co. 3,414,062
---------------------------------------------------------------------------------
145,000 (a)Gymboree Corp. 3,280,625
---------------------------------------------------------------------------------
53,400 IBP, Inc. 3,197,325
---------------------------------------------------------------------------------
57,000 Nike, Inc., Class B 3,234,750
---------------------------------------------------------------------------------
58,100 Oakley, Inc. 2,004,450
---------------------------------------------------------------------------------
52,000 Philip Morris Cos., Inc. 4,394,000
--------------------------------------------------------------------------------- --------------
Total 19,525,212
--------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--3.4%
---------------------------------------------------------------------------------
99,000 Service Corp. International 3,972,375
---------------------------------------------------------------------------------
90,000 (a)Viacom, Inc., Class B 4,500,000
--------------------------------------------------------------------------------- --------------
Total 8,472,375
--------------------------------------------------------------------------------- --------------
ELECTRONIC TECHNOLOGY--14.1%
---------------------------------------------------------------------------------
60,000 (a)Applied Materials, Inc. 3,007,500
---------------------------------------------------------------------------------
45,000 (a)Cisco Systems, Inc. 3,487,500
---------------------------------------------------------------------------------
55,000 (a)Digital Equipment Corp. 2,976,875
---------------------------------------------------------------------------------
120,000 Ericsson LM 2,563,125
---------------------------------------------------------------------------------
130,700 (a)Integrated Device Technology, Inc. 2,483,300
---------------------------------------------------------------------------------
40,000 Intel Corp. 2,795,000
---------------------------------------------------------------------------------
170,000 Loral Corp. 5,036,250
---------------------------------------------------------------------------------
60,800 (a)LSI Logic Corp. 2,865,200
---------------------------------------------------------------------------------
</TABLE>
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
EQUITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
ELECTRONIC TECHNOLOGY--CONTINUED
---------------------------------------------------------------------------------
53,800 Motorola, Inc. $ 3,530,625
---------------------------------------------------------------------------------
57,700 Nokia (AB), ADR 3,216,775
---------------------------------------------------------------------------------
46,500 Texas Instruments, Inc. 3,173,625
--------------------------------------------------------------------------------- --------------
Total 35,135,775
--------------------------------------------------------------------------------- --------------
ENERGY MINERALS--2.2%
---------------------------------------------------------------------------------
31,000 British Petroleum, Ltd., ADR 2,735,750
---------------------------------------------------------------------------------
168,500 YPF Sociedad Anonima, ADR 2,885,563
--------------------------------------------------------------------------------- --------------
Total 5,621,313
--------------------------------------------------------------------------------- --------------
FINANCE--14.8%
---------------------------------------------------------------------------------
78,400 Aflac, Inc. 3,194,800
---------------------------------------------------------------------------------
106,000 Bank of New York Co., Inc. 4,452,000
---------------------------------------------------------------------------------
70,000 Citicorp 4,541,250
---------------------------------------------------------------------------------
80,200 First Commerce Corp. 2,486,200
---------------------------------------------------------------------------------
110,300 Lehman Brothers Holdings, Inc. 2,399,025
---------------------------------------------------------------------------------
125,000 MBNA Corp. 4,609,375
---------------------------------------------------------------------------------
70,000 MGIC Investment Corp. 3,981,250
---------------------------------------------------------------------------------
44,800 NationsBank Corp. 2,945,600
---------------------------------------------------------------------------------
81,400 Sunamerica, Inc. 5,067,150
---------------------------------------------------------------------------------
65,100 Travelers Group, Inc. 3,287,550
--------------------------------------------------------------------------------- --------------
Total 36,964,200
--------------------------------------------------------------------------------- --------------
HEALTH SERVICES--2.9%
---------------------------------------------------------------------------------
100,000 (a)Foundation Health Corp. 4,237,500
---------------------------------------------------------------------------------
175,000 (a)Ornda Healthcorp 3,084,375
--------------------------------------------------------------------------------- --------------
Total 7,321,875
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
EQUITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
HEALTH TECHNOLOGY--12.4%
---------------------------------------------------------------------------------
74,500 (a)Amgen, Inc. $ 3,576,000
---------------------------------------------------------------------------------
44,500 (a)Genzyme Corp. 2,592,125
---------------------------------------------------------------------------------
50,000 Johnson & Johnson 4,075,000
---------------------------------------------------------------------------------
31,900 Lilly (Eli) & Co. 3,082,337
---------------------------------------------------------------------------------
57,000 Medtronic, Inc. 3,291,750
---------------------------------------------------------------------------------
58,300 Merck & Co., Inc. 3,352,250
---------------------------------------------------------------------------------
180,000 Mylan Laboratories, Inc. 3,420,000
---------------------------------------------------------------------------------
67,400 Pfizer, Inc. 3,867,075
---------------------------------------------------------------------------------
100,000 Teva Pharmaceutical Industries, Ltd., ADR 3,925,000
--------------------------------------------------------------------------------- --------------
Total 31,181,537
--------------------------------------------------------------------------------- --------------
INDUSTRIAL SERVICES--3.6%
---------------------------------------------------------------------------------
109,600 Coflexip, ADR 1,534,400
---------------------------------------------------------------------------------
189,324 (a)USA Waste Services, Inc. 3,975,804
---------------------------------------------------------------------------------
79,100 (a)Western Atlas, Inc. 3,470,513
--------------------------------------------------------------------------------- --------------
Total 8,980,717
--------------------------------------------------------------------------------- --------------
NON-ENERGY MINERALS--3.7%
---------------------------------------------------------------------------------
50,700 AK Steel Holding Corp. 1,571,700
---------------------------------------------------------------------------------
67,500 Potash Corporation of Saskatchewan, Inc. 4,699,688
---------------------------------------------------------------------------------
104,500 UCAR Global Enterprises, Inc. 2,978,250
--------------------------------------------------------------------------------- --------------
Total 9,249,638
--------------------------------------------------------------------------------- --------------
PROCESS INDUSTRIES--2.6%
---------------------------------------------------------------------------------
60,000 Champion International Corp. 3,210,000
---------------------------------------------------------------------------------
125,000 Praxair, Inc. 3,375,000
--------------------------------------------------------------------------------- --------------
Total 6,585,000
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
EQUITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING--7.0%
---------------------------------------------------------------------------------
90,500 (a)American Standard Companies $ 2,420,875
---------------------------------------------------------------------------------
98,000 Dover Corp. 3,871,000
---------------------------------------------------------------------------------
100,000 Greenfield Industries, Inc. 3,000,000
---------------------------------------------------------------------------------
71,000 Magna International, Inc. , Class A 3,070,750
---------------------------------------------------------------------------------
81,500 (a)Thermo Electron Corp. 3,749,000
---------------------------------------------------------------------------------
160,000 (a)Westinghouse Air Brakes 1,400,000
--------------------------------------------------------------------------------- --------------
Total 17,511,625
--------------------------------------------------------------------------------- --------------
RETAIL TRADE--2.4%
---------------------------------------------------------------------------------
50,000 Premark International, Inc. 2,312,500
---------------------------------------------------------------------------------
79,200 (a)Safeway, Inc. 3,742,200
--------------------------------------------------------------------------------- --------------
Total 6,054,700
--------------------------------------------------------------------------------- --------------
TECHNOLOGY SERVICES--2.0%
---------------------------------------------------------------------------------
114,000 (a)DST Systems, Inc. 2,394,000
---------------------------------------------------------------------------------
61,800 (a)Oracle Corp. 2,696,025
--------------------------------------------------------------------------------- --------------
Total 5,090,025
--------------------------------------------------------------------------------- --------------
TRANSPORTATION--1.3%
---------------------------------------------------------------------------------
50,000 Delta Air Lines, Inc. 3,281,250
--------------------------------------------------------------------------------- --------------
UTILITIES--7.2%
---------------------------------------------------------------------------------
102,300 CMS Energy Corp. 2,826,037
---------------------------------------------------------------------------------
65,000 FPL Group, Inc. 2,721,875
---------------------------------------------------------------------------------
160,000 MCI Communications Corp. 3,990,000
---------------------------------------------------------------------------------
167,500 (a)PanAmSat Corp. 2,533,438
---------------------------------------------------------------------------------
122,100 Sonat, Inc. 3,510,375
---------------------------------------------------------------------------------
</TABLE>
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
EQUITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
---------------------------------------------------------------------------------
62,000 Vodafone Group $ 2,534,250
--------------------------------------------------------------------------------- --------------
Total 18,115,975
--------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $191,906,522) 226,968,167
--------------------------------------------------------------------------------- --------------
CONVERTIBLE SECURITIES--5.2%
- ------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.6%
---------------------------------------------------------------------------------
$ 13,400,000 Boston Chicken, Inc., Conv. LYON, .08% accrual, 6/1/2015 3,902,750
--------------------------------------------------------------------------------- --------------
FINANCE--2.0%
---------------------------------------------------------------------------------
120,000 First USA, Inc., PRIDES, $1.99 4,980,000
--------------------------------------------------------------------------------- --------------
TECHNOLOGY SERVICES--1.6%
---------------------------------------------------------------------------------
60,900 General Motors Corp., Conv. Pfd., Series C, $3.25 4,080,300
--------------------------------------------------------------------------------- --------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $10,591,019) 12,963,050
--------------------------------------------------------------------------------- --------------
(B) REPURCHASE AGREEMENT--4.9%
- ------------------------------------------------------------------------------------------------
12,310,000 J.P. Morgan Securities, Inc., 5.90%, dated 10/31/95, due 11/1/1995
(AT AMORTIZED COST) 12,310,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $214,807,541)(C) $ 252,241,217
--------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $214,807,541.
The net unrealized appreciation of investments on a federal tax basis
amounts to $37,433,676 which is comprised of $42,475,303 appreciation and
$5,041,627 depreciation at October 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($250,512,270) at October 31, 1995.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
LYON--Liquid Yield Option Note
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $214,807,541) $252,241,217
- ---------------------------------------------------------------------------------------------------
Income receivable 216,664
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 3,776,069
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 316,057
- --------------------------------------------------------------------------------------------------- -----------
Total assets 256,550,007
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable for investments purchased $5,592,077
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 240,824
- ----------------------------------------------------------------------------------------
Payable to Bank 117,346
- ----------------------------------------------------------------------------------------
Accrued expenses 87,490
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 6,037,737
- --------------------------------------------------------------------------------------------------- -----------
Net Assets for 9,552,807 shares outstanding $250,512,270
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $161,711,242
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 37,433,997
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 51,266,162
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 100,869
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $250,512,270
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($249,109,599 / 9,499,332 shares outstanding) $26.22
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/94.50 of $26.22)* $27.75
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $26.22
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,345,476 / 51,294 shares outstanding) $26.23
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $26.23
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $26.23)** $24.79
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($57,195 / 2,181 shares outstanding) $26.22
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $26.22
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $26.22)** $25.96
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "How To Purchase Shares" in the Prospectus.
**See "How To Redeem Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended October 31, 1995
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 4,084,557
- ----------------------------------------------------------------------------------------------------
Interest 1,533,321
- ---------------------------------------------------------------------------------------------------- ------------
Total income 5,617,878
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 1,958,826
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 197,711
- ---------------------------------------------------------------------------------------
Custodian fees 64,622
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 197,076
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,432
- ---------------------------------------------------------------------------------------
Auditing fees 17,700
- ---------------------------------------------------------------------------------------
Legal fees 7,826
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 71,343
- ---------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 1,071
- ---------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 39
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 652,572
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 357
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 13
- ---------------------------------------------------------------------------------------
Share registration costs 55,656
- ---------------------------------------------------------------------------------------
Printing and postage 27,112
- ---------------------------------------------------------------------------------------
Insurance premiums 7,018
- ---------------------------------------------------------------------------------------
Taxes 12,436
- ---------------------------------------------------------------------------------------
Miscellaneous 9,625
- --------------------------------------------------------------------------------------- -----------
Total expenses 3,288,435
- ---------------------------------------------------------------------------------------
Waivers--
- ---------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (407,139)
- --------------------------------------------------------------------------------------- -----------
Net expenses 2,881,296
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 2,736,582
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 51,470,307
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 8,029,038
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments 59,499,345
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 62,235,927
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------
Net investment income $ 2,736,582 $ 3,676,162
- ----------------------------------------------------------------------------------
Net realized gain (loss) on investments ($51,266,240 and $9,574,806, respectively,
as computed for federal tax purposes) 51,470,307 9,370,805
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 8,029,038 (51,582,544)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 62,235,927 (38,535,577)
- ---------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------------
Class A Shares (3,142,465) (3,448,745)
- ----------------------------------------------------------------------------------
Class B Shares -- --
- ----------------------------------------------------------------------------------
Class C Shares -- --
- ----------------------------------------------------------------------------------
Distributions from net realized gains
- ----------------------------------------------------------------------------------
Class A Shares (9,574,950) (9,252,795)
- ----------------------------------------------------------------------------------
Class B Shares -- --
- ----------------------------------------------------------------------------------
Class C Shares -- --
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (12,717,415) (12,701,540)
- ---------------------------------------------------------------------------------- -------------- --------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 85,256,559 161,557,597
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 6,491,787 5,957,016
- ----------------------------------------------------------------------------------
Cost of shares redeemed (211,384,336) (256,459,141)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from share transactions (119,635,990) (88,944,528)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets (70,117,478) (140,181,645)
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 320,629,748 460,811,393
- ---------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment income of $100,869 and
$508,103, respectively) $ 250,512,270 $ 320,629,748
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR
ENDED MAY
YEAR ENDED OCTOBER 31, 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988(A) 1988
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.28 $ 23.92 $ 21.16 $ 21.58 $ 16.78 $ 20.99 $ 17.18 $ 16.93 $ 17.67
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.24 0.21 0.20 0.33 0.57 0.75 0.59 0.09 0.25
- -------------------------
Net realized and
unrealized gain (loss)
on investments 5.64 (2.18) 2.96 0.45 5.97 (2.69) 3.80 1.08 (0.23)
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total from investment
operations 5.88 (1.97) 3.16 0.78 6.54 (1.94) 4.39 1.17 0.02
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.26) (0.19) (0.23) (0.33) (0.61) (0.79) (0.52) (0.15) (0.20)
- -------------------------
Distributions from net
realized gain on
investment transactions (0.68) (0.48) (0.17) (0.87) (1.13) (1.48) (0.06) (0.77) (0.56)
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total distributions (0.94) (0.67) (0.40) (1.20) (1.74) (2.27) (0.58) (0.92) (0.76)
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
NET ASSET VALUE, END OF
PERIOD $ 26.22 $ 21.28 $ 23.92 $ 21.16 $ 21.58 $ 16.78 $ 20.99 $ 17.18 $ 16.93
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
TOTAL RETURN (B) 29.03% (8.43%) 15.06% 3.93% 41.54% (10.41%) 25.87% 6.95% 0.50%
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
- -------------------------
Expenses 1.10% 0.99% 0.96% 1.01% 1.01% 1.01% 1.01% 1.00%* 1.00%
- -------------------------
Net investment income 1.05% 0.89% 0.90% 1.54% 2.88% 4.00% 2.99% 1.30%* 1.39%
- -------------------------
Expense waiver/
reimbursement (c) 0.16% -- -- -- 0.10% 0.22% 0.14% 0.60%* 0.15%
- -------------------------
SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $249,110 $320,630 $460,811 $391,655 $275,561 $138,407 $134,735 $104,146 $102,395
- -------------------------
Portfolio turnover 125% 59% 57% 46% 54% 67% 79% 24 % 88%
- -------------------------
<CAPTION>
<S> <C> <C>
1987 1986
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.03 $ 11.66
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.28 0.27
- -------------------------
Net realized and
unrealized gain (loss)
on investments 2.40 4.46
- ------------------------- --------- ---------
Total from investment
operations 2.68 4.73
- ------------------------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.26) (0.29)
- -------------------------
Distributions from net
realized gain on
investment transactions (0.78) (0.07)
- ------------------------- --------- ---------
Total distributions (1.04) (0.36)
- ------------------------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 17.67 $ 16.03
- ------------------------- --------- ---------
TOTAL RETURN (B) 17.55% 41.58%
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
- -------------------------
Expenses 1.00% 1.00%
- -------------------------
Net investment income 1.78% 2.35%
- -------------------------
Expense waiver/
reimbursement (c) 0.18% 0.50%
- -------------------------
SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $134,657 $47,318
- -------------------------
Portfolio turnover 66% 42%
- -------------------------
</TABLE>
* Computed on an annualized basis.
(a) For the five months ended October 31, 1988, the Fund changed its fiscal
year-end from May 31 to October 31.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.51
- ------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------
Net investment income (0.02)
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.74
- ------------------------------------------------------------------------------------------ -------
Total from investment operations 0.72
- ------------------------------------------------------------------------------------------ -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------
Distributions from net investment income --
- ------------------------------------------------------------------------------------------
Distributions from net realized gain on investment transactions --
- ------------------------------------------------------------------------------------------ -------
Total distributions --
- ------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 26.23
- ------------------------------------------------------------------------------------------ -------
TOTAL RETURN (B) 2.82%
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------
Expenses 2.04%*
- ------------------------------------------------------------------------------------------
Net investment income (0.66%)*
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,345
- ------------------------------------------------------------------------------------------
Portfolio turnover 125%
- ------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 15, 1995 (date of initial
public offering) to October 31, 1995.
(b) Based on net asset value, which does not reflect sales charge or contingent
deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.51
- ------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------
Net investment income (0.02)
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.73
- ------------------------------------------------------------------------------------------ -------
Total from investment operations 0.71
- ------------------------------------------------------------------------------------------ -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------
Distributions from net investment income --
- ------------------------------------------------------------------------------------------
Distributions from net realized gain on investment transactions --
- ------------------------------------------------------------------------------------------ -------
Total distributions --
- ------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 26.22
- ------------------------------------------------------------------------------------------ -------
TOTAL RETURN (B) 2.78%
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------
Expenses 2.05%*
- ------------------------------------------------------------------------------------------
Net investment income (0.71%)*
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $57
- ------------------------------------------------------------------------------------------
Portfolio turnover 125%
- ------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 15, 1995 (date of initial
public offering) to October 31, 1995.
(b) Based on net asset value, which does not reflect sales charge or contingent
deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1995
1. ORGANIZATION
Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of two diversified portfolios. The financial
statements included herein are only those of Federated Growth Strategies Fund
(the "Fund"). As of October 31, 1995, the other portfolio was effective, but did
not have public investment. The assets of the portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
Effective August 15, 1995, the shareholders approved a change in the name of the
Fund from Federated Growth Trust to Federated Growth Strategies Fund.
Also effective August 15, 1995, the Board of Trustees (the "Trustees")
established three classes of shares for the Fund, known as Class A Shares, Class
B Shares, and Class C Shares. Class A Shares maintain the historical performance
of Federated Growth Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the repurchase
price on the sale of collateral securities.
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RECLASSIFICATION--Income distribution and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Accordingly, permanent book and
tax differences have been reclassified to paid-in capital. These
differences are primarily due to differing treatments for book tax
differences in gain and ordinary income distributions. Amounts as of
October 31, 1995 have been reclassified to reflect the following:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET UNDISTRIBUTED NET
PAID-IN CAPITAL REALIZED GAIN/LOSS INVESTMENT INCOME
<S> <C> <C>
$2,286 ($ 935) ($ 1,351)
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this change.
OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,574,020 $ 83,512,397 7,063,731 $ 161,557,597
- --------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 328,335 6,491,787 259,280 5,957,016
- --------------------------------------------------
Shares redeemed (9,466,879) (211,046,538) (11,526,631) (256,459,141)
- -------------------------------------------------- ----------- --------------- ------------- ---------------
Net change resulting from Class A share
transactions (5,564,524) ($ 121,042,354) (4,203,620) ($ 88,944,528)
- -------------------------------------------------- ----------- --------------- ------------- ---------------
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995 (A)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 63,517 $ 1,671,107
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared -- --
- --------------------------------------------------
Shares redeemed (12,223) (322,715)
- -------------------------------------------------- ----------- ---------------
Net change resulting from Class B share
transactions 51,294 $ 1,348,392
- -------------------------------------------------- ----------- ---------------
</TABLE>
(a) Reflects operations for the period from August 15, 1995 (date of initial
public offering) to October 31, 1995.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995 (B)
<S> <C> <C>
CLASS C SHARES SHARES AMOUNT
Shares sold 2,756 $ 73,055
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared -- --
- --------------------------------------------------
Shares redeemed (575) (15,083)
- -------------------------------------------------- ----------- ---------------
Net change resulting from Class C share
transactions 2,181 $ 57,972
- -------------------------------------------------- ----------- ---------------
Net change resulting from share transactions (5,511,049) ($ 119,635,990)
- -------------------------------------------------- ----------- ---------------
</TABLE>
(b) Reflects operations for the period from August 15, 1995 (date of initial
public offering) to October 31, 1995.
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/ or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Class B and Class C shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule annually, to
compensate FSC:
<TABLE>
<CAPTION>
% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75 of 1%
Class C Shares 0.75 of 1%
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Federated Growth Strategies Fund
(formerly, Federated Growth Trust)
- --------------------------------------------------------------------------------
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
October 31, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 308,315,246
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 426,152,971
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Report of Ernst & Young LLP,
Independent Auditors
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED EQUITY FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Growth Strategies Fund (formerly,
Federated Growth Trust), (a portfolio of Federated Equity Funds) as of October
31, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Growth Strategies Fund at October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods presented therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 12, 1995
Directors Officers
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
[LOGO OF FEDERATED FUNDS]
Federated Securities Corp. is the Distributor of the fund.
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 314172107
Cusip 314172206
Cusip 314172305
G01228-08 (12/95)
APPENDIX
A. The graphic representation here displayed entitled "Initial Investment
of $12,000," consists of a boxed legend in the upper left quadrant
indicating the components of the corresponding mountain chart. The lighter-
shaded portion represents the value of Reinvested Income for the Class A
Shares of Federated Growth Strategies Fund (the "Fund"). The darker-shaded
portion reflects the Principal Value of a $12,000/1,134 Shares investment
in the Fund. The color-coded mountain chart is a visual representation of
the narrative text above it, which shows that an initial investment of
$12,000 in the Fund on 8/23/84, would have a reinvested total worth of
$54,442/2,076 on 10/31/95. The "x" axis reflects computation periods from
8/23/84 to 10/31/95. The right margin of the chart reflects the ending
values of a hypothetical investment of $12,000 in the Fund measured in
increments of $10,000 ranging from $0 to $60,000.
B. The graphic representation here displayed, entitled "Yearly Investments
of $1000," consists of a boxed legend in the upper left quadrant indicating
the components of the corresponding mountain chart. The lighter-shaded
portion represents the value of Reinvested Income for the Class A Shares of
Federated Growth Strategies Fund (the "Fund"). The darker-shaded portion
reflects the Principal Value of a $1000/95 Shares investment in the Fund
(totaling $12,000 by 10/31/95). The color-coded mountain chart is a visual
representation of the narrative text above it, which shows that $1000
annual investments in the Class A Shares of Federated Growth Strategies
Fund beginning on 8/23/84 would have a reinvested total value of
$24,362/929 shares on 10/31/95. The "x" axis reflects computation periods
from 8/23/84 to 10/31/95. The right margin of the chart reflects the ending
values of a hypothetical annual investment of $1000 in the Fund measured in
increments of $5000 ranging from $0 to $25,000.
C. The graphic representation here displayed, entitled "Growth Over Time,"
consists of a boxed legend in the upper left quadrant indicating the
components of the corresponding mountain chart. The lighter-shaded portion
represents the value of Reinvested Income for the Class A Shares of
Federated Growth Strategies Fund (the "Fund") the darker-shaded portion
represents the Principal Value of original and subsequent investments
(totaling $35,000 by 10/31/95). The color-coded mountain is a visual
representation of the narrative text above it, which shows that an original
$5000/405 Shares investment in the Fund and additional investments of $250
every month for 10 years totaling $35,000 by 10/31/95 would have grown to a
reinvested total value of $70,507/2,689 Shares on 10/31/95. The "x" axis
reflects computation periods from 10/31/85 to 10/31/95. The right margin of
the chart reflects the ending values of a hypothetical original investment
of $5000 and subsequent monthly investments of $250 in the Fund measured in
increments of $15,000 ranging from $0 to $75,000.
D. The graphic representation here displayed consists of a list entitled
"Some of the Fund's Major Shareholder Groups". The list includes the
following investment groups and their dollar amounts invested in Federated
Growth Strategies Fund:
IRA's $23,514,936
Individuals and Joint Tenants 3,669,423
Corporations 2,033,507
Trusts 867,877
Custodians(under Uniform Gift to Minors Act) 614,716
E. The graphic representation here displayed consists of a list entitled
"Top Ten Holdings". The list includes the following holdings of the
Federated Growth Strategies Fund and the percentage of Net Assets as of
10/31/95:
Sunamerica, Inc. 2.02%
Loral Corp. 2.01%
First USA, Inc., PRIDES, $1.99 1.99%
Potash Corporation of Saskatchewa 1.88%
MBNA Corp. 1.84%
Citicorp 1.81%
Viacom, Inc., Class B 1.80%
Bank of New York Co., Inc. 1.77%
Philip Morris Cos., Inc. 1.75%
Foundation Health Corp. 1.69%
F. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. Federated Growth Strategies Fund (Class A Shares) (the "Fund") is
represented by a solid black line. Standard & Poor's 500 Index (S&P 500) is
represented by a broken line. Lipper Growth Fund Index (LGFI) is
represented by a series of dashes. The line graph is a visual
representation of a comparison of a change in value of a hypothetical
$10,000 investment in the Fund, the S&P 500, and the LGFI. The "x" axis
reflects computation periods from 10/31/85 to 10/31/95. The "y" axis
reflects the cost of investment in $6000 increments ranging from $9000 to
$45,000. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 500 and the LGFI; the ending
values are $39,531, $42,018, and $37,458, respectively. Below the legend is
the Average Annual Total Returns for the one-year, five-year, ten-year, and
Start of Performance (8/23/84) for the period ended October 31,1995; the
Average Annual Total Returns are 21.92%, 13.57%, 14.09%, and 14.47%,
respectively.
G. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. Federated Growth Strategies Fund (Class B Shares) (the "Fund") is
represented by a solid black line. Standard & Poor's 500 Index (S&P 500) is
represented by a broken line. Lipper Growth Fund Index (LGFI) is
represented by a series of dashes. The line graph is a visual
representation of a comparison of a change in value of a hypothetical
$10,000 investment in the Fund, the S&P 500, and the LGFI. The "x" axis
reflects computation periods from 8/15/95 to 10/31/95. The "y" axis
reflects the cost of investment in $500 increments ranging from $9000 to
$11,000. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 500 and the LGFI; the ending
values were $9,733, $10,473, and $10,160, respectively. Below the legend
is Average Annual Total Return for the period ended October 31, 1995, for
the Start of Performance (8/15/95) (cumulative), totaling (2.67%).
H. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line
graph. Federated Growth Strategies Fund (Class C Shares) (the "Fund") is
represented by a solid black line. Standard & Poor's 500 Index (S&P 500) is
represented by a broken line. Lipper Growth Fund Index (LGFI) is
represented by a series of dashes. The line graph is a visual
representation of a comparison of a change in value of a hypothetical
$10,000 investment in the Fund, the S&P 500, and the LGFI. The "x" axis
reflects computation periods from 8/15/95 to 10/31/95. The "y" axis
reflects the cost of investment in $500 increments ranging from $9000 to
$11,000. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 500 and the LGFI; the ending
values are $10,176, $10,473, and $10,160, respectively. Below the legend is
the Average Annual Total Return for the period ended October 31, 1995, for
