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FEDERATED GROWTH TRUST
PROSPECTUS
Federated Growth Trust (the "Trust") is a no-load, open-end,
diversified management investment company (a mutual fund) that seeks
appreciation of capital by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and
dividends, or of companies where significant fundamental changes are
taking place.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know
before you invest in the Trust. Keep this prospectus for future
reference.
The Trust has also filed a Statement of Additional Information dated
December 31, 1994, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy
of the Statement of Additional Information free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about
the Trust, contact the Trust at the address listed in the back of this
prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1994
TABLE OF CONTENTS
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<TABLE>
<S> <C>
SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 6
TRUST INFORMATION 7
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Management of the Trust 7
Distribution of Trust Shares 8
Administration of the Trust 8
Brokerage Transactions 9
NET ASSET VALUE 9
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INVESTING IN THE TRUST 9
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Share Purchases 9
Minimum Investment Required 10
What Shares Cost 10
Exchanging Securities for Trust Shares 10
Subaccounting Services 11
Certificates and Confirmations 11
Dividends 11
Capital Gains 11
Retirement Plans 11
REDEEMING SHARES 11
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Telephone Redemption 11
Written Requests 12
Accounts with Low Balances 12
Redemption in Kind 13
SHAREHOLDER INFORMATION 13
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Voting Rights 13
Massachusetts Partnership Law 13
TAX INFORMATION 13
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Federal Income Tax 13
Pennsylvania Corporate and Personal
Property Taxes 14
PERFORMANCE INFORMATION 14
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FINANCIAL STATEMENTS 15
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 25
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ADDRESSES 26
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</TABLE>
I
SUMMARY OF TRUST EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)....................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)............ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)........................................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)................................ None
Exchange Fee...................................................................................... None
<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee.................................................................................... 0.75%
12b-1 Fee......................................................................................... None
Total Other Expenses.............................................................................. 0.31%
Shareholder Services Fee (after waiver) (1).......................................... 0.09%
Total Trust Operating Expenses (2)........................................................ 1.06%
<FN>
(1) The maximum shareholder services fee is 0.25%.
(2) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1995. The Total Trust
Operating Expenses were 0.99% for the fiscal year ended October 31, 1994.
</TABLE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $11 $34 $58 $129
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
FEDERATED GROWTH TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 25.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.92 $ 21.16 $ 21.58 $ 16.78 $ 20.99 $ 17.18
- -------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------
Net investment income 0.21 0.20 0.33 0.57 0.75 0.59
- -------------------------------
Net realized and unrealized gain (loss) on investments (2.18) 2.96 0.45 5.97 (2.69) 3.80
- ------------------------------- --------- --------- --------- --------- --------- ---------
Total from investment operations (1.97) 3.16 0.78 6.54 (1.94) 4.39
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net investment income (0.19) (0.23) (0.33) (0.61) (0.79) (0.52)
- -------------------------------
Distributions from net realized gain on investment
transactions (0.48) (0.17) (0.87) (1.13) (1.48) (0.06)
- ------------------------------- --------- --------- --------- --------- --------- ---------
Total distributions (0.67) (0.40) (1.20) (1.74) (2.27) (0.58)
- ------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 21.28 $ 23.92 $ 21.16 $ 21.58 $ 16.78 $ 20.99
- ------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (C) (8.43%) 15.06% 3.93% 41.54% (10.41%) 25.87%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.99% 0.96% 1.01% 1.01% 1.01% 1.01%
- -------------------------------
Net investment income 0.89% 0.90% 1.54% 2.88% 4.00% 2.99%
- -------------------------------
Expense waiver/ reimbursement (e) -- -- -- 0.10% 0.22% 0.14%
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000 omitted) $320,630 $460,811 $391,655 $275,561 $138,407 $134,735
- -------------------------------
Portfolio Turnover 59% 57% 46% 54% 67% 79%
- -------------------------------
<CAPTION>
PERIOD
ENDED
OCTOBER
31, YEAR ENDED MAY 31,
--------- ------------------------------------------
1988(A) 1988 1987 1986 1985(B)
------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.93 $ 17.67 $ 16.03 $ 11.66 $ 10.00
- -------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------
Net investment income 0.09 0.25 0.28 0.27 0.27
- -------------------------------
Net realized and unrealized gain (loss) on investments 1.08 (0.23) 2.40 4.46 1.60
- ------------------------------- --------- --------- --------- --------- ---------
Total from investment operations 1.17 0.02 2.68 4.73 1.87
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net investment income (0.15) (0.20) (0.26) (0.29) (0.21)
- -------------------------------
Distributions from net realized gain on investment
transactions (0.77) (0.56) (0.78) (0.07) --
- ------------------------------- --------- --------- --------- --------- ---------
Total distributions (0.92) (0.76) (1.04) (0.36) (0.21)
- ------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $17.18 $ 16.93 $ 17.67 $ 16.03 $ 11.66
- ------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN (C) 6.95% 0.50% 17.55% 41.58% 19.00%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 1.00% (d) 1.00% 1.00% 1.00% 0.99%(d)
- -------------------------------
Net investment income 1.30% (d) 1.39% 1.78% 2.35% 3.33%(d)
- -------------------------------
Expense waiver/ reimbursement (e) 0.60% (d) 0.15% 0.18% 0.50% 0.51%(d)
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000 omitted) $104,146 $102,395 $134,657 $47,318 $7,966
- -------------------------------
Portfolio Turnover 24% 88% 66% 42% 46%
- -------------------------------
<FN>
(a) For the five months ended October 31, 1988.
(b) Reflects operations for the period from August 23, 1984 (date of initial
public investment), to May 31, 1985.
(c) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(d) Computed on an annualized basis.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
Annual Report for the fiscal year ending October 31, 1994, which can be obtained
free of charge.
2
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 17, 1984. The Trust is designed for assets held by bank
customers or by banks in a fiduciary, advisory, agency, custodial (including
individual retirement accounts), or similar capacity. The Trust is also designed
for funds held by other institutions, corporations, trusts, brokers, investment
counselors, pension and profit-sharing plans, and insurance companies. A minimum
initial investment of $25,000 over a 90-day period is required, except for
retirement plans.
Trust shares are currently sold and redeemed at net asset value without a sales
charge imposed by the Trust.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Trust is appreciation of capital. The Trust
pursues this investment objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends, or
of companies where significant fundamental changes are taking place. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Trust will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of Trustees
(the "Trustees") without shareholder approval. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Trust invests primarily in equity securities of
companies selected by the Trust's investment adviser on the basis of traditional
research techniques, including assessment of earnings and dividend growth
prospects and of the risk and volatility of each company's business. The Trust
generally invests in companies with market capitalization of $100,000,000 or
more. The fundamental changes which the investment adviser will seek to identify
in companies include, for example, restructuring of basic businesses or
reallocations of assets which present opportunities for significant share price
appreciation. At times, the Trust will invest in securities of companies which
are deemed by the investment adviser to be candidates for acquisition by other
entities as indicated by changes in ownership, changes in standard
price-to-value ratios, and an examination of other standard analytical indices.
The Trust may invest in preferred stocks, corporate bonds, debentures, notes,
warrants, and put and call options on stocks.
SECURITIES OF FOREIGN ISSUERS. The Trust may invest in the securities of
foreign issuers which are freely traded on United States securities
exchanges or in the over-the-counter market in the form of depository
receipts. Securities of a foreign issuer may present greater risks in the
form of nationalization, confiscation, domestic marketability, or other
national or international restrictions.
3
As a matter of practice, the Trust will not invest in the securities of a
foreign issuer if any such risk appears to the investment adviser to be
substantial.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants, or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted, but also react to
movements in the underlying equity securities. The holder is entitled to
receive the fixed income of a bond or the dividend preference of a preferred
stock until the holder elects to exercise the conversion privilege. Usable
bonds are corporate bonds that can be used, in whole or in part, customarily
at full face value, in lieu of cash to purchase the issuer's common stock.
When owned as part of a unit along with warrants, which are options to buy
the common stock, they function as convertible bonds, except that the
warrants generally will expire before the bond's maturity. Convertible
securities are senior to equity securities and, therefore, have a claim to
assets of the corporation prior to the holders of common stock in the case
of liquidation. However, convertible securities are generally subordinated
to similar nonconvertible securities of the same company. The interest
income and dividends from convertible bonds and preferred stocks provide a
stable stream of income with generally higher yields than common stocks, but
lower than nonconvertible securities of similar quality. The Trust will
exchange or convert the convertible securities held in its portfolio into
shares of the underlying common stock in instances in which, in the
investment adviser's opinion, the investment characteristics of the
underlying common shares will assist the Trust in achieving its investment
objectives. Otherwise, the Trust will hold or trade the convertible
securities. In selecting convertible securities for the Trust, the Trust's
adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Trust's adviser considers
numerous factors, including the economic and political outlook, the value of
the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability
and practices.
The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
RESTRICTED SECURITIES. The Trust may acquire securities which are subject
to legal or contractual delays, restrictions, and costs on resale. Because
of time limitations, the Trust might not be able to dispose of these
securities at reasonable prices or at times advantageous to the Trust. The
Trust intends to limit the purchase of restricted securities which have not
been determined by the Trustees to be liquid, together with other securities
considered to be illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, to not more than 15% of its
net assets.
4
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Trust purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause the Trust to miss a price or yield considered to be advantageous.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices. Accordingly, the Trust may pay more/less than the market value of the
securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter 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 Trust may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of its
investment adviser, prevailing market conditions warrant, the Trust may, for
temporary defensive purposes, invest in:
- short-term money market instruments;
- securities issued and/or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities; and
- repurchase agreements.
REPURCHASE AGREEMENTS. Certain securities in which the Trust invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the
Trust and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not
repurchase the securities from the Trust, the Trust could receive less than
the repurchase price on any sale of such securities.
PUT AND CALL OPTIONS. The Trust may purchase put options on stocks. These
options will be used only as a hedge to attempt to protect securities which the
Trust holds against decreases in value. The Trust may purchase these put options
as long as they are listed on a recognized options exchange and the underlying
stocks are held in its portfolio.
The Trust may also write call options on securities either held in its
portfolio, or which it has the right to obtain without payment of further
consideration, or for which it has segregated cash in the amount of any
additional consideration. The call options which the Trust writes and sells must
be listed on a recognized options exchange. Writing of calls by the Trust is
intended to generate income for the Trust and, thereby, protect against price
movements in particular securities in the Trust's portfolio.
RISKS. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange which may or may not exist for
any particular call or put option at any specific time. The absence of a
liquid secondary market also may limit the Trust's ability to dispose of the
securities underlying an option. The inability to close options also could
have an adverse impact on the Trust's ability to effectively hedge its
portfolio.
5
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Trust may lend its portfolio securities on a short-term or a long-term basis up
to one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Trust will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned.
PORTFOLIO TURNOVER. Although the Trust does not intend to invest for the
purpose of seeking short-term profits, securities in its portfolio will be sold
whenever the Trust's investment adviser believes it is appropriate to do so in
light of the Trust's investment objective, without regard to the length of time
a particular security may have been held.
INVESTMENT LIMITATIONS
The Trust will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Trust sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Trust may borrow up to
one-third of the value of its net assets; or
- sell securities short except, under strict limitations, the Trust may
maintain open short positions so long as not more than 10% of the value of
its net assets is held as collateral for those positions.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
The Trust will not:
- purchase securities of other investment companies, except in open market
transactions limited to not more than 10% of its total assets, or except
as part of a merger, consolidation, or other acquisition;
- invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations and in equity
securities of any issuer which are not readily marketable;
- commit more than 5% of its total assets to premiums on open put option
positions;
- invest more than 5% of its total assets in securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
obligations) or acquire more than 10% of any class of voting securities of
any one issuer; or
- invest more than 5% of its total assets in warrants.
6
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The Trust's Adviser receives an annual investment advisory
fee equal to 0.75 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, which provides for the voluntary waiver of the
advisory fee by the Adviser, the Adviser may voluntarily waive some or all
of its fee. This does not include reimbursement to the Trust of any expenses
incurred by shareholders who use the transfer agent's subaccounting
facilities. The Adviser can terminate this voluntary waiver at any time in
its sole discretion. The Adviser has also undertaken to reimburse the Trust
for operating expenses in excess of limitations established by certain
states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the Trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Peter R. Anderson has been the Trust's senior portfolio manager since
August, 1994. Mr. Anderson joined Federated Investors in 1972 as, and is
presently, a Senior Vice President of the Trust's investment adviser. Mr.
Anderson is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Wisconsin.
Gregory M. Melvin is the Trust's co-portfolio manager and has participated
in the management of the Trust since January 1987. Mr. Melvin joined
Federated Investors in 1980 and has been a Vice President of the Trust's
investment adviser since 1984. Mr. Melvin is a Chartered Financial Analyst
and received his M.B.A. in Finance from Harvard Business School.
James E. Grefenstett has been the Trust's co-portfolio manager since
December 1, 1994. Mr. Grefenstett joined Federated Investors in 1992 and has
been an Assistant Vice President of the Trust's investment adviser since
1994. From 1992 until 1994, Mr. Grefenstett acted as an investment analyst.
Mr. Grefenstett 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. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie Mellon University.
7
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956 as
Federated Investors, Inc., develops and manages mutual funds primarily for
the financial industry. Federated Investors' track record of competitive
performance and its disciplined, risk averse investment philosophy serve
approximately 3,500 client institutions nationwide. Through these same
client institutions, individual shareholders also have access to this same
level of investment expertise.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS
ADMINISTRATIVE 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.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the shares to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.
8
PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may pay financial
institutions a fee based on the average net asset value of shares of their
customers invested in the Fund for providing administrative services. If paid,
this fee will be reimbursed by the Adviser and not the Fund.
The Fund's investment adviser or its affiliates may also offer to pay a fee from
their 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 dealer sells or may sell, and/or upon the type and nature of sales or
operational support furnished by the financial institution. These payments will
be made by the Fund's investment adviser and will not be made from the assets of
the Fund.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Trust, and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Trust and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE TRUST
- --------------------------------------------------------------------------------
SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or mail.
9
To purchase shares of the Trust, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Trust reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Trust by Federal Reserve wire, call the
Trust before 4:00 p.m. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 p.m.
(Eastern time) on the next business day following the order. Federal funds
should be wired as follows: Federated Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Federated Growth Trust; Fund Number (this number can be found on the account
statement or by contacting the Trust); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Payment by Federal Reserve wire
cannot be made on Columbus Day, Veterans' Day, or Martin Luther King Day.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable to
Federated Growth Trust to: Federated Services Company, P.O. Box 8602, Boston,
Massachusetts 02266-8602. Orders by mail are considered received after payment
by check is converted by the transfer agent's bank, State Street Bank, into
federal funds. This is generally the next business day after State Street Bank
receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000 plus any non-affiliated
bank or broker's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a non-
affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Trust shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust. Investors who purchase
Trust shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.
The net asset value is determined at the close of business of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR TRUST SHARES
Investors may exchange certain securities or a combination of securities and
cash for Trust shares. The securities and any cash must have a market value of
at least $25,000. The Trust reserves the right to determine the acceptability of
securities to be exchanged. Securities accepted by the Trust are valued in the
same manner as the Trust values its assets. Investors wishing to exchange
securities should first contact Federated Securities Corp.
10
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Trust shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Trust shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Trust on the record date. Unless shareholders request cash payments by writing
to the Trust, dividends are automatically reinvested in additional shares of the
Trust on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Trust, if any, will be distributed at least once
every 12 months.
RETIREMENT PLANS
Shares of the Trust can be purchased as an investment for retirement plans or
for IRA accounts. For further details, contact Federated Securities Corp. and
consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Trust redeems shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
11
An authorization form permitting the Trust to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
WRITTEN REQUESTS
Trust shares may also be redeemed by sending a written request to the Trust.
Call the Trust for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his name, the Trust name,
his account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Trust, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Trust's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
12
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Trust determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
13
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends are received in cash or as additional
shares. No federal income tax is due on any dividends earned in an IRA or
qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Trust advertises its total return and yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Trust after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Trust is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Trust
over a thirty-day period by the net asset value per share of the Trust on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Trust and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The Trust is sold without any sales charge or other similar non-recurring
charges.
From time to time, the Trust may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
14
FEDERATED GROWTH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITIES--72.7%
- --------------------------------------------------------------------------------
BASIC INDUSTRY--5.4%
-------------------------------------------------------------------
305,500 *Magma Copper Co. $ 5,460,812
-------------------------------------------------------------------
240,000 Medusa Corp. 5,460,000
-------------------------------------------------------------------
270,000 Praxair, Inc. 6,243,750
------------------------------------------------------------------- ------------
Total 17,164,562
------------------------------------------------------------------- ------------
CONSUMER DURABLES--2.3%
-------------------------------------------------------------------
150,000 Chrysler Corp. 7,312,500
------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--6.3%
-------------------------------------------------------------------
800,000 *Dr. Pepper/Seven-Up Cos. 20,300,000
------------------------------------------------------------------- ------------
CONSUMER SERVICES--6.8%
-------------------------------------------------------------------
800,000 *ADT Limited 9,000,000
-------------------------------------------------------------------
2,633,800 *Chambers Development, Inc., Class A 5,267,600
-------------------------------------------------------------------
260,000 *Safeway, Inc. 7,670,000
------------------------------------------------------------------- ------------
Total 21,937,600
------------------------------------------------------------------- ------------
ENERGY--6.7%
-------------------------------------------------------------------
223,600 Ashland Oil, Inc. 8,692,450
-------------------------------------------------------------------
497,600 *Kenetech Corp. 6,344,400
-------------------------------------------------------------------
260,000 YPF Sociedad Anonima, ADR 6,272,500
------------------------------------------------------------------- ------------
Total 21,309,350
------------------------------------------------------------------- ------------
FINANCE--8.9%
-------------------------------------------------------------------
400,000 MBNA Corp. 10,700,000
-------------------------------------------------------------------
60,000 Mellon Bank Corp. 3,337,500
-------------------------------------------------------------------
153,400 NationsBank Corp. 7,593,300
-------------------------------------------------------------------
200,000 Travelers, Inc. 6,950,000
------------------------------------------------------------------- ------------
Total 28,580,800
------------------------------------------------------------------- ------------
</TABLE>
15
FEDERATED GROWTH TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITIES--CONTINUED
- --------------------------------------------------------------------------------
HEALTHCARE--7.0%
-------------------------------------------------------------------
115,000 Columbia HCA Healthcare Corp. $ 4,786,875
-------------------------------------------------------------------
140,000 *Foundation Health Corp. 4,585,000
-------------------------------------------------------------------
150,000 Genentech, Inc. 7,612,500
-------------------------------------------------------------------
136,300 *Genetics Institute, Inc. 5,520,150
------------------------------------------------------------------- ------------
Total 22,504,525
------------------------------------------------------------------- ------------
INDUSTRIAL/MANUFACTURING--11.2%
-------------------------------------------------------------------
204,800 Dover Corp. 11,366,400
-------------------------------------------------------------------
734,700 *Foamex International, Inc. 6,612,300
-------------------------------------------------------------------
204,200 General Motors Corp., Class H 7,351,200
-------------------------------------------------------------------
283,800 Greenfield Industries, Inc. 6,740,250
-------------------------------------------------------------------
100,000 Stewart & Stevenson Services 3,850,000
------------------------------------------------------------------- ------------
Total 35,920,150
------------------------------------------------------------------- ------------
TECHNOLOGY--9.8%
-------------------------------------------------------------------
204,200 *Compaq Computer Corp. 8,193,525
-------------------------------------------------------------------
307,300 *Integrated Device Technology 8,719,637
-------------------------------------------------------------------
104,200 Intel Corp. 6,473,425
-------------------------------------------------------------------
204,200 Loral Corp. 8,091,425
------------------------------------------------------------------- ------------
Total 31,478,012
------------------------------------------------------------------- ------------
TRANSPORTATION--2.0%
-------------------------------------------------------------------
266,300 American President Co. Ltd. 6,457,775
------------------------------------------------------------------- ------------
UTILITIES--6.3%
-------------------------------------------------------------------
306,900 Cinergy Corp. 7,097,063
-------------------------------------------------------------------
210,000 MCI Communications Corp. 4,830,000
-------------------------------------------------------------------
204,200 Sonat, Inc. 6,636,500
-------------------------------------------------------------------
51,600 Sprint Corp. 1,683,450
------------------------------------------------------------------- ------------
Total 20,247,013
------------------------------------------------------------------- ------------
TOTAL EQUITIES (IDENTIFIED COST $205,459,491) 233,212,287
------------------------------------------------------------------- ------------
</TABLE>
16
FEDERATED GROWTH TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
SHARES VALUE
- ----------- ------------------------------------------------------------------- ------------
<C> <S> <C>
CONVERTIBLE SECURITIES--19.5%
- --------------------------------------------------------------------------------
BASIC INDUSTRY--1.5%
-------------------------------------------------------------------
150,000 AK Steel Holding Corp., SAILS, $2.15 $ 4,875,000
------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--2.7%
-------------------------------------------------------------------
$30,000,000 Coleman Worldwide Corp., Conv. LYON, 7.25% accrual, 5/27/2013 8,587,500
------------------------------------------------------------------- ------------
CONSUMER SERVICES--2.6%
-------------------------------------------------------------------
$ 7,750,000 Laidlaw, Inc., Conv. Deb. ADT, 6.00%, 1/15/1999 8,340,938
------------------------------------------------------------------- ------------
FINANCE--6.4%
-------------------------------------------------------------------
312,500 First USA, Inc., PRIDES, $1.99 10,781,250
-------------------------------------------------------------------
250,000 Sunamerica, Inc., Conv. Pfd., Series D, $2.78 9,656,250
------------------------------------------------------------------- ------------
Total 20,437,500
------------------------------------------------------------------- ------------
HEALTHCARE--2.3%
-------------------------------------------------------------------
$10,000,000 Roche Holdings, Inc., LYON, 4.75% accrual, 9/23/2008 5,225,000
-------------------------------------------------------------------
15,000 *Schering Plough Corp., Warrants 2,273,400
------------------------------------------------------------------- ------------
Total 7,498,400
------------------------------------------------------------------- ------------
TECHNOLOGY--2.1%
-------------------------------------------------------------------
$ 4,460,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000 6,603,253
------------------------------------------------------------------- ------------
UTILITIES--1.9%
-------------------------------------------------------------------
104,000 Nacional Financiera, SNC, PRIDES, $6.79 6,032,000
------------------------------------------------------------------- ------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $60,722,428) 62,374,591
------------------------------------------------------------------- ------------
**REPURCHASE AGREEMENT--7.4%
- --------------------------------------------------------------------------------
$23,710,000 J.P. Morgan Securities, Inc., 4.82%, dated 10/31/94, due 11/1/1994
(at amortized cost) 23,710,000
------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $289,891,919) $319,296,878+
------------------------------------------------------------------- ------------
<FN>
+ The cost for federal tax purposes amounts to $290,095,920. The net unrealized
appreciation of investments on a federal tax basis amounts to $29,200,958,
which is comprised of $47,090,873 appreciation and $17,889,915 depreciation
at October 31, 1994.
* Non-income producing.
</TABLE>
17
FEDERATED GROWTH TRUST
- ---------------------------------------------------------
<TABLE>
<S> <C>
** The repurchase agreement is fully collateralized by U.S. government
obligations. The investment in the repurchase agreement was through joint
participation in a joint account with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($320,629,748) at October 31, 1994.
</TABLE>
<TABLE>
<S> <C>
The following abbreviations are used in this portfolio:
ADR --American Depository Receipts
LYON --Liquid Yield Option Note
PRIDES --Preferred Redeemable Increased Dividend Equity Securities
SAILS --Stock Appreciation Income Linked Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
18
FEDERATED GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investment in securities, at value (identified cost, $289,891,919, and tax cost,
$290,095,920) $319,296,878
- -----------------------------------------------------------------------------------
Cash 3,135
- -----------------------------------------------------------------------------------
Income receivable 513,056
- -----------------------------------------------------------------------------------
Receivable for investments sold 22,207,154
- -----------------------------------------------------------------------------------
Receivable for Shares sold 170,972
- ----------------------------------------------------------------------------------- ------------
Total assets 342,191,195
- -----------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Payable for investments purchased $20,712,645
- ----------------------------------------------------------------------
Payable for Shares redeemed 788,817
- ----------------------------------------------------------------------
Accrued expenses 59,985
- ---------------------------------------------------------------------- ----------
Total liabilities 21,561,447
- ----------------------------------------------------------------------------------- ------------
NET ASSETS for 15,063,856 Shares outstanding $320,629,748
- ----------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------
Paid in capital $281,344,946
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 29,404,959
- -----------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments 9,371,740
- -----------------------------------------------------------------------------------
Undistributed net investment income 508,103
- ----------------------------------------------------------------------------------- ------------
Total Net Assets $320,629,748
- ----------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share
($320,629,748 DIVIDED BY 15,063,856 Shares outstanding) $21.28
- ----------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
FEDERATED GROWTH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------
Interest $ 3,586,170
- -------------------------------------------------------------------------
Dividends 4,183,916
- ------------------------------------------------------------------------- -------------
Total income 7,770,086
- -------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee $3,112,641
- ------------------------------------------------------------
Administrative personnel and services fee 410,620
- ------------------------------------------------------------
Custodian fees 170,755
- ------------------------------------------------------------
Transfer agent and dividend disbursing agent fees 69,463
- ------------------------------------------------------------
Trustees' fees 8,912
- ------------------------------------------------------------
Auditing fees 21,895
- ------------------------------------------------------------
Legal fees 14,005
- ------------------------------------------------------------
Portfolio accounting fees 27,722
- ------------------------------------------------------------
Share registration costs 42,079
- ------------------------------------------------------------
Printing and postage 12,144
- ------------------------------------------------------------
Insurance premiums 10,400
- ------------------------------------------------------------
Taxes 4,337
- ------------------------------------------------------------
Miscellaneous 8,801
- ------------------------------------------------------------
Shareholder services fee 180,150
- ------------------------------------------------------------ ----------
Total expenses 4,093,924
- ------------------------------------------------------------------------- -------------
Net investment income 3,676,162
- ------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------
Net realized gain (loss) on investments 9,370,805
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (51,582,544)
- ------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments (42,211,739)
- ------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (38,535,577)
- ------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
FEDERATED GROWTH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 3,676,162 $ 3,943,542
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($9,574,806 and
$9,253,729 net gains, respectively, as computed for federal
income tax purposes) 9,370,805 11,467,664
- ----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (51,582,544) 44,574,581
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (38,535,577) 59,985,787
- ---------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income (3,448,745) (4,405,675)
- ----------------------------------------------------------------
Distributions from net realized gains (9,252,795) (3,134,631)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to
shareholders (12,701,540) (7,540,306)
- ---------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of Shares 161,557,597 219,086,722
- ----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 5,957,016 3,344,081
- ----------------------------------------------------------------
Cost of Shares redeemed (256,459,141) (205,719,474)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from Share transactions (88,944,528) 16,711,329
- ---------------------------------------------------------------- ------------ ------------
Change in net assets (140,181,645) 69,156,810
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 460,811,393 391,654,583
- ---------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$508,103 and $280,686, respectively) $320,629,748 $460,811,393
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
21
FEDERATED GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Growth Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end, no-load
management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sale price reported on
national securities exchanges. Unlisted securities and bonds (and private
placement securities) are generally valued at the price provided by an
independent pricing service. Short-term securities with remaining maturities
of sixty days or less may be stated at amortized cost, which approximates
value.
REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued
interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Trust could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions to shareholders are recorded on the ex-
dividend date.
FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
22
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
GENERAL--Investment transactions are accounted for on the trade date.
RECLASSIFICATION--The Trust reclassified a cumulative net effect of $337
from undistributed net investment income and accumulated net realized gain
(loss) to paid-in capital in accordance with SOP 93-2. Net investment
income, net realized gains, and net assets were not affected by this change.
(3) CAPITAL SHARES
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1994 1993
- -------------------------------------------------- ------------ -----------
<S> <C> <C>
Shares sold 7,063,731 9,655,835
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 259,280 148,924
- --------------------------------------------------
Shares redeemed (11,526,631) (9,050,047)
- -------------------------------------------------- ------------ -----------
Net change (4,203,620) 754,712
- -------------------------------------------------- ------------ -----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Trust's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Trust's average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the FAS fee
is based on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of share.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS a fee of up
to .25 of 1% of average daily net assets
23
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
of the Trust for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Trust. This fee is based on the size, type,
and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records. The
fee is based on the level of the Trust's average daily net assets for the period
plus, out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------
PURCHASES $235,461,785
- -------------------------------------------------- ------------
SALES $226,312,250
- -------------------------------------------------- ------------
</TABLE>
24
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- ---------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED GROWTH TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Growth Trust as of October 31, 1994,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights (see page 2 of this prospectus) for each of the periods
presented therein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Growth Trust at October 31, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
presented therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 9, 1994
25
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Growth Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------
</TABLE>
26
- --------------------------------------------------------------------------------
FEDERATED GROWTH TRUST
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
December 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314190109
8112804A (12/94) [RECYCLED PAPER SYMBOL]
Federated Growth Trust
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Federated Growth Trust (the "Trust") dated December
31, 1994 . This Statement is not a prospectus itself. To receive
a copy of the prospectus, write or call the Trust.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated December 31, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
General Information About the
Trust 1
Investment Objective and Policies 1
Types of Investments 1
Temporary Investments 1
When-Issued and Delayed
Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 3
Portfolio Turnover 3
Investment Limitations 3
Federated Growth Trust Management 5
The Funds 8
Trust Ownership 9
Trustee Liability 9
Investment Advisory Services 9
Adviser to the Trust 9
Advisory Fees 9
Other Related Services 10
Administrative Services 10
Shareholder Services Plan 10
Brokerage Transactions 10
Purchasing Shares 11
Conversion to Federal Funds 11
Determining Net Asset Value 11
Determining Market Value of
Securities 11
Redeeming Shares 11
Redemption in Kind 11
Exchanging Securities for Trust
Shares 12
Tax Consequences 12
Tax Status 12
The Trust's Tax Status 12
Shareholders' Tax Status 12
Total Return 12
Yield 12
Performance Comparisons 13
General Information About the Trust
Federated Growth Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated April 17, 1984.
Investment Objective and Policies
The Trust's investment objective is appreciation of capital. The Trust
pursues this investment objective by investing primarily in equity
securities of companies with prospects for above-average growth in
earnings and dividends, or of companies where significant fundamental
changes are taking place. The investment objective cannot be changed
without approval of shareholders.
Types of Investments
The Trust may invest in common stocks, preferred stocks, corporate
bonds, debentures, notes, warrants, and put options on stocks.
Corporate Debt Securities
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such
as conversion or exchange rights, warrants for the acquisition of
common stock of the same or a different issuer, participations
based on revenues, sales, or profits, or the purchase of common
stock in a unit transaction (where corporate debt securities and
common stock are offered as a unit).
Restricted Securities
The Trust expects that any restricted securities would be acquired
either from institutional investors who originally acquired the
securities in private placements or directly from the issuers of
the securities in private placements. Restricted securities and
securities that are not readily marketable may sell at a discount
from the price they would bring if freely marketable.
Put and Call Options
The Trust may purchase listed put options on stocks or write
covered call options to protect against price movements in
particular securities in its portfolio and generate income. A put
option gives the Trust, in return for a premium, the right to sell
the underlying security to the writer (seller) at a specified
price during the term of the option. As writer of a call option,
the Trust has the obligation upon exercise of the option during
the option period to deliver the underlying security upon payment
of the exercise price.
The Trust may only: (1) buy put options which are listed on a
recognized options exchange and which are on securities held in
its portfolio; and (2) sell listed call options either on
securities held in its portfolio or on securities which it has the
right to obtain without payment of further consideration (or has
segregated cash in the amount of any such additional
consideration). The Trust will maintain its positions in
securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or expire. An
option position may be closed out only on an exchange which
provides a secondary market for an option of the same series.
Although the investment adviser will consider liquidity before
entering into option transactions, there is no assurance that a
liquid secondary market on an exchange will exist for any
particular option or at any particular time. The Trust reserves
the right to hedge the portfolio by buying financial futures and
put options on stock index futures and financial futures.
However, the Trust will not engage in these transactions until (1)
an amendment to its Registration Statement is filed with the
Securities and Exchange Commission and becomes effective; and (2)
ten days after a supplement to the prospectus disclosing this
change in policy has been mailed to the shareholders.
Temporary Investments
The Trust may also invest in temporary investments from time to time for
defensive purposes.
Money Market Instruments
The Trust may invest in the following money market instruments:
o instruments of domestic and foreign banks and savings and loans
if they have capital, surplus, and undivided profits of over
$100,000,000, or if the principal amount of the instrument is
insured in full by the Bank Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation
("FDIC"), or the Savings Association Insurance Fund, which is
administered by the FDIC; and
o prime commercial paper (rated A-1 by Standard and Poor's Ratings
Group, Prime-1 by Moody's Investors Service, Inc., or F-1 by
Fitch Investors Service, Inc.).
U.S. Government Obligations
The types of U.S. government obligations in which the Trust may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Federal Farm Credit Banks;
o Federal Home Loan Banks;
o Federal National Mortgage Association;
o Student Loan Marketing Association; and
o Federal Home Loan Mortgage Corporation.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Trust. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Trust sufficient to make payment for the securities to be
purchased are segregated on the Trust's records at the trade date.
These assets are marked to market daily and are maintained until the
transaction has been settled. The Trust does not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Lending of Portfolio Securities
The collateral received when the Trust lends portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Trust.
During the time portfolio securities are on loan, the borrower pays the
Trust any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Trust or the borrower. The
Trust may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker. The
Trust does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Repurchase Agreements
The Trust or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked to
market daily. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the
Trust might be delayed pending court action. The Trust believes that
under the regular procedures normally in effect for custody of the
Trust's portfolio securities subject to repurchase agreements, a court
of competent jurisdiction would rule in favor of the Trust and allow
retention or disposition of such securities. The Trust will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Trust's
investment adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees (the "Trustees").
Reverse Repurchase Agreements
The Trust may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement, the Trust transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Trust will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase
agreements may enable the Trust to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that
the Trust will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Trust, in a dollar amount sufficient to make payment for the obligations
to be purchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
Portfolio Turnover
The Trust will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in an
attempt to achieve the Trust's investment objective. For the fiscal
years ended October 31, 1994, and 1993, the portfolio turnover rates
were 59% and 57%, respectively.
Investment Limitations
Concentration of Investments
The Trust will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry.
However, the Trust may at times invest 25% or more of the value of
its total assets in cash or cash items (not including certificates
of deposit), securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or repurchase
agreements secured by such instruments.
Investing in Commodities
The Trust will not purchase or sell commodities. The Trust
reserves the right to hedge the portfolio by purchasing financial
futures and put options on stock index futures and on financial
futures.
Investing in Real Estate
The Trust will not purchase or sell real estate, although it may
invest in the securities of companies whose business involves the
purchase or sale of real estate, or in securities which are
secured by real estate or interests in real estate.
Buying on Margin
The Trust will not purchase any securities on margin but may
obtain such short-term credits as may be necessary for clearance
of transactions and may make margin payments in connection with
buying financial futures, put options on stock index futures, and
put options on financial futures.
Selling Short
The Trust will not sell securities short unless:
o during the time the short position is open, it owns an equal
amount of the securities sold or securities convertible into or
exchangeable, without payment of additional consideration, for
securities of the same issuer as, and equal in amount to, the
securities sold short; and
o not more than 10% of the Trust's net assets (taken at current
value) is held as collateral for such sales at any one time.
Issuing Senior Securities and Borrowing Money
The Trust will not issue senior securities, except as permitted by
its investment objective and policies, and except that the Trust
may borrow money and engage in reverse repurchase agreements only
in amounts up to one-third of the value of its net assets,
including the amounts borrowed. The Trust will not borrow money or
engage in reverse repurchase agreements for investment leverage,
but rather as a temporary, extraordinary, or emergency measure, or
to facilitate management of the portfolio by enabling the Trust to
meet redemption requests where the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The
Trust will not purchase any securities while any such borrowings
(including reverse repurchase agreements) are outstanding.
Lending Cash or Securities
The Trust will not lend any of its assets except portfolio
securities. This shall not prevent the purchase or holding of
corporate or government bonds, debentures, notes, certificates of
indebtedness, or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the
Trust's investment objective and policies or Declaration of Trust.
Underwriting
The Trust will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Investing in Minerals
The Trust will not purchase interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may invest in the securities of issuers which invest in or sponsor
such programs.
Diversification of Investments
The Trust will not purchase the securities of any issuer (other
than the U.S. government, its agencies, or instrumentalities, or
instruments secured by securities of such issuers, such as
repurchase agreements) if, as a result, more than 5% of the value
of its total assets would be invested in the securities of such
issuer or acquire more than 10% of any class of voting securities
of any issuer. For these purposes, the Trust takes all common
stock and all preferred stock of an issuer, each as a single
class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material changes in these limitations become effective.
Investing in Securities of Other Investment Companies
The Trust will not purchase securities of other investment
companies, except by purchases in the open market involving only
customary brokerage commissions and as a result of which not more
than 10% of the value of its total assets would be invested in
such securities, or except as part of a merger, consolidation, or
other acquisition. (It should be noted that investment companies
incur certain expenses such as management fees and, therefore, any
investment by the Trust in shares of another investment company
would be subject to such duplicate expenses.)
Investing in Illiquid Securities
The Trust will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice and
certain restricted securities not determined by the Trustees to be
liquid.
Investing in New Issuers
The Trust will not invest more than 5% of the value of its total
assets in securities of issuers which have records of less than
three years of continuous operations, including the operation of
any predecessor.
Investing in Issuers Whose Securities are Owned by Officers of the
Trust
The Trust will not purchase or retain the securities of any issuer
if the officers and Trustees of the Trust or the Trust'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.
Pledging Assets
The Trust will not mortgage, pledge, or hypothecate any assets,
except to secure permitted borrowings. In those cases, it may
pledge assets having a market value not exceeding the lesser of
the dollar amounts borrowed or 10% of the value of total assets at
the time of the borrowing.
Purchasing Put Options
The Trust will not purchase put options on securities unless the
securities are held in the Trust's portfolio and not more than 5%
of the value of the Trust's total assets would be invested in
premiums on open put options.
Writing Covered Call Options
The Trust will not write call options on securities unless the
securities are held in the Trust's portfolio or unless the Trust
is entitled to them in deliverable form without further payment or
after segregating cash in the amount of any further payment.
Acquiring Securities
The Trust will not purchase securities of a company for the
purpose of exercising control or management. However, the Trust
may invest in up to 10% of the voting securities of any one issuer
and may exercise its voting powers consistent with the best
interests of the Trust. In addition, the Trust, other companies
advised by the Trust's investment adviser, and other affiliated
companies may together buy and hold substantial amounts of voting
stock of a company and may vote together in regard to such
company's affairs. In some such cases, the Trust and its
affiliates might collectively be considered to be in control of
such company. In some cases, Trustees and other persons associated
with the Trust and its affiliates might possibly become directors
of companies in which the Trust holds stock.
Investing in Warrants
The Trust will not invest more than 5% of the value of its total
assets in warrants. No more than 2% of this 5% may be warrants
which are not listed on the New York or American Stock Exchange.
Warrants acquired in units or attached to securities may be deemed
to be without value for purposes of this policy.
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 Trust did not borrow
money, sell securities short, or invest in reverse repurchase agreements
in excess of 5% of the value of its total assets during the last fiscal
year and has no present intent to do so in the coming fiscal year.
In addition to the limitations set forth above, the Trust will not
purchase or sell real estate limited partnership interests or oil, gas,
or other mineral leases, except that the Trust may purchase or sell
securities of companies which invest in or hold the foregoing.
Federated Growth Trust Management
Officers and Trustees are listed with their addresses, present
positions with Federated Growth Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; Chairman and
Director, Federated Research Corp.; Chairman, Passport Research,
Ltd.; Director, AEtna Life and Casualty Company; Chief Executive
Officer and Director, Trustee, or Managing General Partner of the
Funds. Mr. Donahue is the father of J. Christopher Donahue , Vice
President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the
Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
* This Trustee is deemed to be an "interested person" as defined
in the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the Board of Trustees handles the responsibilities of the Board
of Trustees between meetings of the Board.
The Funds
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. -
1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds: Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark
Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; World Investment Series, Inc.
Trust Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of December 13, 1994, Bozworth Company , Little Rock, Arkansas owned
5% of the outstanding shares of the Trust.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Trust
The Trust'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 or any shareholder for any losses that
may be sustained in the purchase, holding, or sale of any security, or
for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus. During the
fiscal years ended October 31, 1994, 1993, and 1992, the Trust's Adviser
earned $3,112,641, $3,288,904, , and $2,594,945, respectively.
State Expense Limitation
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose
shares are registered for sale in those states. If the Trust's
normal operating expenses (including the investment advisory fee,
but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year on the next $70 million
of average net assets, and 1 1/2% per year of the remaining
average net assets, the Adviser will reimburse the Trust for its
expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
Adviser will be limited, in any single fiscal year, by the amount
of the investment advisory fee. This arrangement is not part of
the advisory contract and may be amended or rescinded in the
future.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated
Securities Corp.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust for a fee
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc., may hereinafter collectively be referred
to as, the "Administrators.") For the fiscal year ended October 31,
1994, the Administrators collectively earned $ 410,620, of which $ 0 was
waived. For the fiscal years ended October 31, 1993, and 1992,
Federated Administrative Services, Inc., earned $597,926 and $515,312,
respectively, of which $ 0 and $ 0, respectively, were waived. Dr.
Henry J. Gailliot, an officer of Federated Management, the Adviser to
the Trust, holds approximately 20%, of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to the Administrators.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend
disbursing agent for the Trust. The fee paid to the transfer agent is
based upon the size, type and number of accounts and transactions made
by shareholders.
Federated Services Company also maintains the Trust's accounting
records. The fee paid for this service is based upon the level of the
Trust's average net assets for the period plus out-of-pocket expenses.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and, indirectly, to financial institutions to cause services to
be provided to shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to, providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
For the fiscal period ending October 31, 1994, payments in the amount of
$180,150 were made pursuant to the Shareholder Services Plan, all of
which was paid to financial institutions.
Brokerage Transactions
The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Trust
or to the Adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising other accounts. To the
extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend
to reduce their expenses.
For the fiscal years ended October 31, 1994, 1993, and 1992, the Trust
paid total brokerage commissions of $ 829,771, $336,988, and $604,078,
respectively.
As of October 31, 1994, the Trust owned $6,950,000 of securities of
Travelers Inc., and $3,337,500 of securities of Mellon Bank Corp., both
of which are regular broker/dealers that derive more than 15% of gross
revenues from securities-related activities.
Purchasing Shares
Shares are sold at their net asset value without a sales charge on days
the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Trust is explained in the prospectus under
"Investing in the Trust."
Conversion to Federal Funds
It is the Trust's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds. State Street Bank acts as the shareholder's agent in depositing
checks and converting them to federal funds.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset
value is calculated by the Trust are described in the prospectus.
Determining Market Value of Securities
Market values of the Trust's portfolio securities, other than options,
are determined as follows:
o according to the last sale price on a national securities
exchange, if available;
o in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices and for
bonds and other fixed income securities as determined by an
independent pricing service;
o for unlisted equity securities, the latest bid prices; or
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service or at
fair value as determined in good faith by the Board of Trustees.
Options are valued at the market values established by the exchanges at
the close of option trading unless the Trustees determine in good faith
that another method of valuing option positions is necessary to appraise
their fair value.
Redeeming Shares
The Trust redeems shares at the next computed net asset value after the
Trust receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although State
Street Bank does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of
less than $5,000.
Redemption in Kind
Although the Trust intends to redeem shares in cash, it reserves the
right, under certain circumstances, to pay the redemption price in whole
or in part by a distribution of securities from the Trust's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in
a manner the Trustees determine to be fair and equitable. To the extent
available, such securities will be readily marketable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Trust is obligated to redeem shares
for any one shareholder in cash only up to the lesser of $250,000 or 1%
of the Trust's net asset value during any 90-day period.
Exchanging Securities for Trust Shares
Investors may exchange securities they already own for Trust shares, or
they may exchange a combination of securities and cash for Trust shares.
An investor should forward the securities in negotiable form with an
authorized letter of transmittal to Federated Securities Corp. The Trust
will notify the investor of its acceptance and valuation of the
securities within five business days of their receipt by State Street
Bank.
The Trust values securities in the same manner as the Trust values its
assets. The basis of the exchange will depend upon the net asset value
of Trust shares on the day the securities are valued. One share of the
Trust will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, or other rights attached to the securities become the
property of the Trust, along with the securities.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Trust shares, a gain or loss may be realized by the
investor.
Tax Status
The Trust's Tax Status
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special
tax treatment afforded to such companies. To qualify for this treatment,
the Trust must, among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital
gains
received as cash or additional shares. No portion of any income dividend
paid by the Trust is eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-
term capital gains distributed to them regardless of how long they
have held the Trust shares.
Total Return
The Trust's average annual total return for the one-year, five-year and
ten-year periods ended October 31, 1994, were (8.43%), 6.78%, and
13.79%, respectively.
The average annual total return for the Trust is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the offering price per share at the end of
the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
quarterly reinvestment of all dividends and distributions.
Yield
The Trust's yield for the thirty-day period ended October 31, 1994, was
1.41%.
The yield for the Trust is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the Trust over a thirty-day period by the offering price per
share of the Trust on the last day of the period. This value is
annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated
each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by
the Trust because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. To the extent that
financial institutions and broker/dealers charge fees in connection with
services provided in conjunction with an investment in the Trust,
performance will be reduced for those shareholders paying those fees.
Performance Comparisons
The Trust's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio
securities;
o changes in Trust expenses; and
o various other factors.
The Trust's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
o Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specified period of time. From
time to time, the Trust will quote its Lipper ranking in the
"growth funds" category in advertising and sales literature.
o Dow Jones Industrial Average ("DJIA") is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones
& Company, it is cited as a principal indicator of market
conditions.
o Standard & Poor's Low-Priced Index compares a group of
approximately twenty actively traded stocks priced under $25 for
one month periods and year-to-date.
o Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to
the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in the Standard & Poor's
figures.
o Standard & Poor's 500 (S&P 500) is an unmanaged index of common
stocks in industry, transportation, finance, and public utilities
denoting general market performance, as monitored by Standard &
Poor's Corporation.
o Lipper Growth Fund Average is an average of the total returns for
251 growth funds tracked by Lipper Analytical Services, Inc., an
independent mutual fund rating service.
o Lipper Growth Fund Index is an average of the net asset-valuated
total returns for the top 30 growth funds tracked by Lipper
Analytical Services, Inc., an independent mutual fund rating
service.
o Morningstar, Inc. , an independent rating service, is the
publisher of the bi-weekly Mutual Fund Values. Mutual Fund Values
rates more than 1,000 NASDAQ-listed mutual funds of all types,
according to their risk-adjusted returns. The maximum rating is
five stars, and ratings are effective for two weeks.
Advertisements and other sales literature for the Trust may quote total
returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in the Trust based on quarterly reinvestment of dividends
over a specified period of time.
314190109
8112804B (12/94)
INVESTMENT REVIEW FOR FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED OCTOBER 31, 1994
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
At the end of the first quarter of this year, adjustments were made to
the management style of Federated Growth Trust (the "Trust" or "FGT"). These
adjustments were intended to address the historically volatile performance
of the Trust. The volatile returns characteristic of the Trust, even as
compared to its peers, is shown in the following chart.
AVERAGE QUARTERLY TOTAL RETURN (AQR) AND STANDARD DEVIATION (SD) OF RETURNS
AS OF 3/31/94
<TABLE>
<CAPTION>
FEDERATED GROWTH TRUST AVERAGE LIPPER GROWTH STANDARD & POOR'S 500
FUND INDEX
-------------------------- ------------------------ ------------------------
PERIOD AQR(1) SD AQR SD AQR SD
- -------------------------------------- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
One Year 0.15% 4.10% 1.14% 3.53% 0.40% 2.94%
Three Years 1.77% 3.80% 2.42% 4.35% 2.25% 3.42%
Five Years 2.90% 7.93% 2.98% 7.06% 3.08% 6.17%
Since Inception 3.76% 9.78% 3.22% 8.01% 3.76% 7.69%
(9/84)
<FN>
(1) Total cumulative returns for the Trust, as of 3/31/94, for the one year,
three years, and five years and since inception periods were 0.32%, 22.40%,
66.97% and 288.16%, respectively.
</TABLE>
Quarterly data is used, versus annual, so that the larger number of
return points would minimize the impact of any widely divergent periods.
Annual returns, however, show even greater variability. The adjustments to
management style were made in an effort to both reduce the volatility of
returns and increase the likelihood of outperformance.
Instituting the new disciplines required that a material amount of
changes had to be made to the portfolio. One change was the adjustment in
the Trust's exposures in underweighted and overweighted industry sectors, as
shown in the following chart.
<TABLE>
<CAPTION>
STANDARD &
FGT FGT POOR'S 500
RELATIVE RELATIVE INDEX FUND
WEIGHT WEIGHT AVERAGE
SECTOR 3/31/94 11/30/94 WEIGHT*
- ------------------------------------------------------------ ----------- ----------- ---------------
<S> <C> <C> <C>
Basic Industries 18.6% 79.3% 8.4%
Consumer Durables 113.6% 169.3% 4.7%
Consumer Non Durables 58.3% 66.7% 11.0%
Consumer Services 110.7% 84.9% 11.7%
Energy 56.4% 65.5% 9.6%
Finance 161.6% 125.0% 11.0%
Health Care 154.9% 75.8% 7.8%
Industrial/Manufacturing 196.8% 105.8% 9.0%
Technology 68.9% 140.1% 9.3%
Transportation 366.7% 58.6% 1.8%
Utilities 0.0% 67.4% 13.4%
</TABLE>
* THIS IS AN UNMANAGED INDEX. RELATIVE WEIGHTINGS FOR THE STANDARD & POOR'S 500
INDEX ARE FOR THE PERIOD FROM APRIL 1, 1994 TO NOVEMBER 1, 1994.
INVESTMENT REVIEW FOR FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
At the end of the first quarter, the average relative sector underweighting was
40%, while the average relative overweighting (excluding cash) was 184%. As of
the end November 1994, these relative averages were 71% and 135%, respectively.
The Trust has moved from making sizable sector bets to more moderate over and
under weightings.
Since the end of first quarter 1994, 18 of the Trust's 37 (49%) positions were
eliminated and almost all of the remaining positions were reduced. The Trust has
replaced exited holdings and has added seven more positions to increase the
number of securities to 43. The Trust has gone from averaging 4.8 in the
Columbine Growth Decile (the Fund's primary model for ranking stocks; 1-most
attractive, 10-least attractive) and 5.8 in ZEI (Zack's earnings estimate
momentum model and one of the Trust's veto screens: 1-good estimate momentum,
10-weak estimate momentum) to 3.6 and 4.9, respectively.
The average and median market capitalizations have moved from $4.2 and $1.1
billion to $5.1 and $2.0 billion, respectively. This has a couple of positive
effects: 1) for marketing purposes, the Trust will no longer be confused with
small stock funds, which have median market capitalizations of around $1 billion
and below, 2) as the Trust moves up the size ladder, the volatility of its
holdings should decline-- which should help moderate the volatility of returns
for the Trust, and 3) the stocks the Trust holds will be more liquid--they will
be easier to buy and sell without affecting the price as much. The Trust has now
reached a market capitalization that is between mid-and large-market
capitalizations, which should permit the liquidity the Trust needs in stocks
that still have plenty of growth left in them.
Making these changes allowed the Trust's average relative price/earnings ratio
to decrease from 110% of the Standard & Poor's 500 ("S&P 500") to 92%, while
only decreasing the Trust's average expected long-term earnings growth rate,
relative to the S&P 500, from 159% to 144%. In other words, the Trust was able
to get growth at a better price.
While the Trust still has changes yet to come (i.e. continue to reduce its
smaller, more thinly traded holdings and add 10 to 15 new positions), Federated
Growth Trust is materially different from what it was at the end of the first
quarter of 1994. The changes already made should have a meaningful impact on the
Trust's performance into 1995.
On a broader note, about a year ago, we had anticipated the return of growth
style outperformance. As shown in the chart on the following page, there was
only a decline in the momentum of value's outperformance over growth. Now it
appears as though the times have finally changed--growth, according to the
performance of the Russell 1000 Growth Index*, has been outperforming value on a
12-month moving average basis. Whether this is a sign of a trend to come or just
the growth style coming up for a breath is difficult to say.
The driving factor will probably be the economy. While the economy continues to
grow, the rate of its growth has begun to moderate. This moderation, some
believe, portends the coming of the next economic slow down. We believe that
such a slow down should provide a favorable environment for growth stocks, which
by most definitions tend to grow their earnings due to secular forces (or
influences outside that of the broader economy) as opposed to cyclical ones. As
investors begin to anticipate a slow down, they move from value stocks, whose
earnings are usually more sensitive to cyclical economic growth, to growth
stocks.
* THIS INDEX IS UNMANAGED.
The current demographics of the United States could continue to foster a
favorable environment for growth stocks. For the next 5 or more years, the
number of people turning 25 years old and setting up a household (an event which
provides considerable growth to the economy) will be increasing at a declining
rate. This situation, along with the expansion of the older and less consumptive
segment of our population, should provide a damper on the nominal growth of the
economy for the next several years. We believe growth stocks should do well in
this environment.
12 MONTH MOVING AVG OF THE RUSSELL GROWTH INDEX VERSUS THE
RUSSELL VALUE INDEX*
[CHART]
_GRAPHIC REPRESENTATION IS OMITTED. SEE APPENDIX A1.
* THIS INDEX IS UNMANAGED.
FEDERATED GROWTH TRUST
- --------------------------------------------------------------------------------
GROWTH OF $25,000 INVESTED IN FEDERATED GROWTH TRUST
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Growth Trust* (the "Trust") from October 31, 1984, to October 31,
1994, compared to the Standard and Poor's 500 Index (S&P 500)+ and the Lipper
Growth Fund Index (LGFI).+
GRAPHIC REPRESENTATION IS OMITTED. SEE APPENDIX A2.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND INDEX 1 INDEX2
<S> <C> <C> <C>
10/31/84 25,000 25,000 25,000
10/31/85 29,687 29,836 29,563
10/31/86 42,052 39,726 38,542
10/31/87 39,331 42,245 38,153
10/31/88 52,043 48,512 44,511
10/31/89 65,506 61,256 56,333
10/31/90 58,686 56,653 49,587
10/31/91 83,063 75,633 68,888
10/31/92 86,326 83,142 74,457
10/31/93 99,329 95,519 90,310
10/31/94 90,956 99,130 91,764
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 1994
<TABLE>
<S> <C>
1 Year....................................................... (8.43%)
5 Year....................................................... 6.78%
10 Year...................................................... 13.79%
Start of Performance (8/23/84)............................... 13.76%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Trust's prospectus dated
December 31, 1994, and, together with financial statements contained therein,
constitutes the Trust's annual report.
*The Trust'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.
+The S&P 500 and the LGFI are not adjusted to reflect sales loads, expenses, or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance.
[LOGO]
---------------------------------------------------------------------------
Distributor
461444309
3110812-ARS (12/94) [LOGO]
RECYCLED
PAPER
APPENDIX
A1. The graphic presentation here displayed consists of a line graph
titled "12 Month Moving AVG of the Russell Growth Index Versus the
Russell Value Index*." The corresponding components of the line graph
are listed underneath. The graphic presentation here displayed consists
of the components of a line graph. The 12 month moving average of the
Russell Growth Index versus the Russell Value Index (the "Indices") is
represented by a bold solid line. The "y" axis reflects the relative
performance of the Indices. If the average is greater than zero, growth
outperforms; if the average is less than zero, value outperforms. The
"x" axis reflects computation periods from December, 1979 through June,
1994.
A2. The graphic presentation here displayed consists of a line graph
titled "Growth of $25,000 Invested in Federated Growth Trust." The
corresponding components of the line graph are listed underneath.
Federated Growth Trust (the "Trust") is represented by a broken line.
Standard and Poor's 500 Index (the "S&P 500") is represented by a solid
line. Lipper Growth Funds Index (the "LGFI") is represented by a dotted
line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $25,000 investment in the Trust, the
S&P 500 and the LGFI. The "x" axis reflects computation periods from
October 31, 1984 through, October 31, 1994. The "y" axis reflects the
cost of the investment, ranging from $20,000 to $100,000. The right
margin reflects the ending value of the hypothetical investment in the
Trust as compared to the S&P 500 and the LGFI. The ending values are
$90,956, $99,130 and 91,764, respectively.
