Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
412-288-1900 Phone
www.federatedinvestors.com
[Graphic}
August 10, 1998
Dear Valued Shareholder:
I would like to share some good news with you. James E. Grefenstette, the
portfolio manager of Federated Growth Strategies Fund, has been recently
recognized as one of the nation's best fund managers. Jim was ranked 14th in
Barron's annual ranking, conducted by Value Line, which lists the top 100 stock
fund managers who have consistently outperformed other managers in at least the
past three years through June 30, 1998. The complete list is published in the
July 20, 1998 issue of Barron's.
The qualities that earned Jim this recognition are typical among Federated fund
managers. As the article points out, the folks on this list all achieved their
results without taking undue risk-an approach that should serve them well if the
"bear" ever returns to Wall Street.
Mr. Grefenstette, Vice President of Federated Management, joined Federated in
1992 and has managed the fund since 1994. He selects large U.S. companies for a
measure of stability and mid-size U.S. companies for greater growth potential.
Says Jim, "We believe the market will recognize that the premium being paid for
consistency and liquidity is excessive, and investor sentiment will swing back
toward mid-cap stocks."
You are to be congratulated for selecting Federated Growth Strategies Fund to
pursue your investment objective of long-term capital growth. As of June 30,
1998, the fund's Class A Shares average annual total returns based on maximum
offering price were 19.97% for 1 year, 17.25% for 5 years, and 14.94% for 10
years.*
Thank you for entrusting a portion of your wealth in Federated Growth Strategies
Fund. Your questions, comments, or suggestions about your fund are always
welcome.
Very sincerely yours,
Richard B. Fisher
Chairman
Federated Securities Corp.
Enclosure
P.S. The enclosed Semi-Annual Report includes data that was inadvertently
omitted from the Financial Highlights section in the edition you received
earlier. We apologize for the error and can assure you that the additional
expenses incurred have not been charged to the fund itself.
* Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return represents the change in the value of an investment after
reinvesting all income and capital gains. These figures reflect the maximum
5.50% sales charge applicable to an investment in Class A Shares. Additional
classes of shares are available. Performance for these classes will vary due to
differences in charges and expenses.
[Graphic]
Federated
Growth Strategies Fund
14TH SEMI-ANNUAL REPORT
APRIL 30, 1998
ESTABLISHED 1984
PRESIDENT'S MESSAGE
[Graphic]
Dear Shareholder:
Federated Growth Strategies Fund was created in 1984, and I am pleased to
present its 14th Semi-Annual Report. This report covers the first half of the
fund's fiscal year which is the six-month period from November 1, 1997 through
April 30, 1998. It begins with a discussion with the fund's portfolio manager
Jim E. Grefenstette, Vice President of Federated Management. Following his
discussion are three additional items of shareholder interest. First is a series
of graphs showing long-term investment performance. Second is a complete listing
of the fund's stock holdings. Third is the publication of the fund's financial
statements.
Federated Growth Strategies Fund is managed to pursue long-term growth through a
highly diversified portfolio of mid- and large- capitalization stocks selected
for their strong price and earnings momentum. The fund's portfolio includes
common stocks representing the 12 industry sectors with many familiar names that
you will recognize immediately: General Electric, Travelers Group, and Merck, to
name a few.
The fund weathered a difficult fourth quarter of 1997 when the market reacted
negatively to Asian market difficulties. The fund subsequently participated in
the market rally during the first quarter of 1998 and outpaced the average
growth fund from the beginning of the year through April 30, 1998. The fund's
returns were primarily the result of price appreciation of the securities in the
fund's portfolio. Individual share class total return performance, including
capital appreciation, income dividends, and realized gains follows.*
TOTAL CAPITAL NET ASSET
RETURN INCOME GAINS VALUE CHANGE
Class A Shares 13.19% $0.00 $6.39 $31.54 to $28.38 = (10%)
Class B Shares 12.86% $0.00 $6.39 $31.02 to $27.70 = (11%)
Class C Shares 12.87% $0.00 $6.39 $31.16 to $27.86 = (11%)
* Performance quoted is based on net asset value, reflects past performance, and
is not indicative of future results. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Total returns for the period based on
offering price for Class A, B, and C Shares were 6.95%, 6.67%, and 11.73%,
respectively.
Over time, you can easily increase your opportunity to participate in the growth
of American companies by reinvesting your dividends and capital gains
automatically in additional fund shares. You can also add to your account on a
regular basis through a systematic investment program. This program withdraws a
specific amount from your checking account on a regular basis to purchase more
fund shares. Buying shares regularly, (i.e. monthly additions of the same dollar
amount) automatically accumulates more shares in your account at lower prices.+
You can contact your investment representative or Federated Securities Corp. for
more information.
Thank you for selecting Federated Growth Strategies Fund to pursue your
long-term financial goals. We welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
June 15, 1998
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
[Graphic]
Jim E. Grefenstette, CFA
Vice President
Federated Management
[Graphic]
WHAT IS YOUR APPRAISAL OF THE FIRST HALF OF THE FUND'S FISCAL YEAR, WHICH WAS
BOTH REWARDING AND VOLATILE?
The tone for late 1997 was set during the last two weeks of October, when the
markets suddenly realized that near-term economic growth in the southeast Asian
countries was more problematic than certain. This led to a dramatic downward
revaluation of the affected countries' currencies and capital markets. The
impact on the U.S. stock market, aside from a terrific one-day thumping, was
that there was material uncertainty with regard to how fast U.S. companies could
grow earnings over the next year or two. This doubt was caused by fears that
U.S. exports to Asia would likely slow (thanks to moderating local demands and a
stronger dollar), and that cheaper Asian imports to the U.S. would threaten
domestically produced goods.
The result of the Asian transformation from hero to goat was that investors
began to pay premiums for securities that offered stability and to demand
discounts for those that entailed higher risk. The Standard & Poor's ("S&P") 500
Index (large cap stocks) returned 2.9% for the quarter, while the S&P 600 Small
Cap Index (small cap stocks) lost 3.1% and the NASDAQ Composite (a range of caps
dominated by large technology stocks) lost 6.8%.*
Federated Growth Strategies Fund felt the effects of the changes in market
sentiment. We left the third quarter of 1997 with the wind in our sails,
benefiting from the trend of moderating domestic economic growth favoring
smaller growth stocks. The Asian turmoil, however, as mentioned above, caused
investors to rapidly migrate toward the stability of larger stocks.
* The S&P 500 Index is a capitalization weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries. The
S&P 600 Small Cap Index is a capitalization weighted index that measures the
performance of selected U.S. stocks with a small market capitalization. NASDAQ
Composite is a computerized system that provides brokers and dealers with
price quotations for securities traded over the counter as well as for many
New York Stock Exchange listed securities. These indices are unmanaged, and
investments cannot be made in an index.
After that fretful fourth quarter, we returned to business as usual in the first
quarter of 1998. The rally was broad as the S&P 500 Index returned 13.9%, the
S&P 600 Small Cap Index was up 11.1%, and the NASDAQ Composite gained 17.3%.
Federated Growth Strategies Fund performed in line with the market in 1998, as
Class A, B, and C Shares recorded total returns of 14.49%, 14.27%, and 14.27%,
respectively, for the period from January 1, 1998 to April 30, 1998.** These
year-to-date returns were comparable to the 14.27% return of the average growth
fund tracked by the Lipper Growth Funds Average.+
[Graphic]
WHAT IS YOUR OUTLOOK ON ASIA'S POTENTIAL IMPACT ON THE MARKET?
Concerns of a meltdown in Asia resulting in a decline in global Gross Domestic
Product ("GDP"), global excess capacity, reduced U.S. exports, and intense
pricing pressures have been eased considerably. Asia, including Japan,
represents 30% of U.S. exports, but only 3% of domestic GDP. Because the region
is a large source of imports, lower import prices should benefit the economy by
further reducing inflation and our multi-national companies with lower sourced
material costs. While we think it is appropriate for the market to recognize
this, it should also be noted that U.S. exports, along with business fixed
investment, have been the greatest contributors to GDP growth in the U.S.
[Graphic]
HOW DID FEDERATED GROWTH STRATEGIES FUND PERFORM OVER THE SIX-MONTH
REPORTING PERIOD ENDED APRIL 30, 1998 COMPARED TO THE LIPPER GROWTH FUNDS
AVERAGE?
The fund's six-month total returns for Class A, B, and C Shares were 13.19%,
12.86%, and 12.87%, respectively, based on net asset value.** These returns
lagged the 17.31% return of the fund's peer group, the Lipper Growth Funds
Average.
** Performance quoted is based on net asset value, reflects past performance,
and is not indicative of future results. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns for the period
from January 1, 1998 to April 30, 1998, based on offering price for Class A,
B, and C Shares were 8.20%, 8.79%, and 13.29%, respectively. Total returns
for the six-month reporting period ended April 30, 1998, based on offering
price for Class A, B, and C Shares were 6.95%, 6.67%, and 11.73%,
respectively.
+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
[Graphic]
WHAT ARE SOME OF THE FUND'S RECENT PORTFOLIO ADDITIONS?
Our recent purchases include the following:
ADVANCED FIBRE COMMUNICATIONS (1.36% of portfolio): Advanced Fibre designs and
sells one of the most flexible and saleable next generation digital loop carrier
systems on the market. The company is well positioned to benefit from the
prevailing trends in the carrier equipment industry.
CHANCELLOR MEDIA (0.58% of portfolio): This is the largest pure-play public
radio company and the second largest overall with 99 stations in the 21 largest
U.S. markets. Its stations are well positioned for growth due to steady ratings
gains and a rising national advertising presence.
EMC CORP. (0.92% of portfolio): A leading manufacturer of enterprise-scale data
storage devices, EMC is enjoying growth as networks increase in number and grow
in size. The company should continue to benefit from the shift from mainframes
to servers, a trend that should last for years to come.
FAIRFIELD COMMUNITIES (0.71% of portfolio): Fairfield is a leading vacation
ownership sales company with innovative product development and marketing.
Vacation ownership should grow as Baby Boomers mature and experience improved
disposable income. Fairfield has the potential to grow earnings 25%-30% per year
by consolidating a fragmented industry of small operators.
[Graphic]
HOW HAS THE MARKET INFLUENCED THE FUND'S SECTOR WEIGHTINGS?
We still think it will take at least several quarters to work through the Asian
situation, and that it will put pressure on industrial commodity companies. So,
despite the respectable performance of basic industry and producer manufacturing
stocks, we continue to underweight these groups, as well as the energy sector.
Our domestic economy remained healthy, as strong employment trends and wage
growth invigorated American consumers to spend more money on automobiles,
housing, and retail goods. This has led to strong performance by the consumer
durable manufacturers and retail sector. We brought our durables sector position
up closer to market weight to take advantage of the healthy consumer trend, but
remain selective. We have reduced our retail exposure closer to market weight
with the strong performance of this group. We expect this environment to also
benefit the services sector, to which we have been aggressively increasing our
exposure.
[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF APRIL 30, 1998, AND WHAT WERE THE
INDUSTRY WEIGHTINGS?
PERCENTAGE OF
NAME NET ASSETS
Advanced Fibre Communications 1.4%
Lucent Technologies, Inc. 1.3%
Tellabs, Inc. 1.2%
Pfizer, Inc. 1.2%
MBNA Corp. 1.2%
Equitable Companies, Inc. 1.1%
Dollar Tree Stores Inc. 1.1%
Schering Plough Corp. 1.1%
Warner-Lambert Co. 1.1%
Conseco, Inc. 1.1%
TOTAL 11.8%
PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS S&P 500 INDEX
Technology 20.8% 15.2%
Finance 16.0% 16.0%
Health Care 12.8% 11.4%
Consumer Non-Durables 10.9% 11.0%
Energy/Minerals 7.3% 9.1%
Utilities 5.6% 9.5%
Services 5.3% 5.1%
Retail Trade 5.2% 4.8%
Producer Manufacturing 4.1% 7.7%
Consumer Durables 3.6% 3.4%
Basic Industry 2.5% 5.4%
Transportation 1.2% 1.4%
Other 3.3% 0.0%
[Graphic]
AS WE APPROACH MID-YEAR, WHAT IS YOUR OVERALL OUTLOOK FOR THE MARKET?
The market is not cheap, but based on interest rates, it is not overly
expensive. If inflation stays around 2%, it is fairly valued, and the market is
discounting a decline in interest rates. We think a decline in rates is
reasonable based on decelerating growth of consumer credit, slower industrial
capacity growth, and the federal government's budget moving from deficit to
surplus, combined with problems abroad and lower international interest rates.
With top-down strategists' earnings expectations still well below bottom-up
analysts estimates, we think earnings are a bigger risk than valuations. Such an
environment should continue to put a premium on the reliability of earnings
growth and result in a strong bid for growth stocks.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED GROWTH STRATEGIES FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $14,000 IN THE CLASS A SHARES OF
FEDERATED GROWTH STRATEGIES FUND ON 8/23/84, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$120,717 ON 4/30/98. YOU WOULD HAVE EARNED A 17.05%* AVERAGE ANNUAL TOTAL RETURN
FOR THE INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of 3/31/98, Class A Shares' average annual 1-year, 5-year, and 10-year total
returns were 38.45%, 17.16%, and 15.43%, respectively. Class B Shares' 1-year
and since inception (8/16/95) total returns were 38.41% and 25.78%,
respectively. Class C Shares' 1-year and since inception (8/16/95) total returns
were 44.45% and 27.83%, respectively.**
"Graphic representation "B1" omitted. See Appendix."
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50%
sales charge applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
** The total returns stated take into account the 5.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares, and
the 1.00% contingent deferred sales charge for Class C Shares.
FEDERATED GROWTH STRATEGIES FUND
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 13
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $48,975.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
Growth Strategies Fund on 8/23/84, reinvested your dividends and capital gains
and did not redeem any shares, you would have invested only $14,000, but your
account would have reached a total value of $48,975* by 4/30/98. You would have
earned an average annual total return of 16.19%.
A practical investment plan helps you pursue long-term performance from growth
oriented stocks. Through systematic investing, you buy shares on a regular basis
and reinvest all earnings. An investment plan works for you when you invest only
$1,000 annually. You can take it one step at a time.
Put time, money, and compounding to work!
"Graphic representation "B2" omitted. See Appendix."
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. No method of investing can guarantee a profit
or protect against loss in down markets. However, by investing regularly over
time and buying shares at various prices, investors can purchase more shares
at lower prices. All accumulated shares have the ability to pay income to the
investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.
FEDERATED GROWTH STRATEGIES FUND
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR A COLLEGE EDUCATION
David and Joan Rice are a fictitious couple who, like many shareholders, are
searching for a way to make their money grow over time.
David and Joan have been planning for the college education of their child. On
April 30, 1988, they invested $5,000 in the Class A Shares of Federated Growth
Strategies Fund. Since then, David and Joan have made additional investments of
$250 every month.
As this chart shows, over 10 years, the original $5,000 investment along with
their additional monthly $250 investments totaling $35,000 has grown to $92,936.
This represents a 16.42% average annual total return. For the Rices, a dedicated
program of monthly investments really paid off.
"Graphic representation "B3" omitted. See Appendix."
This hypothetical scenario is provided for illustrative purposes only and
does not represent the result obtained by any particular shareholder. Past
performance does not guarantee future results.
FEDERATED GROWTH STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 95.3%
BASIC INDUSTRY -- 2.5%
23,000 Goodrich (B.F.) Co. $ 1,237,688
62,100 Monsanto Co. 3,283,538
165,200 (a)Royal Group Technologies Ltd. 5,131,525
59,000 Southdown, Inc. 4,174,250
52,500 Texas Industries, Inc. 3,382,969
Total 17,209,970
CONSUMER DURABLES -- 3.6%
130,000 Centex Corp. 4,517,500
208,600 (a)Fairfield Communities, Inc. 4,876,025
225,500 (a)Furniture Brands International, Inc. 6,624,063
153,600 (a)Gentex Corp. 5,184,000
117,400 Oakwood Homes Corp. 3,309,213
Total 24,510,801
CONSUMER NON-DURABLES -- 10.9%
92,200 American International Pasta Co. 2,766,000
38,200 Clorox Co. 3,204,025
67,800 Coca-Cola Co. 5,144,325
53,000 Colgate-Palmolive Co. 4,753,438
44,000 Gillette Co. 5,079,250
115,100 (a)Jones Apparel Group, Inc. 6,884,419
106,900 (a)Keebler Foods Co. 3,046,650
87,600 Procter & Gamble Co. 7,199,625
75,300 Quaker Oats Co. 3,915,600
116,200 RJR Nabisco Holdings Corp. 3,231,813
182,600 (a)Smithfield Foods, Inc. 5,546,475
87,800 St. John Knits, Inc. 3,918,075
95,900 (a)Tommy Hilfiger Corp. 5,849,900
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
CONSUMER NON-DURABLES -- CONTINUED
112,000 Universal Corp. $ 4,193,000
126,900 Wolverine World Wide, Inc. 3,664,238
62,300 Wrigley (Wm.), Jr. Co. 5,544,700
Total 73,941,533
ENERGY/MINERALS -- 7.3%
192,400 (a)BJ Services Co. 7,215,000
38,800 Baker Hughes, Inc. 1,571,400
90,800 (a)Cooper Cameron Corp. 6,032,525
93,800 Diamond Offshore Drilling, Inc. 4,748,625
109,600 ENSCO International, Inc. 3,096,200
171,100 (a)Friede Goldman International, Inc. 6,886,775
247,800 (a)Global Industries Ltd. 5,621,963
210,700 (a)Global Marine, Inc. 4,964,619
87,900 Tosco Corp. 3,131,438
199,800 (a)Varco International, Inc. 6,143,850
Total 49,412,395
FINANCE -- 16.0%
77,500 Ahmanson (H.F.) & Co. 5,909,375
61,800 Allstate Corp. 5,948,250
39,400 American International Group, Inc. 5,183,563
52,800 Bank of New York Co., Inc. 3,118,500
62,600 BankAmerica Corp. 5,321,000
223,500 (a)Catellus Development Corp. 3,981,094
149,900 Conseco, Inc. 7,438,788
108,000 (a)E*Trade Group, Inc. 2,693,250
126,100 Equitable Cos., Inc. 7,739,388
184,600 Frontier Insurance Group, Inc. 4,891,900
129,500 (a)Golden State Bancorp, Inc. 5,050,500
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FINANCE -- CONTINUED
232,387 MBNA Corp. $ 7,872,110
87,800 Mellon Bank Corp. 6,321,600
77,400 Merrill Lynch & Co., Inc. 6,791,850
93,605 Morgan Stanley, Dean Witter & Co. 7,383,094
113,400 Old Republic International Corp. 5,131,350
60,900 Providian Financial Corp. 3,665,419
116,550 Raymond James Financial, Inc. 3,795,159
106,800 Torchmark Corp. 4,759,275
88,300 Travelers Group, Inc. 5,402,856
Total 108,398,321
HEALTH CARE -- 12.8%
58,500 (a)Centocor, Inc. 2,467,969
79,700 (a)Dura Pharmaceuticals, Inc. 2,112,050
74,300 Guidant Corp. 4,968,813
93,100 HBO & Co. 5,568,544
163,200 (a)Healthsouth Corp. 4,926,600
50,900 Johnson & Johnson 3,632,988
85,900 Lilly (Eli) & Co. 5,975,419
52,100 Merck & Co., Inc. 6,278,050
243,300 (a)PSS World Medical, Inc. 5,459,044
69,900 Pfizer, Inc. 7,955,494
414,800 (a)PharMerica, Inc. 5,755,350
96,600 (a)Quintiles Transnational Corp. 4,781,700
93,800 Schering Plough Corp. 7,515,725
112,700 Smithkline Beecham Corp., ADR 6,712,694
96,300 (a)Universal Health Services, Inc., Class B 5,543,269
39,500 Warner-Lambert Co. 7,472,906
Total 87,126,615
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PRODUCER MANUFACTURING -- 4.1%
105,000 (a)Chicago Miniature Lamp, Inc. $ 4,029,375
97,700 (a)EVI, Inc. 5,202,525
39,600 General Electric Co. 3,370,950
117,600 Miller Herman, Inc. 3,550,050
68,900 Precision Castparts Corp. 4,280,413
129,500 Tyco International, Ltd. 7,057,750
Total 27,491,063
RETAIL TRADE -- 5.2%
142,300 (a)Dollar Tree Stores, Inc. 7,719,775
131,100 (a)General Nutrition Cos., Inc. 4,703,213
92,600 Home Depot, Inc. 6,447,275
179,700 (a)Safeway, Inc. 6,873,525
176,700 (a)Staples, Inc. 4,362,281
122,900 TJX Cos., Inc. 5,438,325
Total 35,544,394
SERVICES -- 5.3%
201,600 (a)Allied Waste Industries, Inc. 5,544,000
96,400 CBS Corp. 3,434,250
151,455 (a)Cendant Corp. 3,786,375
82,700 (a)Chancellor Media Corp., Class A 3,923,081
156,750 (a)Liberty Media Group, Class A, Series A (LBTYA) 5,202,141
59,200 (a)Premier Parks, Inc. 3,293,000
76,500 Service Corp. International 3,155,625
125,700 (a)Snyder Communications, Inc. 5,342,250
36,800 (a)Veritas DGC, Inc. 1,929,608
Total 35,610,330
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TECHNOLOGY -- 20.8%
217,400 (a)Advanced Fibre Communications $ 9,212,058
79,000 (a)America Online, Inc. 6,320,000
94,800 (a)Applied Materials, Inc. 3,424,650
47,400 (a)BMC Software, Inc. 4,434,863
68,800 (a)CIENA Corp. 3,835,600
134,300 (a)Cadence Design Systems, Inc. 4,876,769
92,600 (a)Cisco Systems, Inc. 6,782,950
79,500 (a)Citrix Systems Inc. 4,938,938
112,000 (a)Compuware Corp. 5,474,000
129,000 (a)Cymer, Inc. 2,878,313
81,700 (a)Dell Computer Corp. 6,597,275
136,000 (a)EMC Corp. Mass 6,273,000
92,800 (a)Gemstar International Group Ltd. 3,584,400
73,700 (a)HNC Software 2,874,300
71,400 Intel Corp. 5,770,013
95,600 (a)KLA-Tencor Corp. 3,853,875
112,600 Lucent Technologies, Inc. 8,571,811
242,000 (a) Mastech Corp. 6,413,000
76,500 (a) Microsoft Corp. 6,894,563
63,900 Northern Telecom Ltd. 3,889,913
95,600 (a)Peoplesoft, Inc. 4,445,400
137,500 (a)Platinum Technology, Inc. 3,506,250
59,050 (a)Rambus, Inc. 2,653,559
116,700 (a)SCI Systems, Inc. 4,806,581
87,800 (a)Sportsline USA, Inc. 3,094,950
97,200 (a)Sun Microsystems, Inc. 4,003,425
117,200 (a)Tellabs, Inc. 8,306,687
73,800 (a)Xilinx, Inc. 3,376,350
Total 141,093,493
</TABLE>
FEDERATED GROWTH STRATEGIES FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TRANSPORTATION -- 1.2%
74,000 Expeditors International Washington, Inc. $ 3,145,000
189,100 Southwest Airlines Co. 5,188,431
Total 8,333,431
UTILITIES -- 5.6%
98,400 Coastal Corp. 7,029,450
108,900 (a)ICG Communications, Inc. 3,811,500
84,100 (a)ITC DeltaCom, Inc. 2,407,363
146,600 (a)IXC Communications, Inc. 7,311,688
130,900 MCI Communications Corp. 6,585,906
106,500 (a)PanAmSat Corp. 6,223,594
86,900 (a)Teleport Communications Group, Inc., Class A 4,681,725
Total 38,051,226
TOTAL COMMON STOCKS
(IDENTIFIED COST $483,287,250) 646,723,572
(B)REPURCHASE AGREEMENT -- 3.3%
$ 22,205,000 BT Securities Corp., 5.53%, dated 4/30/1998,
due 5/1/1998 (AT AMORTIZED COST) 22,205,000
TOTAL INVESTMENTS
(IDENTIFIED COST $505,492,250)(C) $ 668,928,572
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $505,492,250.
The net unrealized appreciation of investments on a federal tax basis
amounts to $163,436,322 which is comprised of $171,156,086 appreciation and
$7,719,764 depreciation at April 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($678,290,314) at
April 30, 1998.
The following acronym is used throughout this portfolio:
ADR -- American Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified cost $505,492,250) $668,928,572
Cash 5,552,245
Income receivable 317,264
Receivable for investments sold 21,139,864
Receivable for shares sold 2,406,751
Total assets 698,344,696
LIABILITIES:
Payable for investments purchased $18,991,542
Payable for shares redeemed 804,850
Income distribution payable 35
Payable for taxes withheld 12,019
Accrued expenses 245,936
Total liabilities 20,054,382
NET ASSETS for 23,973,916 shares outstanding $678,290,314
NET ASSETS CONSIST OF:
Paid in capital $482,003,421
Net unrealized appreciation of investments 163,436,322
Accumulated net realized gain on investments 34,263,770
Distributions in excess of net investment income (1,413,199)
Total Net Assets $678,290,314
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($592,158,329 / 20,866,986 shares $28.38
outstanding)
Offering Price Per Share (100/94.50 of $28.38)* $30.03
Redemption Proceeds Per Share $28.38
CLASS B SHARES:
Net Asset Value Per Share ($74,197,840 / 2,678,550 shares outstanding) $27.70
Offering Price Per Share $27.70
Redemption Proceeds Per Share (94.50/100 of $27.70)** $26.18
CLASS C SHARES:
Net Asset Value Per Share ($11,934,145 / 428,380 shares outstanding) $27.86
Offering Price Per Share $27.86
Redemption Proceeds Per Share (99.00/100 of $27.86)** $27.58
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $13,820) $1,656,570
Interest 602,105
Total income 2,258,675
EXPENSES:
Investment advisory fee $2,180,768
Administrative personnel and services fee 219,285
Custodian fees 21,167
Transfer and dividend disbursing agent fees and expenses 157,293
Directors'/Trustees' fees 1,650
Auditing fees 8,373
Legal fees 1,867
Portfolio accounting fees 56,397
Distribution services fee -- Class B Shares 197,877
Distribution services fee -- Class C Shares 29,983
Shareholder services fee -- Class A Shares 650,970
Shareholder services fee -- Class B Shares 65,959
Shareholder services fee -- Class C Shares 9,994
Share registration costs 30,855
Printing and postage 22,650
Insurance premiums 3,077
Taxes 12,790
Miscellaneous 6,986
Total expenses 3,677,941
Waivers --
Waiver of shareholder services fee -- Class A Shares $(16,805)
Waiver of shareholder services fee -- Class C Shares (948)
Total waivers (17,753)
Net expenses 3,660,188
Net operating loss (1,401,513)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 35,008,875
Net change in unrealized appreciation of investments 42,146,221
Net realized and unrealized gain on investments 77,155,096
Change in net assets resulting from operations $75,753,583
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) OCTOBER 31,
APRIL 30, 1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net operating loss $ (1,401,513) $ (882,924)
Net realized gain on investments ($35,008,875 and $114,090,561,
respectively, as computed for federal tax purposes) 35,008,875 113,887,481
Net change in unrealized appreciation 42,146,221 58,806,461
Change in net assets resulting from operations 75,753,583 171,811,018
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares -- (15,300)
Distributions in excess of net investment income
Class A Shares -- (11,686)
Distributions from net realized gains
Class A Shares (103,524,863) (32,989,453)
Class B Shares (8,434,004) (1,366,243)
Class C Shares (1,228,554) (434,938)
Change in net assets resulting from distributions
to shareholders (113,187,421) (34,817,620)
SHARE TRANSACTIONS--
Proceeds from sale of shares 379,112,689 345,861,726
Proceeds from shares issued in connection with the acquisition -- 74,233,048
Net asset value of shares issued to shareholders in payment of
distributions declared 85,270,596 22,808,813
Cost of shares redeemed (303,784,951) (347,178,563)
Change in net assets resulting from share transactions 160,598,334 95,725,024
Change in net assets 123,164,496 232,718,422
NET ASSETS:
Beginning of period 555,125,818 322,407,396
End of period $ 678,290,314 $ 555,125,818
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEINNING OF PERIOD $31.54 $25.84 $26.22 $21.28 $23.92 $21.16
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05) (0.04) 0.04 0.24 0.21 0.20
Net realized and unrealized gain
(loss)
on investments 3.28 8.56 5.01 5.64 (2.18) 2.96
Total from investment operations 3.23 8.52 5.05 5.88 (1.97) 3.16
LESS DISTRIBUTIONS
Distributions from net investment
income -- 0.00** (0.04) (0.26) (0.19) (0.23)
Distributions from net realized
gain
on investments (6.39) (2.82) (5.39) (0.68) (0.48) (0.17)
Total distributions (6.39) (2.82) (5.43) (0.94) (0.67) (0.40)
NET ASSET VALUE, END OF PERIOD $28.38 $31.54 $25.84 $26.22 $21.28 $23.92
TOTAL RETURN(A) 13.19% 36.37% 23.16% 29.03% (8.43%) 15.06%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.18%* 1.14% 1.13% 1.10% 0.99% 0.96%
Net investment income/(loss) (0.40%)* (0.14%) 0.15% 1.05% 0.89% 0.90%
Expense waiver/reimbursement(b) 0.01%* 0.10% 0.15% 0.16% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 $592,158 $509,678 $307,382 $249,110 $320,630 $460,811
omitted)
Average commission rate paid(c) $0.0559 $.0571 $0.0566 -- -- --
Portfolio turnover 61% 146% 89% 125% 59% 57%
</TABLE>
* Computed on an annualized basis.
** Amounts distributed per share do not round to $0.01.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $31.02 $25.65 $26.23 $25.51
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.09) (0.10) (0.10) (0.02)
Net realized and unrealized gain on investments 3.16 8.29 4.91 0.74
Total from investment operations 3.07 8.19 4.81 0.72
LESS DISTRIBUTIONS
Distributions from net realized gain on (6.39) (2.82) (5.39) --
investments
NET ASSET VALUE, END OF PERIOD $27.70 $31.02 $25.65 $26.23
TOTAL RETURN(B) 12.86% 35.23% 22.03% 2.82%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.94%* 1.99% 2.03% 2.04%*
Net operating loss (1.16%)* (1.04%) (0.79%) (0.66%)*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $74,198 $39,588 $10,858 $1,345
Average commission rate paid(c) $0.0559 $0.0571 $0.0566 --
Portfolio turnover 61% 146% 89% 125%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 16, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED OCTOBER 31,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $31.16 $25.68 $26.22 $25.51
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.08) (0.20) (0.05) (0.02)
Net realized and unrealized gain on investments 3.17 8.50 4.90 0.73
Total from investment operations 3.09 8.30 4.85 0.71
LESS DISTRIBUTIONS
Distributions from net realized gain on (6.39) (2.82) (5.39) --
investments
NET ASSET VALUE, END OF PERIOD $27.86 $31.16 $25.68 $26.22
TOTAL RETURN(B) 12.87% 35.66% 22.12% 2.78%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.92%* 1.90% 1.92% 2.05%*
Net operating loss (1.14%)* (0.91%) (0.72%) (0.71%)*
Expense waiver/reimbursement(c) 0.02%* 0.09% 0.12% --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $11,934 $5,860 $3,667 $57
Average commission rate paid(d) $0.0559 $0.0571 $0.0566 --
Portfolio turnover 61% 146% 89% 125%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 16, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GROWTH STRATEGIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
1. ORGANIZATION
Federated Equity Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Growth Strategies Fund (the "Fund"),
a diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers 3 classes of shares: Class A Shares, Class B Shares, and Class C
Shares. The investment objective of the fund is appreciation of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Listed equity securities are valued at the last sale
price reported on a national securities exchange. U.S. government securities are
generally valued at the mean of the latest bid and asked price as furnished by
an independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Distribution in excess of net investment income were a result of certain book
and tax timing differences. These distributions do not represent a return of
capital for federal income tax purposes.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for net operating
losses.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 13,010,069 $341,699,878 12,275,128 $ 315,683,919
Shares issued in connection
with the acquisition -- -- 3,104,686 74,233,048
Shares issued to shareholders
in payment of distributions 3,073,854 76,047,398 878,652 21,166,808
declared
Shares redeemed (11,378,997) (299,081,619) (12,012,363) (340,958,561)
Net change resulting from
Class A Share transactions 4,704,926 $118,665,657 4,246,103 $ 70,125,214
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,226,117 $ 31,821,342 954,973 $ 27,222,810
Shares issued to shareholders in
payment of distributions declared 336,615 8,152,832 53,641 1,280,406
Shares redeemed (160,493) (4,195,784) (155,624) (4,220,243)
Net change resulting from
Class B Share transactions 1,402,239 $ 35,778,390 852,990 $ 24,282,973
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 215,252 $ 5,591,469 106,759 $ 2,954,997
Shares issued to shareholders in
payment of distributions declared 43,939 1,070,366 15,123 361,599
Shares redeemed (18,854) (507,548) (76,646) (1,999,759)
Net change resulting from
Class C share transactions 240,337 $ 6,154,287 45,236 $ 1,316,837
Net change resulting from
share transactions 6,347,502 $160,598,334 5,144,329 $ 95,725,024
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors, Inc. for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Trust's Class B and Class C Shares. The Plan provides
that the Fund may incur distribution expenses according to the following
schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the fund.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1998, were as follows:
PURCHASES $404,998,929
SALES $349,204,251
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constanakis
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President,
Treasurer, and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314172107
Cusip 314172206
Cusip 314172305
8010409 (6/98)
B1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from August
23, 1984 to April 30, 1998. The "y" axis is measured in increments of $20,000
ranging from $0 to $140,000 and indicates that the ending value of a
hypothetical initial investment of $14,000 in the Federated Growth Strategies
Fund's Class A Shares, assuming a 5.50% sales charge and the reinvestment of all
capital gains and dividends, would have grown to $120,717 on April 30, 1998.
B2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from August
23, 1984 to April 30, 1998. The "y" axis is measured in increments of $10,000
ranging from $0 to $60,000 and indicates that the ending value of hypothetical
yearly investments of $1,000 in Federated Growth Strategies Fund's Class A
Shares, assuming the reinvestment of all capital gains and dividends, would have
grown to $48,975 on April 30, 1998.
B3. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from April
30, 1988 to April 30, 1998. The "y" axis is measured in increments of $20,000
ranging from $0 to $100,000 and indicates that the ending value of a
hypothetical initial investment of $5,000 and subsequent monthly investments of
$250 over 10 years in Federated Growth Strategies Fund's Class A Shares would
have grown to $92,936 on April 30, 1998.
