File No. 333-_______
As filed with the Securities and Exchange Commission on April 6, 2007
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __
Post-Effective Amendment No.
(Check appropriate box or boxes)
FEDERATED MDT SERIES
(Exact Name of Registrant as Specified in Charter)
1-800-341-7400
(Area Code and Telephone Number)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro LLP
1825 Eye Street, NW
Washington, DC 20006
(202) 420-2218
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended.
Title of Securities Being Registered: Class A Shares, Class B Shares and
Class C Shares, at par value, of Federated MDT Large Cap Growth Fund
It is proposed that this filing will become effective on May 7, 2007 pursuant
to Rule 488.
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No filing fee is due because Registrant is relying on Section 24(f) of
the Investment Company Act of 1940, as amended
Federated Equity Funds
Federated Large Cap Growth Fund
Prospectus/Proxy Statement - Please Vote!
TIME IS OF THE ESSENCE. . .VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL
EXPENSE.
Federated Large Cap Growth Fund, a portfolio of the Federated Equity Funds
(the "Trust"), will hold a special meeting of shareholders on June 22, 2007.
It is important for you to vote on the issue described in this
Prospectus/Proxy Statement. We recommend that you read the Prospectus/Proxy
Statement in its entirety; the explanation will help you to decide on the
issue.
Following is an introduction to the process and the proposal.
Why am I being asked to vote?
Mutual funds are required to obtain shareholders' votes for certain types of
changes, like the one included in this Prospectus/Proxy Statement. You have
a right to vote on these changes.
What is the issue?
A proposed Reorganization that would combine Federated Large Cap Growth Fund
with Federated MDT Large Cap Growth Fund.
Why is the Reorganization being proposed?
The Board of Trustees believes that the Reorganization is in the best
interest of Federated Large Cap Growth Fund and its shareholders.
On July 14, 2006, Federated Investors, Inc., the parent company of Federated
Large Cap Growth Fund's investment adviser, acquired Federated MDTA LLC, the
investment adviser to Federated MDT Large Cap Growth Fund. In connection
with the acquisition, on December 8, 2006, the former MDT Large Cap Growth
Fund became Federated MDT Large Cap Growth Fund. As a result, the Federated
family of funds now includes two large cap growth funds. Federated desires
to combine the two Funds to further management efficiency.
Both Funds have similar investment objectives and strategies. The investment
objective of Federated MDT Large Cap Growth Fund is long-term capital
appreciation, while the investment objective of Federated Large Cap Growth
Fund is capital appreciation. Both Funds pursue their investment objectives
by investing primarily in the common stocks of large capitalization growth
companies traded in the United States.
By combining Federated Large Cap Growth Fund with Federated MDT Large Cap
Growth Fund, the Reorganization would provide the shareholders of Federated
Large Cap Growth Fund with a more viable fund.
In the Reorganization, shareholders with Class A Shares and Class C Shares of
Federated Large Cap Growth Fund will receive an equivalent net asset value of
Class A Shares and Class C Shares of Federated MDT Large Cap Growth Fund.
Shareholders with Class B Shares of Federated Large Cap Growth Fund will
receive an equivalent net asset value of Class B Shares of Federated MDT
Large Cap Growth Fund, which is a new share class created for the
Reorganization.
How will the Reorganization affect my investment?
o Both Funds have similar investment objectives and strategies:
Federated Large Cap Growth Fund and Federated MDT Large Cap Growth Fund
both seek to provide long-term capital appreciation.
o The cash value of your investment will not change. You will receive
shares of Federated MDT Large Cap Growth Fund with a total dollar value
equal to the total dollar value of the Federated Large Cap Growth Fund
shares that you own at the time of the Reorganization.
o The Reorganization will be a tax-free transaction.
How do I vote my shares?
You may vote in person at the meeting or complete and return the enclosed
proxy card. Please note that if you:
1. do not respond at all, we may contact you by telephone to request that
you cast your vote;
2. sign and return the proxy card without indicating a preference, your
vote will be cast "for" the proposal.
You may also vote by telephone through the Voice Response Unit (VRU) or
through the Internet. Please refer to your ballot for the appropriate VRU
telephone number and internet address.
What should I do in connection with the Reorganization?
You need not and should not do anything for the Reorganization except vote
your shares today. If approved, the Reorganization will take place
automatically, and your Federated Large Cap Growth Fund shares will
automatically be exchanged for Federated MDT Large Cap Growth Funds. We
request that you do not attempt to make the exchange yourself, as this will
disrupt the management of the Fund's portfolio.
Whom do I call if I have questions about this Prospectus/Proxy Statement?
Call your Investment Professional or a Federated Client Service
Representative. Federated's toll-free number is 1-800-341-7400.
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After careful consideration, the Board of Trustees has unanimously approved
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this proposal. The Board of Trustees recommends that you read the enclosed
materials
carefully and vote FOR the proposal.
FEDERATED EQUITY FUNDS
Federated Large Cap Growth Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 2007
TO SHAREHOLDERS OF FEDERATED LARGE CAP GROWTH FUND, a Portfolio of Federated
Equity Funds.
A special meeting of the shareholders of Federated Large Cap Growth Fund
("LCGF") will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, at 2:00 p.m. (Eastern time), on June 22, 2007 for the following
purposes:
1. To approve or disapprove a proposed Agreement and Plan of Reorganization
pursuant to which Federated MDT Large Cap Growth Fund ("MLCGF") would
acquire all of the assets of LCGF in exchange for Class A Shares, Class B
Shares and Class C Shares of MLCGF to be distributed pro rata by LCGF in
complete liquidation and termination of LCGF; and
2. To transact such other business as may properly come before the special
meeting or any adjournment thereof.
The Board of Trustees has fixed April 24, 2007 as the record date for
determination of shareholders entitled to vote at the special meeting.
By Order of the Board of
Trustees,
/s/ John W. McGonigle
John W. McGonigle
Secretary
May 2, 2007
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YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY CARD. IF
YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE
SPECIAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
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A-8
PROSPECTUS/PROXY STATEMENT
May 2, 2007
Acquisition of the assets of
FEDERATED LARGE CAP GROWTH FUND
a portfolio of Federated Equity Funds
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-245-5000
By and in exchange for Shares of
FEDERATED MDT LARGE CAP GROWTH FUND,
a portfolio of Federated MDT Series
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposal whereby Federated
Large Cap Growth Fund ("LCGF"), a portfolio of Federated Equity Funds (the "FEF
Trust"), would transfer all of its assets to Federated MDT Large Cap Growth Fund
("MLCGF"), a portfolio of Federated MDT Series (the "MDT Trust", in exchange for
shares of MLCGF (the "Reorganization"). MLCGF shares will be distributed pro
rata by LCGF to its shareholders in complete liquidation and dissolution of
LCGF. As a result of the Reorganization, each owner of LCGF's Class A Shares
will become the owner of Class A Shares of MLCGF, each owner of LCGF's Class B
Shares will become the owner of Class B Shares of MLCGF, and each owner of
LCGF's Class C Shares will become the owner of Class C Shares of MLCGF, in each
case having a total net asset value ("NAV") equal to the total NAV of his or her
holdings in LCGF on the date of the Reorganization (the "Closing Date").
The reason for the proposed reorganization is to increase management
efficiency by combining two funds which have similar investment styles. Each of
LCGF and MLCGF (each a "Fund" and collectively the "Funds") pursues its
investment objective of capital appreciation by investing principally in
U.S.-traded common stocks (including ADR's) of large capitalization growth
companies. For a comparison of the investment policies and objectives of the
Funds, see "Summary--Comparison of Investment Objectives, Policies and
Limitations." Information concerning the Class A Shares, Class B Shares and
Class C Shares of MLCGF, as compared to the Class A Shares, Class B Shares and
Class C Shares of LCGF, respectively, is included in this Prospectus/Proxy
Statement in the sections entitled "Summary --Comparative Fee Tables" and
"Information about the Reorganization - Description of MLCGF Shares and
Capitalization."
The Board of Trustees (the "Board") of the FEF Trust and the LCGF's
investment adviser believe that the proposed Reorganization is in the best
interests of LCGF and its shareholders.
This Prospectus/Proxy Statement should be retained for future reference.
It sets forth concisely the information about the Funds that a prospective
investor should know before investing. This Prospectus/Proxy Statement is
accompanied by the Prospectus for the Class A and Class C Shares of MLCGF dated
December 11, 2006 or the Prospectus for the Class B Shares of MLCGF dated March
28, 2007, as applicable, each of which is incorporated herein by reference. A
Statement of Additional Information ("SAI") December 11, 2006 (Revised March 28,
2007) (relating to MLCGF's Class A, Class B, Class C Shares and Institutional
Shares Prospectuses) as well as an SAI dated May 2, 2007 (relating to this
Prospectus/Proxy Statement), all containing additional information, have been
filed with the Securities and Exchange Commission ("SEC") and are incorporated
herein by reference. A Prospectus and SAI dated December 31, 2006 for the Class
A Shares, Class B Shares and Class C Shares of LCGF are also incorporated herein
by reference. Further information about MLCGF's performance is contained in its
Semiannual Report for Class A and Class C Shares dated January 31, 2007, and in
the Annual Report dated July 31, 2006 of its predecessor fund, MDT Large Cap
Growth Fund, which are incorporated herein by reference. As MLCGF's Class B
Shares is a newly created share class of MLCGF, an Annual Report for this Class
is not currently available. Further information about LCGF's performance is
contained in its Annual Report dated October 31, 2006 and its Semi-Annual Report
dated April 30, 2006, which are incorporated herein by reference. Copies of
these materials and other information about MLCGF and LCGF may be obtained
without charge by writing to or calling MLCGF at the address and telephone
number shown on the previous page.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS.
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SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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TABLE OF CONTENTS
Page
SUMMARY
Reasons for the Proposed Reorganization......................... 1
Tax Consequences................................................ 2
Comparison of Investment Objectives, Policies and Limitations... 2
Comparison of Risks............................................. 5
Comparative Fee Tables (Class A Shares)......................... 6
Comparative Fee Tables (Class B Shares)......................... 9
Comparative Fee Tables (Class C Shares)......................... 11
Comparison of Potential Risks and Rewards:
Performance Information 14
Investment Advisers ............................................ 23
Portfolio Management Information................................ 23
Advisory Fees, Service Fees, Shareholder Fees and
Other Expenses 24
Purchase, Redemption and Exchange Procedures; Dividends
and Distributions 26
Tax Information; Frequent Trading; Portfolio Holdings Information 28
INFORMATION ABOUT THE REORGANIZATION
Description of the Plan of Reorganization....................... 28
Description of MLCGF's Share Classes and Capitalization......... 29
Federal Income Tax Consequences................................. 30
Comparative Information on Shareholder Rights................... 31
INFORMATION ABOUT FEDERATED MDT LARGE CAP GROWTH FUND AND
FEDERATED LARGE CAP GROWTH FUND
Where to Find Additional Information............................ 34
Legal Proceedings............................................... 34
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
Proxies, Quorum and Voting at the Special Meeting............... 36
Share Ownership of the Funds.................................... 37
Interest of Certain Persons..................................... 38
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY........ 38
AGREEMENT AND PLAN OF REORGANIZATION (Exhibit A).................... 39
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, or
incorporated by reference into this Prospectus/Proxy Statement. A copy of the
Agreement and Plan of Reorganization (the "Plan") pursuant to which the
Reorganization will be conducted is attached to this Prospectus/Proxy Statement
as Exhibit A. The Prospectus for MLCGF's Class A and Class C Shares or the
Prospectus for MLCGF's Class B Shares, as the case may be, accompanies this
Prospectus/Proxy Statement.
Reasons for the Proposed Reorganization
The Board of the FEF Trust has determined that a combination of LCGF into
MLCGF is in the best interest of LCGF and its shareholders. The investment
objectives, investment strategies and portfolio compositions of the combining
Funds are similar. The reason for the proposed Reorganization is to combine two
Federated funds which have similar investment styles.
On July 31, 2006, Federated Investors, Inc., the parent company of LCGF's
investment adviser, acquired Federated MDTA LLC, the investment adviser to
MLCGF. In connection with the acquisition, on December 8, 2006, the former MDT
Large Cap Growth Fund became Federated MDT Large Cap Growth Fund. As a result,
the Federated family of funds now includes two large cap growth funds.
Federated desires to combine the two funds to further management efficiency.
In the Reorganization, holders of Class B Shares of LCGF will receive an
equivalent net asset value of Class B Shares of MLCGF, which is a new share
class of MLCGF created for the Reorganization. Holders of Class A Shares and
Class C Shares of LCGF will receive in the Reorganization an equivalent net
asset value of Class A Shares or Class C Shares of MLCGF, both existing
classes.
The Board of the FEF Trust has voted to recommend to holders of shares of
LCGF the approval of the Plan, pursuant to which MLCGF would acquire all of the
assets of LCGF in exchange for Class A Shares, Class B Shares, and Class C
Shares of MLCGF (the "Exchange"). Immediately following the Exchange, LCGF will
distribute the Class A Shares, Class B Shares and Class C Shares of MLCGF
received in the Exchange pro rata to holders of its Class A Shares, Class B
Shares and Class C Shares, respectively, in a complete liquidation and
termination of LCGF. As a result of the Reorganization, each holder of Class A
Shares of LCGF will become the owner of Class A Shares of MLCGF, each holder of
Class B Shares of LCGF will become the owner of Class B Shares of MLCGF, and
each holder of Class C Shares of LCGF will become the owner of Class C Shares of
MLCGF, in each case having a total net asset value equal to the total net asset
value of his or her holdings in LCGF on the date of the Reorganization, i.e.,
the Closing Date (as hereinafter defined).
In considering the proposed Reorganization, the Board took into
consideration a number of factors, including: (1) the compatibility of LCGF's
and MLCGF's investment objectives, policies and limitations; (2) the greater
long-term viability of MLCGF based on its stronger performance record; and (3)
that the Reorganization will not result in recognition of any gain or loss for
federal income tax purposes either to LCGF or MLCGF or to shareholders of LCGF
or MLCGF.
The Board concluded to recommend to shareholders of LCGF that they vote to
approve the Reorganization. Pursuant to Rule 17a-8 under the Investment Company
Act of 1940 Act (the "1940 Act"), the Board, including a majority of the
Trustees who are not "interested persons" within the meaning of Section 2(a)(19)
of the 1940 Act, determined that the Reorganization is in the best interest of
LCGF and its shareholders, and that the interests of LCGF shareholders would not
be diluted as a result of the Reorganization.
The Board of Trustees of the MDT Trust likewise approved the
Reorganization on behalf of MLCGF. Pursuant to Rule 17a-8 under the 1940 Act,
the Board of Federated MDT Series, including a majority of the Trustees who are
not "interested persons," determined that the Reorganization is in the best
interest of MLCGF and its shareholders, and that the interests of existing MLCGF
shareholders would not be diluted as a result of the Reorganization.
Tax Consequences
As a condition to the Reorganization, each Fund will receive an opinion of
counsel that the Reorganization will be considered a tax-free "reorganization"
under applicable provisions of the Internal Revenue Code of 1986, as amended, so
that no gain or loss will be recognized by either Fund or LCGF's shareholders.
The tax basis of MLCGF's Class A Shares, Class B Shares and Class C Shares
received by LCGF shareholders will be the same as the tax basis of their shares
in LCGF. There will be taxes payable in connection with distributions, if any,
by LCGF immediately before the Closing Date. These distributions may include
gains realized on dispositions of portfolio securities in connection with the
Reorganization. [The Funds' investment advisers (individually an "Adviser" and
collectively, the "Advisers") do not intend to sell securities in connection
with the Reorganization except to fund redemptions or in the normal course of
business.]
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THE BOARD OF TRUSTEES OF FEDERATED EQUITY FUNDS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE REORGANIZATION.
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Comparison of Investment Objectives, Policies and Limitations
The investment objectives of the two funds are for practical purposes
identical. The investment objective of MLCGF is long-term capital appreciation,
while the investment objective of LCGF is capital appreciation. Both Funds
pursue their investment objectives by investing primarily in the common stocks
of large capitalization growth companies traded in the United States. As of
December 29, 2006, 98.6% of the net assets of LCGF and 100% of the net assets of
MLCGF were invested in common stocks. Each Fund as an investment policy, which
may not be changed without 60 days' advance notice to shareholders, to normally
invest at least 80% of its net assets in large capitalization investments.
Large capitalization companies are considered to be those with a market
capitalization similar to those companies included in the Russell 1000 Growth
Index, which as of February 28, 2007 ranged from $1.3 billion to $410.7
billion.
While both Funds invest primarily in common stocks of large capitalization
growth companies, the Funds differ in their stock selection processes. MLCGF
selects stocks for inclusion in its portfolio using a proprietary quantitative
model known as the Optimum Q Process. This model begins by screening its
universe of stocks for those that meet certain valuation (e.g.,
price-to-earnings ratio, price-to-tangible-book-value ratio) and performance
(e.g., earnings momentum or earnings growth) metrics that MLCGF's Adviser
believes might be indicative of an attractive investment opportunity. The
selection process factors in trading costs (particularly market impact) by
biasing the Fund towards those stocks which have less trading costs. The
process also uses diversification constraints which keep the portfolio
diversified by business, industry and sector.
While LCGF's Adviser also uses quantitative metrics to screen stocks for
LCGF's portfolio, its process is less quantitative and more judgment-based. To
identify companies for its stock universe, LCGF's Adviser will examine the
expected price-to-earnings ratio, price-to-book ratio and estimated earnings
growth and categorize each stock as growth or value. The Adviser will then pick
the largest growth stocks based on market capitalization and will analyze each
company's financial performance and business fundamentals to determine whether
and how much the Fund should invest in each company. The Adviser performs
traditional fundamental analysis to select securities that exhibit the most
promising long-term growth potential for the Fund's portfolio. In selecting
securities, the Adviser focuses primarily on the projected future cash flow of
the issuing company, in addition to examining each issuer's current financial
condition, business and product strength, competitive position and management
expertise. The Adviser diversifies LCGF's investments, limiting LCGF's risk
exposure with respect to individual securities and industry sectors.
While each Fund will normally invest primarily in the common stocks of
large capitalization growth companies traded in the United States (including
American Depositary Receipts and domestically traded securities of foreign
issuers), each Fund also has other categories of permissible investments.
Each Fund may use derivative contracts and/or hybrid instruments to
implement elements of its investment strategy. For example, the Fund may use
derivative contracts and/or hybrid instruments to increase or decrease the
allocation of its portfolio to securities, currencies or types of securities in
which it may invest directly. Each Fund may also, for example, use derivative
contracts to:
o obtain premiums from the sale of derivative contracts;
o realize gains from trading a derivative contract; or
o hedge against potential losses.
There can be no assurance that either Fund's use of derivative contracts will
work as intended.
In addition to common stocks, derivative contracts and hybrid instruments,
the Prospectus of MLCGF also lists preferred stocks, foreign securities and
securities of other investment companies, including exchange traded funds, as
categories of securities in which MLCGF may principally invest. While preferred
stocks, foreign securities and securities of other investment companies are
listed in LCGF's SAI as permissible investments, they are not considered among
LCGF's principal categories of permissible investments.
Each Fund has fundamental investment limitations which may not be changed
without shareholder approval. With two exceptions, the fundamental limitations
of the two Funds are identical. The first difference between the fundamental
limitations of the two Funds concerns lending. LCGF's fundamental limitations
prohibit it from making loans, while MLCGF's fundamental limitations permit it
to make loans in amounts up to one-third of its total assets. Both Funds'
lending limitations do not prohibit it from investing in debt obligations,
entering into repurchase agreements or lending securities. MLCGF may also make
temporary loans to affiliated investment companies in accordance with the
inter-fund borrowing and lending arrangements described in its SAI.
The second difference relates to the permissibility of investing in
commodities. LCGF's fundamental limitations prohibit it from investing directly
in commodities, although it may purchase securities of companies that deal in
commodities. For purposes of the commodities restriction, LCGF's
non-fundamental investment limitations provide that investments in transactions
involving futures contracts, options and other financial contracts that settle
by payment of cash are not considered investments in commodities. MLCGF's
fundamental limitations permit MLCGF to invest in commodities to the maximum
extent permitted by the 1940 Act. The 1940 Act requires that a fund state in
its registration statement a fundamental policy as to whether it reserves
freedom of action to invest in commodities and prohibits a fund from purchasing
commodities without shareholder approval except in accordance with that policy.
The Act does not otherwise prohibit or restrict investments in commodities.
[MLCGF has not in the past invested directly in commodities, and its Adviser has
no present intention of doing so.]
The following chart compares the fundamental limitations and the above
mentioned non-fundamental limitations of LCGF and MLCGF. In addition, each Fund
has non-fundamental limitations that prohibit it from investing more than 15% of
its net assets in illiquid securities, purchasing securities on margin or
mortgaging or pledging its assets except for collateral arrangements in
connection with otherwise permissible activities. While shareholder approval is
required to change a fundamental limitation, non-fundamental limitations may be
changed by the Fund's Board.
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INVESTMENT LIMITATIONS
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LCGF MLCGF
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Diversification of Investments Diversification of Investments
(fundamental) (fundamental)
With respect to securities comprising With respect to securities comprising
75% of the value of its total assets, 75% of the value of its total assets,
the Fund will not purchase securities the Fund will not purchase the
of any one issuer (other than cash; securities of any one issuer (other
cash items; securities issued or than cash, cash items, securities
guaranteed by the government of the issued or guaranteed by the government
United States or its agencies or of the United States or its agencies
instrumentalities and repurchase or instrumentalities and repurchase
agreements collateralized by such U.S. agreements collateralized by such
government securities; and securities U.S. government securities, and
of other investment companies) if, as a securities of other investment
result, more than 5% of the value of companies) if, as a result, more than
its total assets would be invested in 5% of the value of its total assets
the securities of that issuer, or the would be invested in the securities of
Fund would own more than 10% of the that issuer, or it would own more than
outstanding voting securities of that 10% of the outstanding voting
issuer. securities of that issuer.
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Borrowing Money and Issuing Senior Borrowing Money and Issuing Senior
Securities (fundamental) Securities (fundamental)
The Fund may borrow money, directly or The Fund may borrow money, directly or
indirectly, and issue senior securities indirectly, and issue senior
to the maximum extent permitted under securities to the maximum extent
the 1940 Act. permitted under the 1940 Act, any rule
or order thereunder, or any SEC staff
interpretation thereof.
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Investing in Real Estate (fundamental) Investing in Real Estate (fundamental)
The Fund may not purchase or sell real The Fund may not purchase or sell real
estate, provided that this restriction estate, provided that this restriction
does not prevent the Fund from does not prevent the Fund from
investing in issuers which invest, investing in issuers which invest,
deal, or otherwise engage in deal, or otherwise engage in
transactions in real estate or transactions in real estate or
interests therein, or investing in interests therein, or investing in
securities that are secured by real securities that are secured by real
estate or interests therein. The Fund estate or interests therein. The Fund
may exercise its rights under may exercise its rights under
agreements relating to such securities, agreements relating to such
including the right to enforce security securities, including the right to
interests and to hold real estate enforce security interests and to hold
acquired by reason of such enforcement real estate acquired by reason of such
until that real estate can be enforcement until that real estate can
liquidated in an orderly manner. be liquidated in an orderly manner.
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Investing in Commodities (fundamental) Investing in Commodities (fundamental)
The Fund may not purchase or sell The Fund may invest in commodities to
physical commodities, provided that the the maximum extent permitted under the
Fund may purchase securities of 1940 Act.
companies that deal in commodities.
Investing in Commodities
(non-fundamental)
For purposes of the commodities
restriction, investments in
transactions involving futures
contracts and options, forward currency
contracts, swap transactions and other
financial contracts that settle by
payment of cash are not deemed to be
investments in commodities.
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Underwriting (fundamental) Underwriting (fundamental)
The Fund may not underwrite the The Fund may not underwrite the
securities of other issuers, except securities of other issuers, except
that the Fund may engage in that the Fund may engage in
transactions involving the acquisition, transactions involving the
disposition or resale of its portfolio acquisition, disposition or resale of
securities, under circumstances where its portfolio securities, under
it may be considered to be an circumstances where it may be
underwriter under the Securities Act of considered to be an underwriter under
1933. the Securities Act of 1933.
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Concentration of Investments Concentration (fundamental)
(fundamental)
The Fund will not make investments
The Fund will not make investments that that will result in the concentration
will result in the concentration of its of its investments in the securities
investments in the securities of of issuers primarily engaged in the
issuers primarily engaged in the same same industry. Government securities,
industry. Government securities, municipal securities and bank
municipal securities and bank instruments will not be deemed to
instruments will not be deemed to constitute an industry.
constitute an industry.
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Lending (fundamental) Lending (fundamental)
The Fund may not make loans, provided The Fund may not make loans if, as a
that this restriction does not prevent result, more than 33 1/3% of the
the Fund from purchasing debt Fund's total assets would be loaned to
obligations, entering into repurchase other parties, except that the Fund
agreements, lending its assets to may (i) purchase or hold debt
broker/dealers or institutional instruments in accordance with its
investors and investing in loans, investment objective and policies;
including assignments and participation (ii) enter into repurchase agreements;
interests. (iii) lend its securities; and (iv) it
may make loans to affiliated
investment companies in accordance
with SEC exemptive relief.
- --------------------------------------------------------------------------------
Comparison of Risks
All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in either Fund. Since LCGF and MLCGF invest in the same
types of securities, an investment in MLCGF presents the same types of
investment risks as investing in LCGF. A principal risk factor applicable to an
investment in either Fund is stock market risks. The value of equity securities
in each Fund will rise and fall. Each Fund's portfolio will reflect changes in
prices of individual portfolio stocks or general changes in stock valuations.
Each Fund's share price may decline. Each Fund's Adviser attempts to manage
market risk by limiting the amount the Fund invests in the securities of any
individual company or of companies in any one sector or industry. However,
diversification will not protect either Fund against widespread or prolonged
declines in the stock market.
Each Fund is also exposed to risks related to investing for growth. Due
to their relatively high valuations, growth stocks are typically more volatile
than value stocks. Further, growth stocks may not pay dividends or may pay
lower dividends than value stocks. This means they depend more on price changes
for returns and may be more adversely affected in a down market compared to
value stocks that pay higher dividends.
Each Fund's investments in common stocks may include ADRs and domestically
traded securities of foreign issuers. Such investments expose the Fund to a
greater risk that its share price may be affected by foreign economic and
political conditions, taxation policies and accounting and auditing standards
than would otherwise be the case. MLCGF also lists non-domestically traded
foreign securities as a category in which it may principally invest. In
addition to the risks of foreign securities traded in United States markets, the
combination of currency risk and market risk tend to make securities traded in
foreign markets more volatile than those traded exclusively in the United
States. While LCGF may also invest in non-domestically traded foreign
securities, it does not list them as a category of security in which it may
principally invest.
A full discussion of the risks inherent in the investment in LCGF and
MLCGF is set forth in each Fund's Prospectus and SAI, each of which is
incorporated herein by reference. LCGF's Prospectus and SAI are dated December
31, 2006. The Prospectuses for MLCGF are dated December 11, 2006 (Class A and
Class C Shares) and March 28, 2007 (Class B Shares), and the SAI for all classes
of MLCGF is dated December 11, 2006 (Revised March 28, 2007).
Comparative Fee Tables
Like all mutual funds, LCGF and MLCGF incur certain expenses in their
operations. These expenses include management fees, as well as costs of
maintaining accounts, administration, providing shareholder liaison and
distribution services and other activities. Set forth in the tables below is
information regarding the fees and expenses currently incurred by the Class A
Shares, Class B Shares and Class C Shares of LCGF and Class A Shares, Class B
Shares and Class C Shares of MLCGF, respectively, and pro forma fees for MLCGF
after giving effect to the Reorganization.
CLASS A SHARES: Federated Large Cap Growth Fund and Federated MDT Large Cap
Growth Fund
Fees and Expenses
This table describes (1) the actual fees and expenses of Federated Large
Cap Growth Fund's Class A Shares for LCGF's most recent fiscal year ended
October 31, 2006; (2) the anticipated fees and expenses of MLCGF's Class A
Shares for MLCGF's current fiscal period ending July 31, 2007; and (3) the
anticipated fees and expenses of MLCGF's Class A Shares for the fiscal year
ending July 31, 2008 on a pro forma combined basis after giving effect to the
Reorganization. As described below, the pro forma operating expenses of MLCGF
are shown after giving effect to a contractual waiver and reimbursement of
expenses by the Fund's Adviser, Federated MDTA LLC, to limit total operating
expenses to not more than 2.05%, which will continue through December 8, 2008.
FederatedFederated Federated
Large MDT MDT Large
Cap Large Cap Growth
Growth Cap Fund-
Fund- Growth Class A
Class Fund- Shares
A Class A Pro Forma
Shareholder Fees Shares Shares Combined
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases 5.50% 5.50% 5.50%
(as a percentage of offering price)................
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or 0.00% 0.00% 0.00%
redemption proceeds, as applicable)................
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as a None None None
percentage of offering price)......................
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)...........................
Exchange Fee....................................... None None None
Annual Fund Operating Expenses (Before Waivers)(1)
Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee..................................... 0.75% 0.75%(2) 0.75%(3)
Distribution (12b-1) Fee........................... 0.25% 0.25%(4) 0.25%(4)
Other Expenses..................................... 0.82%(5) 2.24%(6) 0.94%(7)
Total Annual Fund Operating Expenses............... 1.82% 3.24% 1.94%
Fee Waiver and/or Expense Reimbursement 0.00% 1.19% 0.00%
(contractual)......................................
Total Annual Fund Operating Expenses (after 1.82% 2.05% 1.94%
contractual waivers/reimbursement).................
1 With respect to LCGF, the percentages shown are based on expenses for the
entire fiscal year ended October 31, 2006. However, the rate at which
expenses are accrued during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated average
percentage. Although not contractually obligated to do so, the shareholder
services provider and the administrator waived or elected not to charge
certain amounts. These are shown below along with the net expenses the Fund
actually paid for the fiscal year ended October 31, 2006. With respect to
MLCGF, the percentages shown are based on anticipated expenses for the
fiscal period ending July 31, 2007. However, the rate at which expenses are
accrued during the fiscal period may not be constant and, at any particular
point, may be greater or less than the stated average percentage. Although
not contractually obligated to do so (except as discussed in Note 2), the
Adviser, distributor and the administrator expect to waive and/or reimburse
certain amounts. These are shown below along with the net expenses MLCGF
expects to pay for the fiscal period ending July 31, 2007. With respect to
MLCGF Pro Forma Combined the percentages shown are based on anticipated
expenses for the fiscal year ending July 31, 2008. However, the rate at
which expenses are accrued during the fiscal year may not be constant and,
at any particular point, may be greater or less than the stated average
percentage. Although not contractually obligated to do so (except as
discussed in Note 3), the Adviser, distributor and the administrator expect
to waive certain amounts. These are shown below along with the net expenses
MLCGF expects to pay for the fiscal year ending July 31, 2008.
Total Waivers of Fund Expenses................... 0.27% 0.55% 0.44%
Total Actual Annual Fund Operating Expenses 1.55% 1.50% 1.50%
(after waivers)..................................
2 Under the investment advisory contract, MLCGF's Adviser is obligated to
waive all or a portion of its investment advisory fee which it is otherwise
entitled to receive, and/or reimburse other operating expenses (excluding
interest, taxes and brokerage commissions), in order to limit the aggregate
annual operating expenses for MLCGF's Class A Shares to not more than 2.05%
of its daily net assets. Any waivers by the administrator and/or
distributor that reduce such expenses (as discussed elsewhere in these
notes) may have the effect of reducing the amount to be waived or
reimbursed by the Adviser pursuant to the contractual commitment. It is
anticipated that this commitment will expire in November 2008. Pursuant to
this contractual commitment, the Adviser expects to waive its management
fee for the fiscal period ending July 31, 2007. The management fee to be
paid by MLCGF (after the contractual waiver) is expected to be 0.00% for
the fiscal period ending July 31, 2007.
3 Under the investment advisory contract, the Adviser of MLCGF Pro Forma
Combined is obligated to waive all or a portion of its investment advisory
fee which it is otherwise entitled to receive, and/or reimburse other
operating expenses (excluding interest, taxes and brokerage commissions),
in order to limit the aggregate annual operating expenses for the Fund's
Class A Shares to not more than 2.05% of its daily net assets. Any waivers
by the administrator and/or distributor that reduce such expenses (as
discussed elsewhere in these notes) may have the effect of reducing the
amount to be waived or reimbursed by the Adviser pursuant to the
contractual commitment. It is anticipated that this commitment will expire
on December 8, 2008. Pursuant to this contractual commitment, the Adviser
does not expect to be required to waive any of its management fee for the
fiscal year ending July 31, 2008. As a separate matter, although not
obligated to do so, the Adviser expects to voluntarily waive a portion of
its investment advisory fee. This voluntary waiver can be terminated at any
time. The management fee to be paid by MLCGF Pro Forma Combined (after the
voluntary waiver) is expected to be 0.60% for the fiscal year ending July
31, 2008.
4 Although not contractually obligated to do so, MLCGF and MLCGF Pro Forma
Combined do not anticipate accruing or charging the distribution (12b-1)
fee for Class A Shares during the fiscal period ending July 31, 2007 and
the fiscal year ending July 31, 2008, respectively. This expense reduction
is voluntary.
5 Other expenses for LCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. The
administrator expects to voluntarily waive a portion of its fee. LCGF Class
A Shares did not pay or accrue the shareholder services fee for the fiscal
year ended October 31, 2006. LCGF has no present intention of paying or
accruing the shareholder services fee for LCGF Class A Shares for the
fiscal year ending October 31, 2007. The administrator and shareholder
services provider can terminate this voluntary waiver and/or reduction at
any time. Total other operating expenses paid by LCGF's Class A Shares
(after the voluntary waiver and reduction) were 0.55% for the fiscal year
ended October 31, 2006.
6 Other expenses for MLCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. Pursuant to
its contractual commitment, MLCGF's Adviser expects to also reimburse 0.01%
of certain operating expenses of the Fund. Although not contractually
obligated to do so, the administrator expects to voluntarily waive a
portion of its fee and the Adviser expects to voluntarily reimburse certain
operating expenses of the Fund. These voluntary waivers/reimbursement can
be terminated at any time. Total Other Expenses paid by MLCGF's Class A
Shares (after the anticipated waivers/reimbursement) are expected to be
1.50% for the fiscal period ending July 31, 2007.
7 Other expenses for MLCGF Pro Forma Combined include a shareholder
fee/account administration fee will be used to compensate intermediaries
for shareholder services or account administrative services. Also includes
a recordkeeping fee will be used to compensate intermediaries for
recordkeeping services. Although not contractually obligated to do so, the
administrator expects to voluntarily waive a portion of its fee. This
voluntary waiver can be terminated at any time. Total Other Expenses paid
by MLCGF Pro Forma Combined Class A Shares (after the anticipated waiver)
are expected to be 0.90% for the fiscal year ending July 31, 2008.
- --------------------------------------------------------------------------------
Example
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Fund's and the pro
forma combined Fund's Class A Shares for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that, for LCGF's Class A
Shares and the Pro Forma Combined Fund's Class A Shares, operating expenses are
before waivers as shown in the Table and remain the same. For MLCGF's Class A
Shares, the one-year dollar amount and the dollar amounts for the first and
second years of the 3, 5 and 10 Years columns reflect the contractually imposed
expense limitation of 2.05% for Class A Shares. MLCGF's Adviser has agreed to
keep this limitation in effect through December 8, 2008. Accordingly, the third
year of the 3, 5 and 10 Years columns reflects the contractually imposed expense
limitation of 2.05% for four months and the "Total Annual Fund Operating
Expenses" of the Fund's Class A Shares without any waivers for the remainder of
the year. The fourth and later years within the 5 and 10 Years columns reflect
the "Total Annual Fund Operating Expenses" of the Fund's Class A Shares without
any waivers. Although the contractual expense cap would also apply to the Pro
Forma Combined Fund's Class A Shares, on a pro forma combined basis the expenses
of the Class A Shares are less than the cap amount.
Although your actual costs and returns may be higher or lower, based on
thses assumptions your costs would be:
- -----------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
Federated Large Cap
Growth Fund, Class A
Shares $725 $1,091 $1,481 $2,570
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Federated MDT Large Cap
Growth Fund, Class A
Shares $747 $1,236 $1,911 $3,705
- -----------------------------------------------------------------------------
Federated MDT Large Cap
Growth Fund, Class A $736 $1,126 $1,539 $2,690
Shares
Pro Forma Combined
- -----------------------------------------------------------------------------
CLASS B SHARES: Federated Large Cap Growth Fund and Federated MDT Large Cap
Growth Fund
Fees and Expenses
This table describes (1) the actual fees and expenses of Federated Large
Cap Growth Fund's Class B Shares for LCGF's most recent fiscal year ended
October 31, 2006; (2) the anticipated fees and expenses of MLCGF's Class B
Shares for MLCGF's current fiscal period ending July 31, 2007; and (3) the
anticipated fees and expenses of MLCGF's Class B Shares for the fiscal year
ending July 31, 2008 on a pro forma combined basis after giving effect to the
Reorganization.
FederatedFederated Federated
Large MDT MDT Large
Cap Large Cap Growth
Growth Cap Fund-
Fund- Growth Class B
Class Fund- Shares
B Class B Pro Forma
Shareholder Fees Shares Shares Combined
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases None None None
(as a percentage of offering price)................
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or 5.50% 5.50% 5.50%
redemption proceeds, as applicable)................
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as a None None None
percentage of offering price)......................
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)...........................
Exchange Fee....................................... None None None
Annual Fund Operating Expenses(1)
Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee..................................... 0.75% 0.75%(2) 0.75%(3)
Distribution (12b-1) Fee........................... 0.75% 0.75% 0.75%
Other Expenses..................................... 0.82%(4) 2.24%(5) 0.94%(6)
Total Annual Fund Operating Expenses (after 2.32% 3.74% 2.44%
contractual waivers/reimbursement)(7)..............
1 With respect to LCGF, the percentages shown are based on expenses for the
entire fiscal year ended October 31, 2006. However, the rate at which
expenses are accrued during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated average
percentage. Although not contractually obligated to do so, the
administrator waived certain amounts. These are shown below along with the
net expenses the Fund actually paid for the fiscal year ended October 31,
2006. With respect to MLCGF, the percentages shown are based on anticipated
expenses for the fiscal period ending July 31, 2007. However, the rate at
which expenses are accrued during the fiscal period may not be constant
and, at any particular point, may be greater or less than the stated
average percentage. Although not contractually obligated to do so (except
as discussed in Note 2), the Adviser and the administrator expect to waive
and/or reimburse certain amounts. These are shown below along with the net
expenses MLCGF expects to pay for the fiscal period ending July 31, 2007.
With respect to MLCGF Pro Forma Combined, the percentages shown are based
on anticipated expenses for the fiscal year ending July 31, 2008. However,
the rate at which expenses are accrued during the fiscal year may not be
constant and, at any particular point, may be greater or less than the
stated average percentage. Although not contractually obligated to do so
(except as discussed in Note 3), the Adviser and the administrator expect
to waive certain amounts. These are shown below along with the net expenses
MLCGF expects to pay for the fiscal year ending July 31, 2008.
Total Waivers of Fund Expenses................... 0.02% 1.49% 0.19%
Total Actual Annual Fund Operating Expenses 2.30% 2.25% 2.25%
(after waivers)..................................
2 Under the investment advisory contract, MLCGF's Adviser is obligated to
waive all or a portion of its investment advisory fee which it is otherwise
entitled to receive, and/or reimburse other operating expenses (excluding
interest, taxes and brokerage commissions), in order to limit the aggregate
annual operating expenses for other classes of the Fund. Any waivers by the
administrator that reduce such expenses (as discussed elsewhere in these
notes) may have the effect of reducing the amount to be waived or
reimbursed by the Adviser pursuant to the contractual commitment. Pursuant
to this contractual commitment, the Adviser expects to waive its management
fee for the fiscal period ending July 31, 2007. The management fee to be
paid by MLCGF (after the contractual waiver) is expected to be 0.00% for
the fiscal period ending July 31, 2007.
3 Under the investment advisory contract, the Adviser of MLCGF Pro Forma
Combined is obligated to waive all or a portion of its investment advisory
fee which it is otherwise entitled to receive, and/or reimburse other
operating expenses (excluding interest, taxes and brokerage commissions),
in order to limit the aggregate annual operating expenses for other classes
of the Fund. Any waivers by the administrator that reduce such expenses (as
discussed elsewhere in these notes) may have the effect of reducing the
amount to be waived or reimbursed by the Adviser pursuant to the
contractual commitment. Pursuant to this contractual commitment, the
Adviser does not expect to be required to waive any of its management fee
for the fiscal year ending July 31, 2008. As a separate matter, although
not obligated to do so, the Adviser expects to voluntarily waive a portion
of its investment advisory fee. This voluntary waiver can be terminated at
any time. The management fee to be paid by MLCGF Pro Forma Combined (after
the voluntary waiver) is expected to be 0.60% for the fiscal year ending
July 31, 2008.
4 Other expenses for LCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. The
administrator expects to voluntarily waive a portion of its fee. The
administrator can terminate this voluntary waiver at any time. Total other
operating expenses paid by the LCGF's Class B Shares (after the voluntary
waiver) were 0.80% for the fiscal year ended October 31, 2006.
5 Other expenses for MLCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. Pursuant to
its contractual commitment, the Adviser expects to also reimburse 0.01% of
certain operating expenses of the Fund. Although not contractually
obligated to do so, the administrator expects to voluntarily waive a
portion of its fee and the Adviser expects to voluntarily reimburse certain
operating expenses of the Fund. These voluntary waivers/reimbursement can
be terminated at any time. Total Other Expenses paid by MLCGF's Class B
Shares (after the anticipated waivers/reimbursement) are expected to be
2.25% for the fiscal period ending July 31, 2007.
6 Other expenses for MLCGF Pro Forma Combined include a shareholder
fee/account administration fee will be used to compensate intermediaries
for shareholder services or account administrative services. Also includes
a recordkeeping fee will be used to compensate intermediaries for
recordkeeping services. Although not contractually obligated to do so, the
administrator expects to voluntarily waive a portion of its fee. This
voluntary waiver can be terminated at any time. Total Other Expenses paid
by MLCGF Pro Forma Combined Class B Shares (after the anticipated waiver)
are expected to be 0.90% for the fiscal year ending July 31, 2008.
7 After Class B Shares have been held for eight years from the date of
purchase, they will automatically convert to Class A Shares on or about the
last day of the following month. Class A Shares pay lower operating
expenses than Class B Shares.
- --------------------------------------------------------------------------------
Example
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Fund's and the pro
forma combined Fund's Class B Shares for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's Class B
Shares operating expenses are before waiver as shown in the Table and remain the
same. Although your actual costs and returns may be higher or lower, based on
thses assumptions your costs would be:
- -------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
Federated Large Cap Growth
Fund, Class B Shares
Expenses assuming redemption $785 $1,124 $1,440 $2,531
Expenses assuming no $235 $724 $1,240 $2,531
redemption
Federated MDT Large Cap
Growth Fund, Class B Shares
Expenses assuming redemption $926 $1,543 $2,130 $3,876
Expenses assuming no $376 $1,143 $1,930 $3,876
redemption
Federated MDT Large Cap
Growth Fund, Class B Shares
Pro Forma Combined
Expenses assuming redemption $797 $1,161 $1,501 $2,653
Expenses assuming no
redemption $247 $761 $1,301 $2,653
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CLASS C SHARES: Federated Large Cap Growth Fund and Federated MDT Large Cap
Growth Fund
Fees and Expenses
This table describes (1) the actual fees and expenses of Federated Large
Cap Growth Fund's Class C Shares for LCGF's most recent fiscal year ended
October 31, 2006; (2) the anticipated fees and expenses of MLCGF's Class A
Shares for MLCGF's current fiscal period ending July 31, 2007; and (3) the
anticipated fees and expenses of MLCGF's Class A Shares for the fiscal year
ending July 31, 2008 on a pro forma combined basis after giving effect to the
Reorganization. As described below, the pro forma operating expenses of MLCGF
are shown after giving effect to a contractual waiver and reimbursement of
expenses by the Fund's Adviser, Federated MDTA LLC, to limit total operating
expenses to not more than 2.80%, which will continue through December 8, 2008.
Shareholder Fees FederatedFederated Federated
Large MDT
Cap Large MDT Large
Growth Cap Cap Growth
Fund- Growth Fund- Class
Class Fund- C Shares
C Class C Pro Forma
Shares Shares Combined
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases 0.00% 0.00% 0.00%
(as a percentage of offering price)................
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or 1.00% 1.00% 1.00%
redemption proceeds, as applicable)................
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as a None None None
percentage of offering price)......................
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)...........................
Exchange Fee....................................... None None None
Annual Fund Operating Expenses(1)
Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee..................................... 0.75% 0.75%(2) 0.75%(3)
Distribution (12b-1) Fee........................... 0.75% 0.75% 0.75%
Other Expenses..................................... 0.82%(4) 2.24%(5) 0.94%(6)
Total Annual Fund Operating Expenses............... 2.32% 3.74% 2.44%
Fee Waiver and/or Expense Reimbursement 0.00% 0.94% 0.00%
(contractual)......................................
Total Annual Fund Operating Expenses (after 2.32% 2.80% 2.44%
contractual waivers/reimbursement).................
1 With respect to LCGF, the percentages shown are based on expenses for the
entire fiscal year ended October 31, 2006. However, the rate at which
expenses are accrued during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated average
percentage. Although not contractually obligated to do so, the shareholder
services provider and the administrator waived or elected not to charge
certain amounts. These are shown below along with the net expenses the Fund
actually paid for the fiscal year ended October 31, 2006. With respect to
MLCGF, the percentages shown are based on anticipated expenses for the
fiscal period ending July 31, 2007. However, the rate at which expenses are
accrued during the fiscal period may not be constant and, at any particular
point, may be greater or less than the stated average percentage. Although
not contractually obligated to do so (except as discussed in Note 2), the
Adviser and the administrator expect to waive and/or reimburse certain
amounts. These are shown below along with the net expenses MLCGF expects to
pay for the fiscal period ending July 31, 2007. With respect to MLCGF Pro
Forma Combined the percentages shown are based on anticipated expenses for
the fiscal year ending July 31, 2008. However, the rate at which expenses
are accrued during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated average
percentage. Although not contractually obligated to do so (except as
discussed in Note 3), the Adviser and the administrator expect to waive
certain amounts. These are shown below along with the net expenses the Fund
expects to pay for the fiscal year ending July 31, 2008.
Total Waivers of Fund Expenses................... 0.03% 0.55% 0.19%
Total Actual Annual Fund Operating Expenses 2.29% 2.25% 2.25%
(after waivers)..................................
2 Under the investment advisory contract, MLCGF's Adviser is obligated to
waive all or a portion of its investment advisory fee which it is otherwise
entitled to receive, and/or reimburse other operating expenses (excluding
interest, taxes and brokerage commissions), in order to limit the aggregate
annual operating expenses for MLCGF's Class C Shares to not more than 2.80%
of its daily net assets. Any waivers by the administrator and/or
distributor that reduce such expenses (as discussed elsewhere in these
notes) may have the effect of reducing the amount to be waived or
reimbursed by the Adviser pursuant to the contractual commitment. It is
anticipated that this commitment will expire on December 8, 2008. Pursuant
to this contractual commitment, the Adviser expects to waive its management
fee for the fiscal period ending July 31, 2007. The management fee to be
paid by MLCGF (after the contractual waiver) is expected to be 0.00% for
the fiscal period ending July 31, 2007.
3 Under the investment advisory contract, the Adviser of MLCGF Pro Forma
Combined is obligated to waive all or a portion of its investment advisory
fee which it is otherwise entitled to receive, and/or reimburse other
operating expenses (excluding interest, taxes and brokerage commissions),
in order to limit the aggregate annual operating expenses for the Fund's
Class C Shares to not more than 2.80% of its daily net assets. Any waivers
by the administrator that reduce such expenses (as discussed elsewhere in
these notes) may have the effect of reducing the amount to be waived or
reimbursed by the Adviser pursuant to the contractual commitment. It is
anticipated that this commitment will expire in November 2008. Pursuant to
this contractual commitment, the Adviser does not expect to be required to
waive any of its management fee for the fiscal year ending July 31, 2008.
As a separate matter, although not obligated to do so, the Adviser expects
to voluntarily waive a portion of its investment advisory fee. This
voluntary waiver can be terminated at any time. The management fee to be
paid by MLCGF Pro Forma Combined (after the voluntary waiver) is expected
to be 0.60% for the fiscal year ending July 31, 2008.
4 Other expenses for LCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. The
administrator expects to voluntarily waive a portion of its fee.
Additionally, the shareholder services provider elected not to charge,
therefore LCGF did not accrue, a portion of its fee for Class C Shares. The
administrator and shareholder services provider can terminate this
voluntary waiver and/or reduction at any time. Total other operating
expenses paid by LCGF's Class C Shares (after the voluntary waiver and
reduction) were 0.79% for the fiscal year ended October 31, 2006.
5 Other expenses for MLCGF include a shareholder fee/account administration
fee which is used to compensate intermediaries for shareholder services or
account administrative services. Also includes a recordkeeping fee which is
used to compensate intermediaries for recordkeeping services. Pursuant to
its contractual commitment, MLCGF's Adviser expects to also reimburse 0.01%
of certain operating expenses of the Fund. Although not contractually
obligated to do so, the administrator expects to voluntarily waive a
portion of its fee and the Adviser expects to voluntarily reimburse certain
operating expenses of the Fund. These voluntary waivers/reimbursement can
be terminated at any time. Total Other Expenses paid by MLCGF's Class C
Shares (after the anticipated waivers/reimbursement) are expected to be
2.25% for the fiscal period ending July 31, 2007.
6 Other expenses for MLCGF Pro Forma Combined include a shareholder
fee/account administration fee will be used to compensate intermediaries
for shareholder services or account administrative services. Also includes
a recordkeeping fee will be used to compensate intermediaries for
recordkeeping services. Although not contractually obligated to do so, the
administrator expects to voluntarily waive a portion of its fee. This
voluntary waiver can be terminated at any time. Total Other Expenses paid
by MLCGF Pro Forma Combined Class C Shares (after the anticipated waiver)
are expected to be 0.90% for the fiscal year ending July 31, 2008.
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Fund's and the pro
forma combined Fund's Class C Shares for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that, for LCGF's Class A
Shares and the Pro Forma Combined Fund's Class C Shares, operating expenses are
before waivers as shown in the Table and remain the same. For MLCGF's Class C
Shares, the one-year dollar amount and the dollar amounts for the first and
second years of the 3, 5 and 10 Years columns reflect the contractually imposed
expense limitation of 2.80% for Class C Shares. MLCGF's Adviser has agreed to
keep this limitation in effect through December 8, 2008. Accordingly, the third
year of the 3, 5 and 10 Years columns reflects the contractually imposed expense
limitation of 2.80% for four months and the "Total Annual Fund Operating
Expenses" of the Fund's Class C Shares without any waivers for the remainder of
the year. The fourth and later years within the 5 and 10 Years columns reflect
the "Total Annual Fund Operating Expenses" of the Fund's Class C Shares without
any waivers. Although the contractual expense cap would also apply to the Pro
Forma Combined Fund's Class C Shares, on a pro forma combined basis the expenses
of the Class C Shares are less than the cap amount.
Although your actual costs and returns may be higher or lower, based on
these assumptions your costs would be:
- -------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
Federated Large Cap Growth
Fund, Class C Shares
Expenses assuming redemption $335 $724 $1,240 $2,656
Expenses assuming no $225 $724 $1,240 $2,656
redemption
Federated MDT Large Cap
Growth Fund, Class C Shares
Expenses assuming redemption $383 $933 $1,737 $3,836
Expenses assuming no $283 $933 $1,737 $3,836
redemption
Federated MDT Large Cap
Growth Fund, Class C Shares
Pro Forma Combined
Expenses assuming redemption $347 $761 $1,301 $2,776
Expenses assuming no
redemption $247 $761 $1,301 $2,776
- -------------------------------------------------------------------------------
Comparison of Potential Risks and Rewards: Performance Information
- --------------------------------------------------------------------------------
The performance information shown below will help you analyze each Fund's
investment risks in light of its historical returns. The bar charts show the
variability of each Fund's Class A Shares total returns on a calendar
year-by-year basis. The Average Annual Total Return tables show each Fund's
Class A, Class B and Class C Shares returns averaged over the stated periods,
and include comparative performance information. Each Fund's performance will
fluctuate, and past performance (before and after taxes) is no guarantee of
future results.
FEDERATED LARGE CAP GROWTH FUND
Risk/Return Bar Chart - Class A Shares
[OBJECT OMITTED] [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
The total returns shown in the bar chart do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower.
- --------------------------------------------------------------------------------
Within the period shown in the bar chart, LCGF's Class A Shares highest
quarterly return was 36.80% (quarter ended December 31, 1999). Its lowest
quarterly return was (20.10) % (quarter ended March 31, 2001).
Average Annual Total Return Table
The Average Annual Total Returns for LCGF's Class A, Class B and Class C
Shares are reduced to reflect applicable sales charges. Return Before Taxes is
shown for all classes. In addition, Return After Taxes is shown for LCGF's
Class A Shares to illustrate the effect of federal taxes on Fund returns.
Actual after-tax returns depend on each investor's personal tax situation, and
are likely to differ from those shown. The table also shows returns for the
Russell 1000 Growth Index (R1000G), a broad-based market index, and the Lipper
Large-Cap Growth Funds Index (LLCGF). Index returns do not reflect taxes, sales
charges, expenses or other fees that the Securities and Exchange Commission
requires to be reflected in a fund's performance. Indexes are unmanaged, and it
is not possible to invest directly in an index.
(For the periods ended December 31, 2006)
Start of
- -------------------------------- 1 Year 5 Years Performance(1)
Federated Large Cap Growth Fund
Class A
Return Before Taxes (3.88) (1.33)% (2.45)%
Return After Taxes on (3.88) (1.33)% (2.45)%
Distributions(2)
Return After Taxes on
Distributions and Sale of Fund -(2.52) (1.13)% (2.06)%
Shares(2)
Class B
Return Before Taxes (4.39) (1.35)% (2.45)%
Class C
Return Before Taxes (0.87) (1.15)% (2.57)%
R1000G(3) 9.07% 2.69% (0.83)%
LLCGF(4) 4.72% 2.01% (1.17)%
- -------------------------------------------------------------------------------
1 LCGF's Class A, Class B and Class C Shares start of performance was
December 29, 1998.
2 After-tax returns are calculated using a standard set of assumptions. The
stated returns assume the highest historical federal income and capital gains
tax rates. Return After Taxes on Distributions assumes a continued
investment in the Fund and shows the effect of taxes on Fund distributions.
Return After Taxes on Distributions and Sale of Fund Shares assumes all
shares were redeemed at the end of each measurement period, and shows the
effect of any taxable gain (or offsetting loss) on redemption, as well as the
effects of taxes on Fund distributions. These after-tax returns do not
reflect the effect of any applicable state and local taxes. After-tax
returns are not relevant to investors holding Shares through tax-deferred
programs, such as IRA or 401(k) plans.
3 The R1000G measures the performance of those Russell 1000 companies with
higher price-to-book ratios and higher forecasted growth values. The index
is not adjusted to reflect taxes, sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. The index is
unmanaged and unlike the Fund, is not affected by cashflows.
4 The Lipper Large-Cap Growth Funds Index measures the performance of the 30
largest funds in the large cap growth category as tracked by Lipper, Inc.
These figures do not reflect sales charges.
FEDERATED MDT LARGE CAP GROWTH FUND
Risk/Return Bar Chart - Class A Shares
Federated MDT Large Cap Growth Fund is the successor to the MDT Large Cap
Growth Fund pursuant to a reorganization that was completed on December 8,
2006. Prior to that date, MLCGF had no investment operations. Accordingly, the
performance information and financial information provided in this prospectus
for periods prior to December 11, 2006, is historical information for the MDT
Large Cap Growth Fund. The MDT Large Cap Growth Fund was managed by MDT
Advisors and had similar investment objectives and strategies to MLCGF.
Federated MDT Large Cap Growth Fund - Class A Shares
[OBJECT OMITTED] [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
The total returns shown in the bar chart do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Within the period shown in the bar chart, MLCGF's Class A Shares highest
quarterly return was 4.41% (quarter ended March 30, 2006). Its lowest quarterly
return was (1.75)% (quarter ended June 30, 2006).
- --------------------------------------------------------------------------------
Average Annual Total Return Table
The Average Annual Total Returns for MLCGF's Class A, Class B and Class C
Shares are reduced to reflect applicable sales charges. Return Before Taxes is
shown for all classes. In addition, Return After Taxes is shown for MLCGF's
Class A Shares to illustrate the effect of federal taxes on Fund returns.
Actual after-tax returns depend on each investor's personal tax situation, and
are likely to differ from those shown. The table also shows returns for the
Russell 1000 Growth Index (R1000G), a broad-based market index, and the Lipper
Large-Cap Growth Funds Index (LLCGF). Index returns do not reflect taxes, sales
charges, expenses or other fees that the Securities and Exchange Commission
requires to be reflected in a fund's performance. Indexes are unmanaged, and it
is not possible to invest directly in an index.
(For the periods ended December 31, 2006)
------------------------------------------------------------
-------------
--------------------------------------- 1 Year Start of
Performance
Federated MDT Large Cap Growth Fund (1)
------------------------------------------------------------
------------------------------------------------------------
Class A Shares
Return Before Taxes 0.82% 3.92%
Return After Taxes on Distributions(2) 0.47% 3.64%
Return After Taxes on Distributions 0.54% 3.18%
and Sale of Fund Shares(2)
Class B Shares(3) 0.21% 3.84%
Class C Shares 3.68% 6.07%
R1000G(4) 9.07% 9.58%
LLCGF(5) 4.72% 7.09%
1 MLCGF's Class A Shares and Class C Shares commenced operations on
September 15, 2005. MLCGF's Class B Shares commenced operations on March
29, 2007. Start of Performance returns for the Class B shares and the
two indexes have been calculated since September 15, 2005.
- --------------------------------------------------------------------------------
2 After-tax returns are calculated using a standard set of assumptions. The
stated returns assume the highest historical federal income and capital
gains tax rates. Return After Taxes on Distributions assumes a continued
investment in the Fund and shows the effect of taxes on Fund
distributions. Return After Taxes on Distributions and Sale of Fund
Shares assumes all shares were redeemed at the end of each measurement
period, and shows the effect of any taxable gain (or offsetting loss) on
redemption, as well as the effects of taxes on Fund distributions. These
after-tax returns do not reflect the effect of any applicable state and
local taxes. After-tax returns are not relevant to investors holding
Shares through tax-deferred programs, such as IRA or 401(k) plans.
3 MLCGF's Institutional Shares total returns have been adjusted to reflect
the contingent deferred sales charge and expenses applicable to Class B
Shares. This adjustment shows the total returns you would have received
if MLCGF Class B Shares had existed over the calculation period.
4 The R1000G measures the performance of those Russell 1000 companies with
higher price-to-book ratios and higher forecasted growth values. The
index is not adjusted to reflect taxes, sales charges, expenses or other
fees that the SEC requires to be reflected in the Fund's performance.
The index is unmanaged and unlike the Fund, is not affected by cashflows.
5 The Lipper Large-Cap Growth Funds Index measures the performance of the 30
largest funds in the large cap growth category as tracked by Lipper,
Inc. These figures do not reflect sales charges.
FEDERATED LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand LCGF's Class A, Class B
and Class C Shares financial performance for LCGF's past five fiscal years.
Some of the information is presented on a per share basis. Total returns
represent the rate an investor would have earned (or lost) on an investment in
LCGF, assuming reinvestment of any dividends and capital gains.
This information for the fiscal year ended October 31, 2006 has been
audited by KPMG LLP, an independent registered public accounting firm, whose
report, along with LCGF's audited financial statements, is included in LCGF's
Annual Report.
On August 18, 2006, the Fund's Board, upon recommendation of the Audit
Committee, appointed KPMG LLP as the Fund's independent registered public
accounting firm for the fiscal year ended October 31, 2006. On the same date,
LCGF's former auditor, Deloitte & Touche LLP, resigned. See LCGF's Annual
Report for further information regarding the change in independent registered
public accounting firm.
Federated Large Cap Growth Fund
FINANCIAL HIGHLIGHTS - CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Year Ended October 31 2006(1) 2005 2004 2003 2002
Net Asset Value, Beginning of $8.13 $7.56 $7.37 $6.47 $7.95
Period
Income From Investment Operations:
Net investment income (loss) (0.03)(2) 0.01(2) (0.02)(2)(0.03)(2)(0.04)(2)
Net realized and unrealized gain 0.43 0.56 0.21 0.93 (1.44)
(loss) on investments
TOTAL FROM INVESTMENT OPERATIONS 0.40 0.57 0.19 0.90 (1.48)
Net Asset Value, End of Period $8.53 $8.13 $7.56 $7.37 $6.47
Total Return(3) 4.92% 7.54% 2.58% 13.91% (18.62)%
Ratios to Average Net Assets:
Net expenses 1.55%(4) 1.45%(4) 1.44%(4) 1.56%(4) 1.46%(4)
Net investment income (loss) (0.38)% 0.07% (0.31)% (0.44)% (0.47)%
Expense waiver/reimbursement(5) 0.02% 0.02% 0.01% 0.00%(6) 0.00%(6)
Supplemental Data:
Net assets, end of period (000 $95,178 $104,837 $144,921 $148,090 $144,499
omitted)
Portfolio turnover 166% 128% 103% 126% 233%
1 For the year ended October 31, 2006, LCGF was audited by KPMG LLP, Previous
years were audited by another independent registered public accounting firm.
- --------------------------------------------------------------------------------
2 Per share numbers have been calculated using the average shares method.
3 Based on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable. Total returns for
periods of less than one year, if any, are not annualized.
4 The expense ratio is calculated without reduction for fees paid indirectly for
directed brokerage arrangements. The expense ratios are 1.52%, 1.45%, 1.43%,
1.54% and 1.44% after taking into account these expense reductions for the
years ended October 31, 2006, 2005, 2004, 2003 and 2002, respectively.
5 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
6 Represents less than 0.01%.
Further information about LCGF's performance is contained in LCGF's Annual
Report, dated October 31, 2006, which can be obtained free of charge.
Federated Large Cap Growth Fund
FINANCIAL HIGHLIGHTS - CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Year Ended October 31 2006(1) 2005 2004 2003 2002
Net Asset Value, Beginning of $7.76 $7.26 $7.13 $6.31 $7.82
Period
Income From Investment Operations:
Net investment income (loss) (0.09)(2(0.05)(2(0.08)(2)(0.08)(2) (0.09)(2)
Net realized and unrealized gain 0.41 0.55 0.21 0.90 (1.42)
(loss) on investments
TOTAL FROM INVESTMENT OPERATIONS 0.32 0.50 0.13 0.82 (1.51)
Net Asset Value, End of Period $8.08 $7.76 $7.26 $7.13 $6.31
Total Return(3) 4.12% 6.89% 1.82% 13.00% (19.31)%
Ratios to Average Net Assets:
Net expenses 2.30%(4)2.20%(4)2.19%(4) 2.31%(4) 2.21%(4)
Net investment income (loss) (1.12)% (0.69)% (1.06)% (1.19)% (1.22)%
Expense waiver/reimbursement(5) 0.02% 0.02% 0.01% 0.00%(6) 0.00%(6)
Supplemental Data:
Net assets, end of period (000 $59,008 $78,152 $95,901 $116,166 $121,572
omitted)
Portfolio turnover 166% 128% 103% 126% 233%
1 For the year ended October 31, 2006, LCGF was audited by KPMG LLP, Previous
years were audited by another independent registered public accounting firm.
- --------------------------------------------------------------------------------
2 Per share numbers have been calculated using the average shares method.
3 Based on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable. Total returns for
periods of less than one year, if any, are not annualized.
4 The expense ratio is calculated without reduction for fees paid indirectly for
directed brokerage arrangements. The expense ratios are 2.27%, 2.19%, 2.18%,
2.29% and 2.19% after taking into account these expense reductions for the
years ended October 31, 2006, 2005, 2004, 2003 and 2002, respectively.
5 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
6 Represents less than 0.01%.
Further information about LCGF's performance is contained in LCGF's Annual
Report, dated October 31, 2006, which can be obtained free of charge.
Federated Large Cap Growth Fund
FINANCIAL HIGHLIGHTS - CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Year Ended October 31 2006(1) 2005 2004 2003 2002
Net Asset Value, Beginning of $7.76 $7.26 $7.13 $6.31 $7.82
Period
Income From Investment Operations:
Net investment income (loss) (0.0)(2)(0.05)(2)(0.0)(2)(0.08)(2)(0.09)(2)
Net realized and unrealized gain 0.41 0.55 0.21 0.90 (1.42)
(loss) on investments
TOTAL FROM INVESTMENT OPERATIONS 0.32 0.50 0.13 0.82 (1.51)
Net Asset Value, End of Period $8.08 $7.76 $7.26 $7.13 $6.31
Total Return(3) 4.12% 6.89% 1.82% 13.00% (19.3)%
Ratios to Average Net Assets:
Net expenses 2.29%(4) 2.20%(4)2.19%(4) 2.31%(4) 2.21%(4)
Net investment income (loss) (1.1)% (0.69)% (1.0)% (1.19)% (1.22)%
Expense waiver/reimbursement(5) 0.02% 0.02% 0.01% 0.00%(6) 0.00%(6)
Supplemental Data:
Net assets, end of period (000 $9,660 $12,007 $13,866 $15,444 $16,067
omitted)
Portfolio turnover 166% 128% 103% 126% 233%
1 For the year ended October 31, 2006, LCGF was audited by KPMG LLP, Previous
years were audited by another independent registered public accounting firm.
- --------------------------------------------------------------------------------
2 Per share numbers have been calculated using the average shares method.
3 Based on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable. Total returns for
periods of less than one year, if any, are not annualized.
4 The expense ratio is calculated without reduction for fees paid indirectly for
directed brokerage arrangements. The expense ratios are 2.26%, 2.19%, 2.18%,
2.29% and 2.19% after taking into account these expense reductions for the
years ended October 31, 2006, 2005, 2004, 2003 and 2002, respectively.
5 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
6 Represents less than 0.01%.
Further information about LCGF's performance is contained in LCGF's Annual
Report, dated October 31, 2006, which can be obtained free of charge.
FEDERATED MDT LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand MLCGF's Class A and
Class C Shares financial performance for the periods presented. Some of the
information is presented on a per share basis. Total returns represent the rate
an investor would have earned (or lost) on an investment in MLCGF, assuming
reinvestment of any dividends and capital gains.
This information for the fiscal year ended July 31, 2006 has been audited
by Ernst & Young LLP, an independent registered public accounting firm, whose
report, along with MLCGF's audited financial statements, is included in MLCGF's
Annual Report. As the first fiscal year for MLCGF's Class B Shares will end on
July 31, 2007, financial information for this class is not yet available.
MDT Large Cap Growth Fund (the Predecessor Fund) was reorganized into
Federated MDT Large Cap Growth Fund (MLCGF), a portfolio of Federated MDT
Series, as of the close of business on December 8, 2006. Prior to the
reorganization, MLCGF had no investment operations. MLCGF is the successor to
the Predecessor Fund. The information presented incorporates the operations of
the Predecessor Fund, which, as a result of the reorganization, are MLCGF's
operations.
Federated MDT Large Cap Growth Fund
FINANCIAL HIGHLIGHTS - CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Period Ended July 31 2006(1)
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net investment income (loss) (0.10)(2)
Net realized and unrealized gain on investments 0.27
TOTAL FROM INVESTMENT OPERATIONS 0.17
Net Asset Value, End of Period $10.17
Total Return(3) 1.70%
Ratios to Average Net Assets:
Net expenses 2.01%(4)
Net investment income (loss) (0.93)%(4)
Expense waiver/reimbursement(5) 20.55%(4)
Supplemental Data:
Net assets, end of period (000 omitted) $183
Portfolio turnover(6) 237%
1 Reflects operations for the period from September 15, 2005 (date of initial
public investment) to July 31, 2006.
- --------------------------------------------------------------------------------
2 Based on average shares outstanding.
3 Based on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. Total returns for
periods of less than one year, if any, are not annualized.
4 Computed on an annualized basis.
5 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
6 Portfolio turnover is calculated at the Fund level. Percentages indicated
were calculated for the year ended July 31, 2006.
Further information about the MLCGF's performance is contained in MLCGF's
Annual Report, dated July 31, 2006, which can be obtained free of charge.
Federated MDT Large Cap Growth Fund
FINANCIAL HIGHLIGHTS - CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Period Ended July 31 2006(1)
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net investment income (loss) (0.19)(2)
Net realized and unrealized gain on investments 0.29
TOTAL FROM INVESTMENT OPERATIONS 0.10
Net Asset Value, End of Period $10.10
Total Return(3) 1.00%
Ratios to Average Net Assets:
Net expenses 2.76%(4)
Net investment income (loss) (1.68)%(4)
Expense waiver/reimbursement(5) 20.55%(4)
Supplemental Data:
Net assets, end of period (000 omitted) $147
Portfolio turnover(6) 237%
1 Reflects operations for the period from September 15, 2005 (date of initial
public investment) to July 31, 2006.
- --------------------------------------------------------------------------------
2 Based on average shares outstanding.
3 Based on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. Total returns for
periods of less than one year, if any, are not annualized.
4 Computed on an annualized basis.
5 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
6 Portfolio turnover is calculated at the Fund level. Percentages indicated were
calculated for the year ended July 31, 2006.
Further information about the MLCGF's performance is contained in MLCGF's
Annual Report, dated July 31, 2006, which can be obtained free of charge.
Investment Advisers
The Board of the FEF Trust selects and oversees LCGF's Adviser, Federated
Equity Management Company of Pennsylvania ("FEMCOPA"). FEMCOPA manages LCGF's
assets, including buying and selling portfolio securities. FEMCOPA is
registered as an investment adviser under the Investment Adviser Act of 1940.
The address of the FEMCOPA is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779.
The Board of the MDT Trust selects and oversees MLCGF's Adviser, Federated
MDTA LLC ("Federated MDTA"). Federated MDTA manages MLCGF's assets, including
buying and selling portfolio securities. Federated MDTA is registered as an
investment adviser under the Investment Adviser Act of 1940. The address of
Federated MDTA is 125 Cambridge Park Drive, Cambridge, Massachusetts, 02140.
Federated MDTA is the investment adviser to approximately $6.8 billion in
total assets including, $6.3 billion in separately managed account portfolios,
$197 million in institutional accounts and approximately $311 million in mutual
funds as of July 25, 2006, that use Federated MDTA's proprietary quantitative
investment process.
Both FEMCOPA and Federated MDTA are subsidiaries of Federated Investors,
Inc. ("Federated"). The Advisers and other subsidiaries of Federated advise
approximately 148 equity, fixed-income, and money market mutual funds as well as
a variety of customized separately managed accounts, which totaled approximately
$237 billion in assets as of December 31, 2006. Federated was established in
1955 and is one of the largest investment managers in the United States with
approximately 1,243 employees. Federated provides investment products to more
than 5,500 investment professionals and institutions.
Portfolio Management Information
Federated Large Cap Growth Fund:
The following individuals serve as portfolio manager for LCGF:
Curtis R. Gross
Curtis R. Gross has been LCGF's Portfolio Manager since August 2006.
Mr. Gross joined Federated in April 2003 as a Senior Research Analyst. He
became Vice President and Director of Global Equity Research of LCGF's Adviser
in June 2005 and served as the Associate Director of Research and Senior
Investment Analyst of LCGF's Adviser from January 2004 to June 2005. Mr. Gross
has been a Portfolio Manager since March 2005. Mr. Gross was a Senior
Investment Analyst/Portfolio Manager with Northern Capital Management from
May 1997 to April 2003. Mr. Gross is a Chartered Financial Analyst. Mr. Gross
earned his M.B.A from the University of Pittsburgh.
Michael R. Tucker
Michael R. Tucker has been LCGF's Portfolio Manager since August 2006.
Mr. Tucker joined Federated in June 1993 as a Research Assistant. He became a
Vice President of LCGF's Adviser in January 2005 and served as Assistant Vice
President of LCGF's Adviser from March 2000 through 2004. Mr. Tucker has been a
Portfolio Manger since March 2000. He served as an Analyst from December 1995
to May 1999 and became a Senior Investment Analyst in June 1999. Mr. Tucker
earned his Master of Science in Industrial Administration with an emphasis on
Finance and Strategy from Carnegie Mellon University.
Federated MDT Large Cap Growth Fund:
MLCGF is managed by the Federated MDTA LLC Investment Team ("Investment
Team"), headed by Dr. David M. Goldsmith, who is primarily responsible for the
day-to-day management of MLCGF.
MLCGF is the successor to the MDT Large Cap Growth Fund pursuant to a
reorganization that was completed on December 8, 2006. Prior to that date MLCGF
had no investment operations. Dr. Goldsmith has been the portfolio manager of
MLCGF since December 11, 2006, and prior thereto was the portfolio manager of
the MDT Large Cap Growth Fund since its inception in September 2005.
Dr. Goldsmith, Ph.D., Chief Investment Officer, joined MDT Advisers (the
predecessor to the Federated MDTA) in 1990. He was responsible for the initial
development and launch of the Optimum Q Process which drives the Federated MDT
equity strategies. Dr. Goldsmith currently leads the Investment Team which is
responsible for the ongoing development and implementation of the Optimum Q
Process. He received an A.B., Summa Cum Laude, in Economics from Princeton
University, where he won the Wolf Balleison Memorial Prize for the outstanding
senior thesis in economics. Dr. Goldsmith also received a Ph.D. in Economics
with a concentration in Finance from Harvard University.
Each Fund's SAI provides additional information about its Portfolio
Managers' compensation, management of other accounts, and ownership of
securities in the Fund.
Advisory Fees, Service Fees, Shareholder Fees and Other Expenses
Investment Advisory Fees
The annual investment advisory fee for LCGF's Class A Shares, Class B
Shares and Class C Shares is 0.75% of LCGF's average daily net assets. LCGF's
Adviser may voluntarily choose to waive a portion of its advisory fee or
reimburse other expenses of LCGF. This voluntary waiver or reimbursement may be
terminated by LCGF's Adviser at any time in its sole discretion.
The annual investment advisory fee for MLCGF's Class A Shares, Class B
Shares and Class C Shares and Institutional Shares is 0.75% of MLCGF's average
daily net assets. Under the investment advisory contract, which is subject to
annual renewal by the Board of Trustees of Federated MDTA Series, MLCGF's
Adviser will waive the amount, limited to the amount of the advisory fee, by
which MLCGF's aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions, expenses of
registering or qualifying MLCGF and its shares under federal and state laws and
regulations, expenses of withholding taxes, and extraordinary expenses exceed
2.05% for Class A Shares, 2.25% for Class B Shares and 1.80% for Institutional
Shares of its average daily net assets. MLCGF's Adviser has agreed to keep
these contractual limitations in place through December 8, 2008. The advisory
fee for MLCGF's Class B Shares is not subject to a contractual expense cap, but
to the extent the advisory fee is reduced due to the expense caps for the other
classes, the reduction would also apply to Class B Shares.
A discussion of review of LCGF's investment advisory contract by the Board
of Trustees of Federated Equity Funds is available in the LCGF's Annual Report
dated October 31, 2006. A discussion of the review of MLCGF's investment
advisory contract by the Board of Trustees of Federated MDT Series is available
in MLCGF's Semi-Annual Report dated January 31, 2007.
Administrative Fees
Federated Administrative Services ("FAS"), an affiliate of the Advisers,
serves as administrator to LCGF and MLCGF and provides certain administrative
personnel and services as necessary. FAS provides these services at an annual
rate based on the average aggregate daily net assets of the Funds and most of
the other Federated funds advised by the Advisers or their affiliates. The rate
charged by FAS is based on a scale that ranges from 0.150% on the first $5
billion of average aggregate daily nets assets to 0.075% on assets over $20
billion. FAS' minimum annual administrative fee with respect to each Fund is
$150,000 per portfolio and $40,000 per each additional class of shares. FAS may
choose voluntarily to waive a portion of its fee. The net administrative fee
expense charged by FAS for LCGF's fiscal year ended October 31, 2006 was
$230,000, or 0.102% of average daily net assets.
The fee for the period from July 15, 2006 through July 31, 2006 was
pro-rated for MLCF. During the period from July 15, 2006 through July 31, 2006,
the administrator contractually agreed to waive the portion of its fee which it
would otherwise be entitled to receive from MLCGF under the Agreement. The net
administrative fee expense charged by FAS for MLCGF for its fiscal year ended
July 31, 2006 was $9,879 or 0.093% of average daily net assets. This figure
reflects operations for the period from September 15, 2005 (date of initial
public investment) to July 31, 2006.
The Funds and their affiliated service providers may pay fees as described
below to financial intermediaries (such as broker-dealers, banks, investment
advisers or third-party administrators) whose customers are shareholders of the
Funds.
Service Fees
LCGF and MLCGF each have entered into a Shareholder Services Agreement
under which it may make payments of up to 0.25% of the average daily net assets
of the Fund to obtain certain personal services for shareholders and the
maintenance of shareholder accounts. The Shareholder Services Agreement
provides that Federated Shareholder Services Company ("FSSC"), an affiliate of
the Advisers, either will perform shareholder services directly or will select
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedule of such fees and the basis upon which such fees will be paid is
determined from time to time by each Fund and FSSC.
Rule 12b-1 Fees
Federated Securities Corp. ("FSC"), an affiliate of the Adviser, is the
principal distributor (the "Distributor") for shares of the Funds. Both Funds
have adopted a Rule 12b-1 Distribution Plan (the "Distribution Plan") pursuant
to which they may pay a fee to the distributor in an amount computed at an
annual rate of 0.25% of the average daily net assets of each Fund's Class A
Shares, 0.75% of the average daily net assets of each Fund's Class B Shares and
0.75% of the average daily net assets of each Fund's Class C Shares to finance
any activity which is principally intended to result in the sale of shares
subject to the Distribution Plan.
Account Administration Fees
The Funds may pay Account Administration Fees of up to 0.25% of average
net assets to banks that are not registered as broker-dealers or investment
advisers for providing administrative services to the Funds and shareholders.
If a financial intermediary receives Account Administration Fees on an account,
it is not eligible to also receive Service Fees or Recordkeeping Fees on that
same account.
Recordkeeping Fees
The Funds may pay Recordkeeping Fees on an average net assets basis or on
a per account per year basis to financial intermediaries for providing
recordkeeping services to the Funds and shareholders. If a financial
intermediary receives Recordkeeping Fees on an account, it is not eligible to
also receive Account Administration Fees or Networking Fees on that same
account.
Networking Fees
The Funds may reimburse Networking Fees on a per account per year basis to
financial intermediaries for providing administrative services to the Funds and
shareholders on certain non-omnibus accounts. If a financial intermediary
receives Networking Fees on an account, it is not eligible to also receive
Recordkeeping Fees on that same account.
Additional Payments to Financial Intermediaries
The Distributor may pay out of its own resources amounts (including items
of material value) to certain financial intermediaries that support the sale of
Shares or provide services to Fund shareholders. The amounts of these payments
could be significant, and may create an incentive for the financial intermediary
or its employees or associated persons to recommend or sell Shares of the Fund
to you. In some cases, such payments may be made by or funded from the
resources of companies affiliated with the Distributor (including the Adviser).
These payments are not reflected in the fees and expenses listed in the fee
table section of the Fund's prospectus and described above because they are not
paid by the Fund.
These payments are negotiated and may be based on such factors as the
number or value of Shares that the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or support
furnished by the financial intermediary. These payments may be in addition to
payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan
and/or Service Fees arrangement. In connection with these payments, the
financial intermediary may elevate the prominence or profile of the Fund and/or
other Federated funds within the financial intermediary's organization by, for
example, placement on a list of preferred or recommended funds, and/or granting
the Distributor preferential or enhanced opportunities to promote the funds in
various ways within the financial intermediary's organization. You can ask your
financial intermediary for information about any payments it receives from the
Distributor or the Fund and any services provided.
Purchase, Redemption and Exchange Procedures; Dividends and Distributions; Tax
Information; Frequent Trading; Portfolio Holdings Information
The transfer agent and dividend-disbursing agent for both Funds is State
Street Bank and Trust Company. Procedures for the purchase, exchange, and
redemption of MLCGF's Shares are substantially similar to the procedures
applicable to the purchase, exchange, and redemption of LCGF's Shares, subject
to the differences addressed below. Reference is made to the Prospectuses of
MLCGF and the Prospectus of LCGF, each of which is incorporated by reference,
for a complete description of the purchase, exchange, and redemption procedures
applicable to purchases, exchanges, and redemptions of MLCGF's Shares and LCGF's
Shares, respectively. Set forth below is a brief description of the significant
purchase, exchange, and redemption procedures applicable to MLCGF's and LCGF's
Shares.
Purchases
Shares of LCGF and MLCGF may be purchased, redeemed or exchanged any day
the New York Stock Exchange (NYSE) is open. When the Funds receive your
transaction request in proper form (as described in the Prospectus), it is
processed at the next calculated net asset value (NAV), plus any applicable
front-end sales charge (public offering price). NAV for both Funds is
determined as of the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) each day the NYSE is open.
Purchases of both Funds may be made through a financial intermediary,
directly from the Fund or through an exchange from another Federated fund. Each
Fund reserves the right to reject any request to purchase or exchange shares.
Purchasers of both MLCGF's and LCGF's Class A Shares incur a front-end
sales charge of up to 5.50% of the public offering price on purchase amounts
less than $1 million. The sales charges are subject to the breakpoint discounts
and rights of accumulation, which are identical for each Fund, described in each
Fund's Prospectus for its Class A Shares. For purchases of $1 million or more,
a contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase under certain investment
programs where a financial intermediary received an advance payment on the
transaction.
There is no front-end sales charge upon purchase of Class B or Class C
Shares. However, upon redemption, holders of both MLCGF's and LCGF's Class B
Shares may incur a contingent deferred sales charge, or CDSC. The CDSC for
Class C Shares is 1% on Class C Shares redeemed within 12 months of the purchase
date. The CDSC on Class B Shares varies according to the length of time the
Class B Shares are held as follows:
Contingent
Deferred
Shares Held Up To: Sales Charge
1 Year 5.50%
2 Years 4.75%
3 Years 4.00%
4 Years 3.00%
5 Years 2.00%
6 Years 1.00%
7 Years or More 0.00%
The CDSC is calculated using the Share price at the time of purchase or
redemption, whichever is lower. The CDSC on each Fund's Class B and Class C
Shares may be reduced or eliminated in the circumstances, which are identical
for each Fund, described in the Prospectuses for the Funds' Class B and Class C
Shares.
The following chart shows the minimum initial and subsequent investment
amounts for each Fund:
-----------------------------------------------------------------
Systematic
Investment
Program
Initial SubsequentInitial/Subsequent
InvestmentInvestmentInvestment
Fund Minimum Minimum Minimum
-----------------------------------------------------------------
-----------------------------------------------------------------
LCGF/MLCGF - Class A $1,500 $100 $50/$50
Shares
-----------------------------------------------------------------
-----------------------------------------------------------------
LCGF/MLCGF - Class B Shares $1,500 $100 $50/$50
-----------------------------------------------------------------
-----------------------------------------------------------------
LCGF/MLCGF - Class C Shares $1,500 $100 $50/$50
-----------------------------------------------------------------
For Trustees and Officers of the Federated MDT Funds or of the former MDT
Funds, shareholders of any MDT Fund as of August 26, 2006, employees of MLCGF's
Adviser, and former members of the Memorial Drive Trust, the required minimum
initial investment of MLCGF shares is $1,000. Shareholders eligible to purchase
Institutional Shares of MLCGF under these categories may be asked to include a
written statement with their initial purchase verifying their qualification.
Due to the high cost of maintaining accounts with low balances, accounts
may be closed if redemptions or exchanges cause the account balance to fall
below the minimum initial investment amount. Before an account is closed, you
will be notified and allowed 30 days to purchase additional Shares to meet the
minimum.
In addition to purchases by wire and by check, both Funds offer the
following purchase options: (i) Through an Exchange: Shareholders may purchase
through an exchange from the same class of another Federated fund. You must
meet the minimum initial investment requirement for purchasing Shares and both
accounts must have identical registrations; (ii) By Automated Clearing House
(ACH): Once you have opened your account, you may purchase additional Shares
through a depository institution that is an ACH member; (iii) all classes except
MLCGF's Institutional Shares can purchase Shares by using the Systematic
Investment Program (SIP).
Redemptions and Exchanges
Redemptions and exchanges of each Fund may be made through a financial
intermediary or directly from the Fund by telephone or by mailing a written
request. Shares of both Funds may be redeemed for cash or exchanged for shares
of the same class of other Federated funds on days on which the Fund computes
its NAV.
Each Fund has an exchange privilege that allows shareholders to exchange
Shares of the Fund into shares of the same class of another Federated fund.
Any questions about the foregoing procedures may be directed to, and
assistance in effecting purchases, redemptions or exchanges of each Fund may be
obtained by calling 1-800-341-7400.
Dividends and Distributions
Both Funds declare and pay any dividends annually to shareholders. In
addition, both Funds pay any capital gains at least annually. Dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect a cash payment.
Tax Information
Both Funds' distributions are expected to be both dividends and capital
gains. The Funds' distributions of dividends and capital gains are taxable to
you whether paid in cash or reinvested in the Funds. Dividends are taxable at
different rates depending on the source of dividend income. Capital gains are
taxable at different rates depending on the length of time the Funds hold its
assets. Redemptions and exchanges are taxable sales.
Frequent Trading
Frequent or short-term trading into and out of the Funds can have adverse
consequences for the Funds and shareholders who use the Funds as a long-term
investment vehicle. Such trading in significant amounts can disrupt the Funds'
investment strategies (e.g., by requiring it to sell investments at inopportune
times or maintain excessive short-term or cash positions to support
redemptions), increase brokerage and administrative costs and affect the timing
and amount of taxable gains distributed by the Funds. Investors engaged in such
trading may also seek to profit by anticipating changes in the Funds' NAV in
advance of the time as of which NAV is calculated.
Each Fund's Board has approved policies and procedures intended to
discourage excessive frequent or short-term trading of the Fund's Shares. These
policies and procedures are identical for both Funds and are described in each
Fund's Prospectus, incorporated herein by reference.
Portfolio Holdings Disclosure Policies
Each Fund's SAI contains a description of the Fund's policies and
procedures with respect to the disclosure of its portfolio securities. The SAIs
are available on Federated's website at FederatedInvestors.com.
INFORMATION ABOUT THE REORGANIZATION
Description of the Plan of Reorganization
The Plan provides for the Reorganization to occur on the Closing Date,
which is expected to be on or after June 22, 2007. On the Closing Date, all of
the assets of LCGF will be transferred to MLCGF. In exchange for the transfer
of these assets, MLCGF will simultaneously issue to LCGF a number of full and
fractional Class A Shares, Class B Shares and Class C Shares of MLCGF equal in
value to the aggregate NAV of the Class A Shares, Class B Shares and Class C
Shares, respectively, of LCGF calculated as of 4:00 p.m. on the Closing Date.
Following the transfer of its assets in exchange for Class A Shares, Class
B Shares and Class C Shares of MLCGF, LCGF will distribute the Class A Shares,
Class B Shares and Class C Shares of MLCGF pro rata to shareholders of record of
Class A Shares, Class B Shares and Class C Shares of LCGF, respectively, in
complete liquidation of LCGF. Shareholders of LCGF owning shares at the closing
on the Closing Date of the Reorganization will receive a number of Class A
Shares, Class B Shares or Class C Shares of MLCGF with the same aggregate value
as the shareholder had in LCGF immediately before the Reorganization. This
distribution will be accomplished by the establishment of accounts in the names
of LCGF's shareholders on the share records of MLCGF's transfer agent. LCGF
will then be terminated. MLCGF does not issue share certificates to
shareholders.
The transfer of shareholder accounts from LCGF to MLCGF will occur
automatically. It is not necessary for LCGF shareholders to take any action to
effect the transfer. Please do not attempt to make the transfer yourself. If
you do so, you may disrupt the management of the Funds' portfolios, and you may
incur sales charges or contingent deferred sales charges that you would not
incur in the Reorganization.
The Plan contains customary representations, warranties and conditions.
The Plan provides that the consummation of the Reorganization is conditioned
upon, among other things: (i) approval of the Reorganization by LCGF's
shareholders; and (ii) the receipt by the FEF Trust of an opinion to the effect
that the Reorganization will be tax-free to LCGF, its shareholders and MLCGF.
The Plan may be terminated if, before the Closing Date, any of the required
conditions have not been met, the representations and warranties are not true or
the Board of either Fund determines that the Reorganization is not in the best
interest of the shareholders of that Fund.
The expenses of the Reorganization will be paid by the MLCGF's Adviser or
its affiliates. Reorganization expenses include, without limitation: expenses
associated with the preparation and filing of this Prospectus/Proxy Statement;
postage; printing; accounting fees; legal fees incurred by LCGF and MLCGF; proxy
solicitation costs; and other related administrative or operational costs.
The foregoing brief summary of the Plan is qualified in its entirety by
the terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference.
Description of MLCGF Share Classes and Capitalization
Class A Shares, Class B Shares and Class C Shares of MLCGF to be issued to
shareholders of LCGF's Class A Shares, Class B Shares and Class C Shares,
respectively, under the Plan will be fully paid and non-assessable when issued,
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectuses of MLCGF provided herewith
for additional information about Class A Shares, Class B Shares and Class C
Shares of MLCGF.
The following tables set forth the unaudited capitalization of LCGF's and
MLCGF's Class A Shares, Class B Shares and Class C Shares as of March 8, 2007
and on a pro forma combined basis after giving effect to the Reorganization as
of that date:
Federated Federated MDT Adjustments Federated MDT
Large Cap Growth
Fund -
Large Cap Large Cap Pro Forma
Growth Fund Growth Fund (1) Combined
Class A Shares:
Net Assets (2)......) $87,193,507 $574,049 ___ $87,767,556
Net Asset Value Per $8.72 $11.25 ___ $11.25
Share................
Shares Outstanding... 9,997,708 51,044 (2,247,174)(3) 7,801,578
Class B Shares:
Net Assets(2)........ $52,127,854 NA ___ $52,127,854
Net Asset Value Per $8.24 NA ___ $11.31
Share................
Shares Outstanding... 6,329,618 NA (1,720,612)(3) 4,609,006
Class C Shares:
Net Assets(2)........ $8,864,505 $308,066 ___ $9,172,571
Net Asset Value Per $8.24 $11.12 ___ $11.12
Share................
Shares Outstanding... 1,076,290 27,706 (279,122)(3) 824,874
- -------------
1 The adjustments reflect the allocation of the aggregate net asset value of
the LCGF Shares to a smaller number of MLCGF Shares to reflect the higher net
asset value per share of the MLCGF Shares.
2 Does not reflect an additional $1,026,105 of net assets of Federated MDT
Large Cap Growth Fund represented by the Institutional Share class.
3 Adjustment to reflect share balance as a result of combination.
Federal Income Tax Consequences
As a condition to the Reorganization, MLCGF and LCGF will receive an
opinion of counsel to the effect that, on the basis of the existing provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), current
administrative rules and court decisions, for federal income tax purposes:
o the Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a) of the Code, and LCGF and MLCGF each
will be a "party to a reorganization" within the meaning of section 368(b)
of the Code;
o no gain or loss will be recognized by MLCGF upon its receipt of LCGF's
assets in exchange for Class A Shares, Class B Shares and Class C Shares
of MLCGF;
o no gain or loss will be recognized by LCGF upon transfer of its assets to
MLCGF in exchange for MLCGF Class A Shares, Class B Shares and Class C
Shares or upon the distribution of MLCGF's shares to LCGF's shareholders
in exchange for their Class A Shares, Class B Shares and Class C Shares;
o no gain or loss will be recognized by shareholders of LCGF upon exchange
of their Class A Shares, Class B Shares and Class C Shares for Class A
Shares, Class B Shares and Class C Shares of MLCGF;
o the aggregate tax basis of the Class A Shares, Class B Shares or Class C
Shares of MLCGF received by each shareholder of LCGF pursuant to the Plan
will be the same as the aggregate tax basis of the shares of LCGF held by
such shareholder immediately prior to the Reorganization;
o the holding period of MLCGF Class A Shares, Class B Shares or Class C
Shares received by each shareholder of LCGF pursuant to the Plan will
include the period during which the LCGF Class A Shares, Class B Shares or
Class C Shares exchanged therefor were held by such shareholder, provided
the shares of LCGF were held as capital assets on the date of the
Reorganization;
o the tax basis of the assets LCGF acquired by MLCGF will be the same as the
tax basis of such assets to LCGF immediately prior to the Reorganization;
and
o the holding period of LCGF's assets in the hands of MLCGF will include the
period during which those assets were held by MLCGF.
As of October 31, 2006, LCGF had a capital loss carry-forward of
$408,159,270. LCGF used capital loss carry-forwards of $15,898,167 to offset
taxable capital gains realized during the year ended October 31, 2006. The
final amount of the unutilized capital loss carryover for LCGF is subject to
change and will not be determined until the time of the Reorganization. It is
anticipated that any capital loss carryover for LCGF, which was generated prior
to the Reorganization and which is unutilized as of the time of the
Reorganization, will be subject to an annual limitation on use because it is
anticipated that the Reorganization will result in an "ownership change" under
Section 382 of the Code with respect to LCGF. Under Section 382, the amount of
such unutilized capital losses which may be used to offset capital gain of MLCGF
after the Reorganization in any year are generally limited to an amount equal to
the value of the Shares of LCGF immediately prior to the Reorganization
multiplied by the long-term tax-exempt rate (an interest rate set monthly by the
Internal Revenue Service by reference to the interest rate on long-term federal
obligation, as adjusted). There are certain exceptions and adjustments to the
annual limitation under Section 382 of the Code which may or may not be
applicable to the MLCGF after the Reorganization.
The foregoing opinion may state that no opinion is expressed as to the
effect of the Reorganization on MLCGF, LCGF or LCGF's shareholders with respect
to any asset as to which unrealized gain or loss is required to be recognized
for federal income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of accounting.
Shareholders of LCGF should consult their tax advisors regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisors about state and local tax consequences, if any, of
the Reorganization.
Before the Reorganization, LCGF may distribute ordinary income and
realized capital gains, if any, to shareholders.
Comparative Information on Shareholder Rights
Federated MDT Large Cap Growth Fund is a portfolio of Federated MDT Series
(the "MDT Trust"), while Federated Large Cap Growth Fund is a portfolio of
Federated Equity Funds (the "FEF Trust"). Both the MDT Trust and the FEF Trust
are open-end, management investment companies, each comprised of multiple
portfolios, that were established as business trusts under the laws of the
Commonwealth of Massachusetts. The rights of shareholders of MLCGF and LCGF are
defined by Declaration of Trust and Bylaws of the Trust of which they are
portfolios and by the laws of the Commonwealth of Massachusetts The rights of
the shareholders of the two Funds relating to voting, distributions and
redemptions, are substantively similar. The chart below describes some of the
differences between your rights as a shareholder of LCGF and your rights as a
shareholder of MLCGF.
- -------------------------------------------------------------------------------
CATEGORY LARGE CAP GROWTH FUND MDT LARGE CAP GROWTH FUND
- -------------------------------------------------------------------------------
Preemptive Rights None None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Preferences None None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Appraisal Rights None None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Conversion Rights None None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exchange Rights None None
(other than the
right to exchange
for shares of the
same class of
other Federated
mutual funds as
provided in the
Funds'
prospectuses)
- -------------------------------------------------------------------------------
Minimum Account Class A Shares - $1,500 Class A Shares - $1,500
Size Class B Shares - $1,500 Class B Shares - $1,500
Class C Shares - $1,500 Class C Shares - $1,500
Institutional Shares -
$25,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Annual Meetings Not required Not required
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Right to Call Shall be called upon the Shall be called upon the
Shareholder written request of the written request of the
Meetings holders of at least 10% of holders of at least 10% of
outstanding shares of the outstanding shares of the
Fund entitled to vote at Fund entitled to vote at the
the meeting. meeting.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Notice of Meetings Mailed to each shareholder Mailed to each shareholder
entitled to vote at least entitled to vote at least 15
15 days before the meeting. days before the meeting.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Record Date For The Board of Trustees may The Board of Trustees may
Meetings fix a date not more than 60 fix a date not more than 90
days before the meeting days before the meeting date
date as the record date for as the record date for
determining Shareholders determining Shareholders
entitled to notice of and entitled to notice of and to
to vote at any meeting of vote at any meeting of
shareholders. shareholders.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Quorum for Meetings Except when otherwise Except when otherwise
required by law, the required by law, the he
presence in person or by presence in person or by
proxy of the holders of proxy of the holders of
one-fourth of the shares one-half or one-third of the
entitled to vote shares entitled to vote
constitutes a quorum at any constitutes a quorum at any
meeting of shareholders. meeting of shareholders
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Vote Required for A plurality of votes at the A plurality of votes cast at
Election of meeting. Cumulative voting the meeting. Cumulative
Trustees is not permitted. voting is not permitted
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Adjournment of In the absence of a quorum, In the absence of a quorum,
Meetings a majority of those a plurality of the shares
shareholders present in present in person or by
person or by proxy may proxy may adjourn the
adjourn the meeting from meeting from time to time
time to time without without further notice than
further notice than by by announcement at the
announcement at the meeting meeting until a quorum shall
until a quorum shall be be present.
present.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Removal of A Trustee may be removed at A Trustee may be removed at
Trustees by any special meeting of any special meeting of
Shareholders shareholders by a vote of shareholders by a vote of
two-thirds of the two-thirds of the
outstanding shares. outstanding shares.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Personal Liability Provided they have acted Trustees and officers of the
of Officers and under the belief that their Trust shall be liable for
Trustees actions are in the best the their willful
interest of the Trust, the misfeasance, bad faith,
Trustees and officers shall gross negligence or reckless
not be responsible for or disregard of the duties
liable in any event for involved in the conduct of
neglect or wrongdoing by the office of Trustee or
them or any officer, agent, officer, as the case may be,
employee, investment and for nothing else.
adviser or principal
underwriter of the Trust or
of any entity providing
administrative services to
the Trust, but nothing
herein contained shall
protect any Trustee or
officer against any
liability to which he would
otherwise be subject by
reason of willful
misfeasance, bad faith,
gross negligence or
reckless disregard of the
duties involved in the
conduct of his office.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Personal Liability Under certain Under certain circumstances,
of Shareholders circumstances, shareholders shareholders may be held
may be held personally personally liable as
liable as partners under partners under Massachusetts
Massachusetts law for law for obligations of the
obligations of the Trust. Trust. To protect its
To protect its shareholders, the Trust has
shareholders, the Trust has filed legal documents with
filed legal documents with Massachusetts that expressly
Massachusetts that disclaim the liability of
expressly disclaim the its shareholders for acts or
liability of its obligations of the Trust.
shareholders for acts or In the unlikely event a
obligations of the Trust. shareholder is held
In the unlikely event a personally liable for the
shareholder is held Trust's obligations, the
personally liable for the Trust is required by the
Trust's obligations, the Declaration of Trust to use
Trust is required by the its property to protect or
Declaration of Trust to use compensate the shareholder.
its property to protect or On request, the Trust will
compensate the shareholder. defend any claim made and
On request, the Trust will pay any judgment against a
defend any claim made and shareholder for any act or
pay any judgment against a obligation of the Trust.
shareholder for any act or Therefore, financial loss
obligation of the Trust. resulting from liability as
Therefore, financial loss a shareholder will occur
resulting from liability as only if the Trust itself
a shareholder will occur cannot meet its obligations
only if the Trust itself to indemnify shareholders
cannot meet its obligations and pay judgments against
to indemnify shareholders them.
and pay judgments against
them.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Number of Unlimited; no par value. Unlimited; no par value.
Authorized Shares;
Par Value
- -------------------------------------------------------------------------------
INFORMATION ABOUT FEDERATED MDT LARGE CAP GROWTH FUND AND FEDERATED LARGE CAP
GROWTH FUND
Where to Find Additional Information
Information about LCGF is included in its Prospectus and its SAI dated
December 31, 2006, each of which is incorporated herein by reference.
Information about MLCGF's Class A Shares and Class C Shares is included in its
Prospectus for these classes dated December 11, 2006, and information about
MLCGF's Class B Shares is included in its Prospectus for this class dated March
28, 2007, each of which is incorporated herein by reference, and information
concerning all classes is included in MLCGF's SAI dated December 11, 2006
(Revised March 28, 2007), which is incorporated herein by reference. A copy of
the Prospectuses for the Class A Shares and Class C Shares or the Class B
Shares, as appropriate, of MLCGF accompanies this Prospectus/Proxy Statement.
Copies of the SAI of MLCGF, the Prospectus and SAI of LCGF and the SAI dated May
2, 2007 relating to this Prospectus/Proxy Statement, all of which have been
filed with the SEC, may be obtained without charge by contacting the Funds at
1-800-341-7400 or by writing to Federated Investors Funds, 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000. The Prospectuses and SAIs of LCGF and
MLCGF are also available electronically at Federated's website at
FederatedInvestors.com.
The MDT Trust, on behalf of MLCGF, and the FEF Trust, on behalf of LCGF,
are subject to the informational requirements of the Securities Act of 1933, the
Securities Exchange Act of 1934, and the 1940 Act, and in accordance therewith
file reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the MDT Trust on behalf of MLCGF and
by the FEF Trust on behalf of LCGF, can be obtained by calling or writing the
Funds and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, DC located at Room 1580, 100 F
Street, N.E., Washington DC 20549. Copies of such material can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, Washington DC 20549, or obtained electronically
from the EDGAR database on the SEC's website (www.sec.gov).
Legal Proceedings
Since October 2003, Federated and related entities (collectively,
"Federated"), and various Federated funds ("Funds"), have been named as
defendants in several class action lawsuits now pending in the United States
District Court for the District of Maryland. The lawsuits were purportedly
filed on behalf of people who purchased, owned and/or redeemed shares of
Federated-sponsored mutual funds during specified periods beginning November 1,
1998. The suits are generally similar in alleging that Federated engaged in
illegal and improper trading practices including market timing and late trading
in concert with certain institutional traders, which allegedly caused financial
injury to the mutual fund shareholders. These lawsuits began to be filed
shortly after Federated's first public announcement that it had received
requests for information on shareholder trading activities in the Funds from the
SEC, the Office of the New York State Attorney General ("NYAG"), and other
authorities. In that regard, on November 28, 2005, Federated announced that it
had reached final settlements with the SEC and the NYAG with respect to those
matters. Specifically, the SEC and NYAG settled proceedings against three
Federated subsidiaries involving undisclosed market timing arrangements and late
trading. The SEC made findings: that Federated Investment Management Company
("FIMC"), an SEC-registered investment adviser to various Funds, and Federated
Securities Corp., an SEC-registered broker-dealer and distributor for the Funds,
violated provisions of the Investment Advisers Act and Investment Company Act by
approving, but not disclosing, three market timing arrangements, or the
associated conflict of interest between FIMC and the funds involved in the
arrangements, either to other fund shareholders or to the funds' board; and that
Federated Shareholder Services Company, formerly an SEC-registered transfer
agent, failed to prevent a customer and a Federated employee from late trading
in violation of provisions of the Investment Company Act. The NYAG found that
such conduct violated provisions of New York State law. Federated entered into
the settlements without admitting or denying the regulators' findings. As
Federated previously reported in 2004, it has already paid approximately $8.0
million to certain funds as determined by an independent consultant. As part of
these settlements, Federated agreed to pay disgorgement and a civil money
penalty in the aggregate amount of an additional $72 million and, among other
things, agreed that it would not serve as investment adviser to any registered
investment company unless (i) at least 75% of the fund's directors are
independent of Federated, (ii) the chairman of each such fund is independent of
Federated, (iii) no action may be taken by the fund's board or any committee
thereof unless approved by a majority of the independent trustees of the fund or
committee, respectively, and (iv) the fund appoints a "senior officer" who
reports to the independent trustees and is responsible for monitoring compliance
by the fund with applicable laws and fiduciary duties and for managing the
process by which management fees charged to a fund are approved. The
settlements are described in Federated's announcement which, along with previous
press releases and related communications on those matters, is available in the
"About Us" section of Federated's website at FederatedInvestors.com.
Federated and various Funds have also been named as defendants in several
additional lawsuits, the majority of which are now pending in the United States
District Court for the Western District of Pennsylvania, alleging, among other
things, excessive advisory and Rule 12b-1 fees.
The board of the Funds has retained the law firm of Dickstein Shapiro LLP
to represent the Funds in these lawsuits. Federated and the Funds, and their
respective counsel, are reviewing the allegations and intend to defend this
litigation. Additional lawsuits based upon similar allegations may be filed in
the future. The potential impact of these lawsuits, all of which seek
unquantified damages, attorneys' fees, and expenses, and future potential
similar suits is uncertain. Although we do not believe that these lawsuits will
have a material adverse effect on the Funds, there can be no assurance that
these suits, ongoing adverse publicity and/or other developments resulting from
the regulatory investigations will not result in increased Fund redemptions,
reduced sales of Fund shares, or other adverse consequences for the Funds.
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THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS APPROVE THE
AGREEMENT AND PLAN OF REORGANIZATION.
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ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
Proxies are being solicited by the Board of Trustees of the FEF Trust, on
behalf of its portfolio LCGF. The proxies will be voted at the special meeting
of shareholders of LCGF to be held at _____ (Eastern Time) on June 22, 2007 at
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000 (such special meeting
and any adjournment or postponement thereof are referred to as the "Special
Meeting").
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by MLCGF's Adviser or its affiliates. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees, and agents of MLCGF's Adviser or its affiliates or, if necessary, a
communications firm retained for this purpose. Such solicitations may be by
telephone, through the Internet or otherwise. Any telephonic solicitations will
follow procedures designed to ensure accuracy and prevent fraud, including
requiring identifying shareholder information, recording the shareholder's
instructions, and confirming to the shareholder after the fact. Shareholders
who communicate proxies by telephone or by other electronic means have the same
power and authority to issue, revoke, or otherwise change their voting
instructions as shareholders submitting proxies in written form. The Trust may
reimburse custodians, nominees, and fiduciaries for the reasonable costs
incurred by them in connection with forwarding solicitation materials to the
beneficial owners of shares held of record by such persons.
The purpose of the Special Meeting is set forth in the accompanying
Notice. The Board knows of no business other than that mentioned in the Notice
that will be presented for consideration at the Special Meeting. Should other
business properly be brought before the Special Meeting, proxies will be voted
in accordance with the best judgment of the persons named as proxies. This
Prospectus/Proxy Statement and the enclosed proxy card are expected to be mailed
on or about May 14, 2007, to shareholders of record at the close of business on
April 24, 2007 (the "Record Date").
LCGF's Annual Report, which includes audited financial statements for its
fiscal year ended October 31, 2006, and its Semi-Annual Report containing
unaudited financial statements for the six-month period ended April 30, 2006,
were previously mailed to shareholders of LCGF. MLCGF's Annual Report, which
includes audited financial statements for its fiscal year ended July 31, 2006,
and its Semi-Annual Report containing unaudited financial statements for the
six-month period ended January 31, 2006, were previously mailed to shareholders
of MLCGF or its predecessor fund. LCGF and MLCGF will each promptly provide,
without charge and upon request, to each person to whom this Prospectus/Proxy
Statement is delivered, a copy of its Annual Report and/or the Semi-Annual
Report. Requests for Annual Reports or Semi-Annual Reports for MLCG or LCGF may
be made by writing to the Funds' principal executive offices or by calling the
toll-free telephone number, 1-800-341-7400. The principal executive office for
both Funds is located at Federated Investors Funds, 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000. Except for MLCGF's Annual Report, which
was issued by its predecessor fund, these reports are also available
electronically at Federated's website at FederatedInvestors.com.
Proxies, Quorum and Voting at the Special Meeting
Only shareholders of record on the Record Date will be entitled to vote at
the Special Meeting. Each Class A, Class B and Class C Share of LCGF is
entitled to one vote. Fractional shares are entitled to proportionate shares of
one vote. The votes of shareholders of MLCGF are not being solicited since
their approval is not required in order to effect the Reorganization.
Any person giving a proxy has the power to revoke it any time prior to its
exercise by executing a superseding proxy or by submitting a written notice of
revocation to the Secretary of the FEF Trust. In addition, although mere
attendance at the Special Meeting will not revoke a proxy, a shareholder present
at the Special Meeting may withdraw his or her proxy and vote in person. All
properly executed and unrevoked proxies received in time for the Special Meeting
will be voted in accordance with the instructions contained in the proxies. If
no instruction is given on the proxy, the persons named as proxies will vote the
shares represented thereby in favor of approval of the Agreement and Plan of
Reorganization.
In order to hold the Special Meeting, a "quorum" of shareholders of LCGF
must be present. Due to the requirements of the 1940 Act discussed in the next
paragraph, holders of majority of the total number of Class A, Class B and Class
C Shares of LCGF entitled to vote, present in person or by proxy, shall be
required to constitute a quorum for the purpose of voting on the proposal to
approve the Agreement and Plan of Reorganization. Holders of one-fourth of the
total number of Class A, Class B and Class C Shares of LCGF entitled to vote,
present in person or by proxy, shall be required to constitute a quorum for the
purpose of transacting any other business which may properly come before the
meeting..
Shareholder approval with respect to the proposal requires the affirmative
vote of "a majority of the outstanding voting securities" as defined in the 1940
Act. This vote requires the lesser of (A) 67% or more of the Class A, Class B
and Class C Shares of LCGF present at the meeting, voting together as a single
class, if the shareholders of more than 50% of the outstanding Class A, Class B
and Class C Shares of LCGF are present or represented by proxy; or (B) more than
50% of the outstanding Class A, Class B and Class C Shares of LCGF, voting
together as a single class.
For purposes of determining a quorum for transacting business at the
Special Meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present but which have
not been voted. For this reason, abstentions and broker non-votes will have the
effect of a "no" vote for purposes of obtaining the requisite approval of the
proposal.
If a quorum is not present, the persons named as proxies may vote those
proxies that have been received to adjourn the Special Meeting from time to time
to be held at the same place without further notice than by announcement to be
given at the meeting until a quorum shall be present. In the event that a
quorum is present but sufficient votes in favor of the proposal have not been
received, the persons named as proxies may propose one or more adjournments of
the Special Meeting to permit further solicitations of proxies with respect to
the proposal. All such adjournments will require the affirmative vote of a
majority of the shares present in person or by proxy at the session of the
Special Meeting to be adjourned. The persons named as proxies will vote AGAINST
an adjournment those proxies that they are required to vote against the
proposal, and will vote in FAVOR of such an adjournment all other proxies that
they are authorized to vote. A shareholder vote may be taken on the proposal in
this Prospectus/Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.
Share Ownership of the Funds
Officers and Directors of the Trust own less than 1% of each class of
LCGF's outstanding shares.
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding shares of each
class of LCGF:
Class A Shares: The following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Class A Shares: Edward Jones & Co.,
Maryland Heights, MO, owned approximately 2,336,392 Shares (21.30%) and IITC &
Co., Niwot, CO, owned approximately 672,947 Shares (6.14%).
Class B Shares: The following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Class B Shares: Pershing LLC, Jersey City,
NJ, owned approximately 820,178 Shares (11.64%) and Edward Jones & Co., Maryland
Heights, MO, owned approximately 623,984 Shares (8.86%).
Class C Shares: The following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Class C Shares: MLPF&S, Jacksonville, FL
owned approximately 112,580 Shares (9.58%), Edward Jones & Co., Maryland
Heights, MO, owned approximately 74,788 Shares (6.36%) and Pershing LLC, Jersey
City, NJ, owned approximately 69,406 Shares (5.90%).
Officers and Trustees of MLCGF own less than 1% of each class of MLCGF's
outstanding shares.
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding shares of each
class of MLCGF:
Class A Shares: The following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Class A Shares: Edward Jones & Co.,
Maryland Heights, MO, owned approximately 34,126 Shares (63.16%) and Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL, owned approximately 18,806 Shares
(34.81%).
Class B Shares:
Class C Shares: The following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Class C Shares: Edward Jones & Co.,
Maryland Heights, MO, owned approximately 3,163 Shares (18.68%) and Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL, owned approximately 12,158 Shares
(71.80%).
Institutional Shares: The following shareholders owned of record, beneficially,
or both, 5% or more of the outstanding Institutional Shares: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL, owned approximately 1,695 Shares
(5.36%), Gerald P. Thomas, Park City, UT owned approximately 3,087 Shares
(9.76%) and State Street Bank and Trust Company, Bedford, MA, owned
approximately 23,868 Shares (75.48%).
Shareholders owning 25% or more of outstanding Shares may be in control
and be able to affect the outcome of certain matters presented for a vote of
shareholders.
Edward Jones & Co. is organized in the state of Missouri and is a subsidiary of
Jones Financial Companies; organized in the state of Missouri.
Merrill Lynch Pierce Fenner & Smith is organized in the state of Delaware and is
a subsidiary of Merrill Lynch & Co., Inc.; organized in the state of Delaware.
State Street Bank and Trust Company is organized in the state of Massachusetts
and is a subsidiary of State Street Corporation; organized in the state of
Massachusetts.
Interests of Certain Persons
Each Funds is managed byits Adviser. Both Advisers are subsidiaries of
Federated Investors, Inc. All of the voting securities of Federated Investors,
Inc. are owned by a trust, the trustees of which are John F. Donahue, his wife
and his son, J. Christopher Donahue. John F. Donahue and J. Christopher Donahue
currently serve as trustees of both the FEF Trust and the MDT Trust.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
LCGF is not required, and does not intend, to hold regular annual meetings
of shareholders. Shareholders wishing to submit proposals for consideration for
inclusion in a Proxy Statement for the next meeting of shareholders should send
their written proposals to Federated Equity Funds, Federated Investors Funds,
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, so that they are
received within a reasonable time before any such meeting.
No business other than the matters described above is expected to come
before the Special Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or postponement
of the Special Meeting, the persons named on the enclosed proxy card will vote
on such matters according to their best judgment in the interests of LCGF.
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SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES.
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By Order of the Board of Directors,
John W. McGonigle
Secretary
May 2, 2007
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
between
FEDERATED MDT SERIES, with respect to its portfolio,
FEDERATED MDT LARGE CAP GROWTH FUND
and
FEDERATED EQUITY FUNDS, with respect to its portfolio,
FEDERATED LARGE CAP GROWTH FUND
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 1st day of May 2007, by and between FEDERATED MDT SERIES, a Massachusetts
business trust, with its principal place of business at 5800 Corporate Drive,
Pittsburgh, PA, 15237 (the "MDT Trust"), with respect to its portfolio,
FEDERATED MDT LARGE CAP GROWTH FUND (the "Acquiring Fund"), and FEDERATED EQUITY
FUNDS, a Massachusetts business trust, with its principal place of business at
5800 Corporate Drive, Pittsburgh, PA, 15237 (the "FEF Trust" and, collectively
with the MDT Trust, the "Trusts"), with respect to its portfolio, FEDERATED
LARGE CAP GROWTH FUND (the "Acquired Fund" and, collectively with the Acquiring
Fund, the "Funds").
RECITALS
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations
promulgated thereunder. The reorganization will consist of: (i) the transfer
of all of the assets of the Acquired Fund in exchange for Class A Shares, Class
B Shares, Class C Shares of the Acquiring Fund ("Acquiring Fund Shares"); and
(ii) the distribution of Class A Shares, Class B Shares and Class C Shares of
the Acquiring Fund to the holders of Class A Shares, Class B Shares and Class C
Shares, respectively, of the Acquired Fund and the liquidation of the Acquired
Fund as provided herein, all upon the terms and conditions set forth in this
Agreement (the "Reorganization").
WHEREAS, the Acquired Fund is a separate portfolio of the FEF Trust, the
Trusts are open-end, registered management investment companies and the Acquired
Fund owns securities that generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, each of the Acquiring Fund and the Acquired Fund is authorized to
issue its respective shares of beneficial interest;
WHEREAS, the Trustees of the MDT Trust have determined that the
Reorganization, with respect to the Acquiring Fund, is in the best interests of
the Acquiring Fund and that the interests of the existing shareholders of the
Acquiring Fund will not be diluted as a result of the Reorganization; and
WHEREAS, the Trustees of the FEF Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best interests of
the Acquired Fund and that the interests of the existing shareholders of the
Acquired Fund will not be diluted as a result of the Reorganization;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein, the
Acquired Fund agrees to transfer all of its assets, as set forth in
paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund agrees to
deliver to the Acquired Fund:
(a) the number of full and fractional Class A Shares of the
Acquiring Fund determined by multiplying (i) the Class A Shares
outstanding of the Acquired Fund by (ii) the ratio computed by dividing
(x) the net asset value per Class A Share of the Acquired Fund by (y) the
net asset value per Class A Share of the Acquiring Fund;
(a) the number of full and fractional Class B Shares of the
Acquiring Fund determined by multiplying (i) the Class B Shares
outstanding of the Acquired Fund by (ii) the ratio computed by dividing
(x) the net asset value per Class B Share of the Acquired Fund by (y) the
net asset value per Class B Share of the Acquiring Fund; and
(a) the number of full and fractional Class C Shares of the
Acquiring Fund determined by multiplying (i) the Class C Shares
outstanding of the Acquired Fund by (ii) the ratio computed by dividing
(x) the net asset value per Class C Share of the Acquired Fund by (y) the
net asset value per Class C Share of the Acquiring Fund;
in each case computed in the manner and as of the time and date set forth in
paragraph 2.2. Holders of the Class A Shares of the Acquired Fund will receive
Class A Shares of the Acquiring Fund, holders of the Class B Shares of the
Acquired Fund will receive Class B Shares of the Acquiring Fund, and holders of
the Class C Shares of the Acquired Fund will receive Class C Shares of the
Acquiring Fund. Such transactions shall take place at the closing on the
Closing Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of property having a value equal to
the total net assets of the Acquired Fund, including, without limitation, cash,
securities, commodities, interests in futures and dividends or interest
receivable, owned by the Acquired Fund and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of the Acquired Fund's
assets as of the date of such statements. The Acquired Fund hereby represents
that as of the date of the execution of this Agreement, there have been no
changes in its financial position as reflected in such financial statements
other than as the result of changes in the market values of securities or
otherwise occurring in the ordinary course of business in connection with the
purchase and sale of securities, the issuance and redemption of Acquired Fund
shares and the payment of normal operating expenses, dividends and capital gains
distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will discharge all
of its liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable: (a) the Acquired Fund will distribute in
complete liquidation of the Acquired Fund, pro rata to the shareholders of
record, determined as of the close of business on the Closing Date (the
"Acquired Fund Shareholders"), of its Class A Shares, Class B Shares and Class C
Shares, respectively, all of the Acquiring Fund Class A Shares, Class B Shares
and Class C Shares, respectively, received by the Acquired Fund pursuant to
paragraph 1.1; and (b) the Acquired Fund will thereupon proceed to dissolve and
terminate as set forth in paragraph 1.8 below. Such distribution will be
accomplished by the transfer of Acquiring Fund Shares credited to the account of
the Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund in the names of the Acquired Fund
Shareholders, and representing the respective pro rata numbers of Acquiring Fund
Shares due such shareholders. All issued and outstanding shares of the Acquired
Fund (the "Acquired Fund Shares") will simultaneously be canceled on the books
of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing Acquiring Fund Shares in connection with such transfer. After the
Closing Date, the Acquired Fund shall not conduct any business except in
connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Acquiring Fund
Shares will be issued simultaneously to the Acquired Fund, in an amount equal in
value to the aggregate net asset value of the Acquired Fund Shares, to be
distributed to Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the Acquired
Fund shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Acquired Fund is and shall remain the responsibility of the Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund,
including all books and records required to be maintained under the Investment
Company Act of 1940 (the "1940 Act"), and the rules and regulations thereunder,
shall be available to the Acquiring Fund from and after the Closing Date and
shall be turned over to the Acquiring Fund as soon as practicable following the
Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets at
the closing on the Closing Date, using the valuation procedures set forth in the
Acquiring Fund's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring
Fund Shares shall be the net asset value per share computed at the closing on
the Closing Date, using the valuation procedures set forth in the Acquiring
Fund's Declaration of Trust and the Acquiring Fund's then current prospectus and
statement of additional information, or such other valuation procedures as shall
be mutually agreed upon by the parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund's Class A
Shares, Class B Shares and Class C Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Fund's assets, shall be determined
by (a) multiplying the shares outstanding of each class of the Acquired Fund by
(b) the ratio computed by (x) dividing the net asset value per share of such
class of the Acquired Fund by (y) the net asset value per share of the
corresponding class, as provided in paragraph 1.1, of Acquiring Fund Shares,
determined in accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company, on behalf of the Acquiring Fund and the
Acquired Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about June 22, 2007, or
such other date(s) as the parties may agree to in writing (the "Closing Date").
All acts taking place at the closing shall be deemed to take place at 4:00 p.m.
Eastern Time on the Closing Date unless otherwise provided herein. The closing
shall be held at the offices of Federated Services Company, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779, or at such other time and/or place as the
parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. State Street Bank and Trust Company, as
custodian for the Acquired Fund (the "Custodian"), shall deliver at the Closing
a certificate of an authorized officer stating that: (a) the Acquired Fund's
portfolio securities, cash, and any other assets have been delivered in proper
form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities by the Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the scheduled
Closing Date, either: (a) the New York Stock Exchange ("NYSE") or another
primary exchange on which the portfolio securities of the Acquiring Fund or the
Acquired Fund are purchased or sold, shall be closed to trading or trading on
such exchange shall be restricted; or (b) trading or the reporting of trading on
the NYSE or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Closing Date shall be postponed until the first business day after the day
when trading is fully resumed and reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. State Street Bank and Trust Company,
as transfer agent for the Acquired Fund as of the Closing Date, shall deliver at
the Closing a certificate of an authorized officer stating that its records
contain the names and addresses of Acquired Fund Shareholders, and the number
and percentage ownership of outstanding shares of each class owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue
and deliver or cause State Street Bank and Trust Company, its transfer agent, to
issue and deliver a confirmation evidencing Acquiring Fund Shares to be credited
on the Closing Date to the Secretary of the FEF Trust or provide evidence
satisfactory to the Acquired Fund that the Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, receipts, officers certificates, transfer agent
certificates, custodian certificates, opinions, and other certificates and
documents, if any, as such other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The FEF Trust, on behalf of
the Acquired Fund, represents and warrants to the MDT Trust as follows:
a) The Acquired Fund is a legally designated, separate portfolio
of a trust duly organized, validly existing, and in good standing under
the laws of Massachusetts.
b) The FEF Trust is registered as an open-end management
investment company under the 1940 Act, and the FEF Trust's registration
with the Securities and Exchange Commission (the "Commission") as an
investment company under the 1940 Act is in full force and effect.
c) The current prospectus and statement of additional information
of the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the 1940
Act, and the rules and regulations thereunder, and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
d) The Acquired Fund is not in violation, and the execution,
delivery, and performance of this Agreement (subject to shareholder
approval) will not result in the violation, of any provision of the FEF
Trust's Declaration of Trust or By-Laws or of any material agreement,
indenture, instrument, contract, lease, or other undertaking to which the
Acquired Fund is a party or by which it is bound.
e) The Acquired Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to it before the Closing Date, except for liabilities, if any,
to be discharged as provided in paragraph 1.3 hereof.
f) Except as otherwise disclosed in writing to and accepted by
the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets, which, if adversely determined, would materially
and adversely affect its financial condition, the conduct of its
business, or the ability of the Acquired Fund to carry out the
transactions contemplated by this Agreement. The Acquired Fund knows of
no facts that might form the basis for the institution of such proceedings
and is not a party to or subject to the provisions of any order, decree,
or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transactions contemplated herein.
g) The financial statements of the Acquired Fund as of October
31,2006, and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and audited by
KPMG LLP, independent registered public accountants, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such date, and there
are no known contingent liabilities of the Acquired Fund as of such date
that are not disclosed in such statements.
h) The unaudited financial statements of the Acquired Fund as of
April 30, 2006, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquiring Fund)
fairly reflect the financial condition of the Acquired Fund as of such
date, and there are no known contingent liabilities of the Acquired Fund
as of such date that are not disclosed in such statements.
i) Since the date of the financial statements referred to in
paragraph (g) above, there have been no material adverse changes in the
Acquired Fund's financial condition, assets, liabilities or business
(other than changes occurring in the ordinary course of business), or any
incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of this
paragraph (i), a decline in the net asset value of the Acquired Fund shall
not constitute a material adverse change.
j) All federal and other tax returns and reports of the Acquired
Fund required by law to be filed, have been filed, and all federal and
other taxes shown due on such returns and reports have been paid, or
provision shall have been made for the payment thereof. To the best of
the Acquired Fund's knowledge, no such return is currently under audit,
and no assessment has been asserted with respect to such returns.
k) All issued and outstanding shares of the Acquired Fund are
duly and validly issued and outstanding, fully paid and non-assessable by
the Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired Fund's
transfer agent as provided in paragraph 3.4. The Acquired Fund has no
outstanding options, warrants, or other rights to subscribe for or
purchase any of the Acquired Fund shares, and has no outstanding
securities convertible into any of the Acquired Fund shares.
l) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, and full right, power, and
authority to sell, assign, transfer, and deliver such assets hereunder,
free of any lien or other encumbrance, except those liens or encumbrances
of which the Acquiring Fund has received notice, and, upon delivery and
payment for such assets, and the filing of any articles, certificates or
other documents under the laws of Massachusetts, the Acquiring Fund will
acquire good and marketable title, subject to no restrictions on the full
transfer of such assets, other than such restrictions as might arise under
the 1933 Act, and other than as disclosed to and accepted by the Acquiring
Fund.
m) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the FEF
Trust. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the FEF Trust,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights and to general equity
principles.
n) The information to be furnished by the Acquired Fund for use
in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection
with the transactions contemplated herein shall comply in all material
respects with federal securities and other laws and regulations and will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were made, not
misleading.
o) The Acquired Fund has elected to qualify and has qualified as
a "regulated investment company" under the Code (a "RIC"), as of and since
its first taxable year; has been a RIC under the Code at all times since
the end of its first taxable year when it so qualified; and qualifies and
will continue to qualify as a RIC under the Code for its taxable year
ending upon its liquidation.
p) No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the Securities Exchange Act of 1934 (the
"1934 Act"), the 1940 Act or Massachusetts law for the execution of this
Agreement by the FEF Trust or the performance of this Agreement by the FEF
Trust, for itself and on behalf of the Acquired Fund, except for the
effectiveness of the Registration Statement, and the filing of any
articles, certificates or other documents that may be required under
Massachusetts law, and except for such other consents, approvals,
authorizations and filings as have been made or received, and such
consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date, it being understood, however, that this
Agreement and the transactions contemplated herein must be approved by the
shareholders of the Acquired Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The MDT Trust, on behalf of
the Acquiring Fund, represents and warrants to the FEF Trust as follows:
a) The MDT Trust is a Massachusetts business trust, duly
organized, validly existing and in good standing under the laws of
Massachusetts.
b) The MDT Trust is registered as an open-end management
investment company under the 1940 Act, and the MDT Trust's registration
with the Commission as an investment company under the 1940 Act is in full
force and effect.
c) The current prospectuses and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated or
necessary to make such statements therein, in light of the circumstances
under which they were made, not misleading.
d) The Acquiring Fund is not in violation, and the execution,
delivery and performance of this Agreement will not result in a violation,
of the MDT Trust's Declaration of Trust or By-Laws or of any material
agreement, indenture, instrument, contract, lease, or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
e) Except as otherwise disclosed in writing to and accepted by
the Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any
of its properties or assets, which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of
its business or the ability of the Acquiring Fund to carry out the
transactions contemplated by this Agreement. The Acquiring Fund knows of
no facts that might form the basis for the institution of such proceedings
and it is not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transaction contemplated herein.
f) The financial statements of the Acquiring Fund as of July 31,
2006, and for the fiscal year then ended have been prepared in accordance
with generally accepted accounting principles, and audited by Ernst &
Young LLP, independent registered public accountants, and such statements
(copies of which have been furnished to the Acquired Fund) fairly reflect
the financial condition of the Acquiring Fund as of such date, and there
are no known contingent liabilities of the Acquiring Fund as of such date
that are not disclosed in such statements.
g) The unaudited financial statements of the Acquiring Fund as of
January 31, 2007, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired Fund)
fairly reflect the financial condition of the Acquiring Fund as of such
date, and there are no known contingent liabilities of the Acquiring Fund
as of such date that are not disclosed in such statements.
h) Since the date of the financial statements referred to in
paragraph (f) above, there have been no material adverse changes in the
Acquiring Fund's financial condition, assets, liabilities or business
(other than changes occurring in the ordinary course of business), or any
incurrence by the Acquiring Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquired Fund. For the purposes of this
paragraph (h), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse change.
i) All federal and other tax returns and reports of the Acquiring
Fund required by law to be filed, have been filed. All federal and other
taxes shown due on such returns and reports have been paid or provision
shall have been made for their payment. To the best of the Acquiring
Fund's knowledge, no such return is currently under audit, and no
assessment has been asserted with respect to such returns.
i) All issued and outstanding Acquiring Fund Shares are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund has no outstanding options, warrants,
or other rights to subscribe for or purchase any Acquiring Fund Shares,
and there are no outstanding securities convertible into any Acquiring
Fund Shares.
j) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the MDT Trust,
and this Agreement constitutes a valid and binding obligation of the MDT
Trust, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights and to general
equity principles.
k) Acquiring Fund Shares to be issued and delivered to the
Acquired Fund for the account of the Acquired Fund Shareholders pursuant
to the terms of this Agreement will, at the Closing Date, have been duly
authorized. When so issued and delivered, such shares will be duly and
validly issued Acquiring Fund Shares, and will be fully paid and
non-assessable.
l) The information to be furnished by the Acquiring Fund for use
in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection
with the transactions contemplated herein shall comply in all material
respects with federal securities and other laws and regulations and will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were made, not
misleading.
m) The Acquiring Fund has elected to qualify and has qualified as
a RIC under the Code as of and since its first taxable year; has been a
RIC under the Code at all times since the end of its first taxable year
when it so qualified; and qualifies and shall continue to qualify as a RIC
under the Code for its current taxable year.
n) No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the MDT Trust or
the performance of the Agreement by the MDT Trust, for itself and on
behalf of the Acquired Fund, except for the effectiveness of the
Registration Statement, and the filing of any articles, certificates or
other documents that may be required under Massachusetts law, and such
other consents, approvals, authorizations and filings as have been made or
received, and except for such consents, approvals, authorizations and
filings as may be required subsequent to the Closing Date.
o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
Act, and any state Blue Sky or securities laws as it may deem appropriate
in order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Acquired
Fund will each operate its respective business in the ordinary course between
the date of this Agreement and the Closing Date; it being understood that such
ordinary course of business will include customary dividends and shareholder
purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The FEF Trust will call a special meeting
of the Acquired Fund Shareholders to consider and act upon this Agreement and to
take all other appropriate action necessary to obtain approval of the
transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Acquired Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be certified by the FEF
Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A PROXY
STATEMENT. The MDT Trust will review and file with the Commission a
registration statement on Form N-14 relating to the Acquiring Fund Shares to be
issued to shareholders of the Acquired Fund (the "Registration Statement"). The
Registration Statement on Form N-14 shall include a proxy statement and a
prospectus of the Acquiring Fund relating to the transaction contemplated by
this Agreement. The Registration Statement shall be in compliance with the 1933
Act, the 1934 Act and the 1940 Act, as applicable. Each party will provide the
other party with the materials and information necessary to prepare the
registration statement on Form N-14 Form N-14, and the proxy materials for
inclusion therein in connection with the meeting of the Acquired Fund's
Shareholders to consider the approval of this Agreement and the transactions
contemplated herein (the "Proxy Materials").
5.8 On or before the Closing Date, the Acquired Fund shall have declared
and paid a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its shareholders all of the
Acquired Fund's investment company taxable income (computed without regard to
any deduction for dividends paid), if any, plus the excess, if any, of its
interest income excludible from gross income under Section 103(a) of the Code
over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for
all taxable periods or years ending on or before the Closing Date, and all of
its net capital gains realized (after reduction for any capital loss carry
forward), if any, in all taxable periods or years ending on or before the
Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
MDT Trust and the Acquiring Fund of all the obligations to be performed by them
pursuant to this Agreement on or before the Closing Date, and, in addition,
subject to the following conditions:
6.1 All representations, covenants, and warranties of the MDT Trust and
the Acquiring Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date. The MDT Trust
shall have delivered to the Acquired Fund a certificate executed in the MDT
Trust's name by its President or Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquired Fund and dated as
of the Closing Date, to such effect and as to such other matters as the Acquired
Fund shall reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by FEF
Trust and the Acquired Fund of all the obligations to be performed by the them
pursuant to this Agreement, on or before the Closing Date and, in addition,
shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of FEF Trust and the
Acquired Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date, with the
same force and effect as if made on and as of such Closing Date. The FEF Trust
shall have delivered to the Acquiring Fund on such Closing Date a certificate
executed in the FEF Trust's name by the its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquiring Fund and dated as of such Closing Date, to such effect and as to such
other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a list of
the Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Date, certified by the Treasurer of the FEF Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with
respect to the Acquired Fund, shall have been approved by the requisite vote of
the holders of the outstanding shares of the Acquired Fund in accordance with
applicable law and the provisions of the FEF Trust's Declaration of Trust and
By-Laws. Certified copies of the resolutions evidencing such approval shall
have been delivered to the Acquiring Fund. Notwithstanding anything herein to
the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with, this Agreement or the transactions
contemplated herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of State securities authorities,
including any necessary "no-action" positions and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated herein shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 The parties shall have received an opinion of Reed Smith LLP
substantially to the effect that for federal income tax purposes:
a) The transfer of all of the Acquired Fund's assets to the Acquiring
Fund solely in exchange for Acquiring Fund Shares (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund
Shareholders in dissolution and liquidation of the Acquired Fund)
will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code.
b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
Acquiring Fund Shares.
c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund solely
in exchange for Acquiring Fund Shares or upon the distribution
(whether actual or constructive) of Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their Acquired Fund
Shares.
d) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund
Shares.
e) The aggregate tax basis of the Acquiring Fund Shares received by
each Acquired Fund Shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the Acquired Fund Shares
held by it immediately prior to the Reorganization. The holding
period of Acquiring Fund Shares received by each Acquired Fund
Shareholder will include the period during which the Acquired Fund
Shares exchanged therefor were held by such shareholder, provided
the Acquired Fund Shares are held as capital assets at the time of
the Reorganization.
f) The tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to
the Acquired Fund immediately prior to the Reorganization. The
holding period of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the period during which those assets
were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such
representations as Reed Smith LLP may reasonably request, and the Acquired Fund
and Acquiring Fund will cooperate to make and certify the accuracy of such
representations. The foregoing opinion may state that no opinion is expressed
as to the effect of the Reorganization on the Acquiring Fund, the Acquired Fund
or any Acquired Fund Shareholder with respect to any asset as to which
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
Federated Equity Management Company of Pennsylvania, Federated MTDA LLC or
their affiliates will pay all expenses associated with Acquiring Fund's and
Acquired Fund's participation in the Reorganization, provided, however, that the
Acquiring Fund shall bear expenses associated with the qualification of
Acquiring Fund Shares for sale in the various states. Reorganization expenses
include, without limitation: (a) expenses associated with the preparation and
filing of the Proxy Materials; (b) postage; (c) printing; (d) accounting fees;
(e) legal fees incurred by each Fund; (f) solicitation costs of the transaction;
and (g) other related administrative or operational costs.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The MDT Trust, on behalf of the Acquiring Fund and the FEF Trust, on
behalf of the Acquired Fund, agree that neither party has made to the other
party any representation, warranty and/or covenant not set forth herein, and
that this Agreement constitutes the entire agreement between the parties.
10.2 Except as specified in the next sentence set forth in this paragraph
10.2, the representations, warranties, and covenants contained in this Agreement
or in any document delivered pursuant to or in connection with this Agreement,
shall not survive the consummation of the transactions contemplated hereunder.
The covenants to be performed after the Closing Date shall continue in effect
beyond the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
This Agreement may be terminated by the mutual agreement of the MDT Trust
and the FEF Trust. In addition, either the MDT Trust or the FEF Trust may at
its option terminate this Agreement at or before the Closing Date due to:
a) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not cured
within 30 days;
b) a condition herein expressed to be precedent to the obligations of
the terminating party that has not been met and it reasonably appears that it
will not or cannot be met; or
c) a determination by a party's Board of Trustees that the consummation
of the transactions contemplated herein is not in the best interest of Acquired
Fund or the Acquiring Fund, and notice given to the other party hereto.
In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring
Fund, the MDT Trust, the Acquired Fund, the FEF Trust, or their respective
trustees or officers, to the other party or its trustees or officers.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such manner as
may be mutually agreed upon in writing by the officers of the MDT Trust and the
FEF Trust as specifically authorized by their respective Boards of Trustees;
provided, however, that following the meeting of the Acquired Fund Shareholders
called by the Acquired Fund pursuant to paragraph 5.2 of this Agreement, no such
amendment may have the effect of changing the provisions for determining the
number of Acquiring Fund Shares to be issued to the Acquired Fund Shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to the conflict of
laws rules of that or any other jurisdiction.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
FEDERATED EQUITY FUNDS
on behalf of its portfolio,
Federated Large Cap Growth Fund
----------------------------------
John W. McGonigle, Secretary
FEDERATED MDT SERIES
on behalf of its portfolio,
Federated MDT Large Cap Growth Fund
------------------------------------
John W. McGonigle, Secretary
EXHIBIT 17.2
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Large Cap Growth Fund (the "Fund"), a portfolio of Federated Equity
Funds (the "Trust"), hereby designate and appoint
_____________________________, as proxies to act at the Special Meeting of
Shareholders (the "Special Meeting") to be held on June 22, 2006, at 5800
Corporate Drive, Pittsburgh, Pennsylvania, 15237-7000, at 2:00 p.m. (Eastern
Time) and at any adjournment thereof.
The proxies are hereby authorized and instructed to vote upon the matters
specified in the notice of meeting in accordance with the choices made on
this ballot. If no choice is indicated as to a proposal, this proxy will be
voted affirmatively on the matters. The proxies may vote in their discretion
on any other matter which may properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL.
PROPOSAL: To approve or disapprove a proposed Agreement and Plan of
Reorganization pursuant to which Federated MDT Large Cap Growth
Fund would acquire all of the assets of Federated Large Cap
Growth Fund in exchange for Class A Shares, Class B Shares, Class
C Shares and Institutional Shares of Federated MDT Large Cap
Growth Fund to be distributed pro rata by Federated Large Cap
Growth Fund in complete liquidation and termination of Federated
Large Cap Growth Fund.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign and return this card as soon as
possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the
Trust. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
STATEMENT OF ADDITIONAL INFORMATION
MAY 2, 2007
ACQUISITION OF THE ASSETS OF
FEDERATED LARGE CAP GROWTH FUND,
A PORTFOLIO OF FEDERATED EQUITY FUNDS
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
BY AND IN EXCHANGE FOR CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES OF
FEDERATED MDT LARGE CAP GROWTH FUND,
A PORTFOLIO OF FEDERATED MDT SERIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
This Statement of Additional Information dated May 2, 2007, is not a prospectus.
A Prospectus/Proxy Statement dated May 2, 2007, related to the above-referenced
matter may be obtained from Federated Large Cap Growth Fund by writing or
calling Federated Large Cap Growth Fund at the address and telephone number
shown above. This Statement of Additional Information should be read in
conjunction with such Prospectus/Proxy Statement.
3
TABLE OF CONTENTS
Page
1.Statement of Additional Information of Federated Large Cap Growth
Fund, a portfolio of Federated Equity Funds, dated December 31, 2006
(incorporated by reference). 3
2. Statement of Additional Information of Federated MDT Large Cap
Growth Fund, a portfolio of Federated MDT Series, dated
December 11, 2006 (Revised March 28, 2007)(incorporated by
reference) 3
3. Audited Financial Statements of Federated Large Cap Growth Fund, a
portfolio of Federated Equity Funds, dated October 31, 2006
(incorporated by reference) 3
4. Audited Financial Statements of MDT Large Cap Growth Fund, a
portfolio of MDT Funds, dated July 31, 2006 (incorporated by
reference) 3
5. Unaudited Semi-Annual Financial Statements of Federated Large
Cap Growth Fund, a portfolio of Federated Equity Funds, dated
April 30, 2006 (incorporated by reference) 3
6. Unaudited Semi-Annual Financial Statements of Federated MDT Large
Cap Growth Fund, a portfolio of Federated MDT Series, dated
January 31, 2007 (incorporated by reference) 3
7. Federated Large Cap Growth Fund and Federated MDT Large Cap Growth
Fund, Pro Forma Financial Statements for the Period Ended
July 31, 2006 (unaudited):
Introduction 4
Pro Forma Combining Portfolio of Investments,
July 31, 2006 (unaudited) 5
Pro Forma Combining Statements of Assets and
Liabilities, Period Ended July 31, 2006 (unaudited) 11
Pro Forma Combining Statements of Operations, Period Ended
July 31, 2006 (unaudited) 13
Notes to Pro Forma Financial Statements, for the Period Ended
July 31, 2006 (unaudited) 15
8. Federated Large Cap Growth Fund and Federated MDT Large Cap Growth
Fund, Pro Forma Financial Statements for the Six Months Ended
January 31, 2007 (unaudited):
Introduction 19
Pro Forma Combining Portfolio of Investments,
January 31, 2007 (unaudited) 20
Pro Forma Combining Statements of Assets and Liabilities,
Period Ended January 31, 2007 (unaudited) 26
Pro Forma Combining Statements of Operations,
Period Ended January 31, 2007 (unaudited) 28
Notes to Pro Forma Financial Statements, for the
Period Ended January 31, 2007 (unaudited) 30
INFORMATION INCORPORATED BY REFERENCE
The Statement of Additional Information of Federated Large Cap Growth
Fund, a portfolio of Federated Equity Funds, dated December 31, 2006, is
incorporated by reference to Federated Equity Funds, Post-Effective Amendment
No. 79 to its Registration Statement on Form N-1A (File No. 811-4017), which was
filed with the Securities and Exchange Commission on or about December 29, 2006.
A copy may be obtained from the Federated Large Cap Growth Fund at 1-800-341-
7400.
The Statement of Additional Information of Federated MDT Large Cap Growth
Fund, a portfolio of Federated MDT Series, dated December 11, 2006 (Revised
March 15, 2007), is incorporated by reference to Federated MDT Series Post-
Effective Amendment No. 02 to its Registration Statement on Form N-1A (File No.
811-21904), which was filed with the Securities and Exchange Commission on or
about December 12, 2006. A copy may be obtained from the Federated MDT Large
Cap Growth Fund at 1-800-341-7400.
The audited financial statements of Federated Large Cap Growth Fund, dated
October 31, 2006, are incorporated by reference to the Annual Report to
shareholders of Federated Large Cap Growth Fund, which was filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the Investment
Company Act of 1940, as amended, on or about December 29, 2006.
The audited financial statements of MDT Large Cap Growth Fund, dated July
31, 2006, are incorporated by reference to the Annual Report to shareholders of
MDT Large Cap Growth Fund, which was filed with the Securities and Exchange
Commission pursuant to Section 30(b) of the Investment Company Act of 1940, as
amended, on or about September 30, 2006.
The unaudited financial statements of Federated Large Cap Growth Fund,
dated April 30, 2006, are incorporated by reference to the Semi-Annual Report to
shareholders of Federated Large Cap Growth Fund, which was filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the Investment
Company Act of 1940, as amended, on or about June 29, 2006.
The unaudited financial statements of MDT Large Cap Growth Fund, dated
January 31, 2007, are incorporated by reference to the Semi-Annual Report to
shareholders of MDT Large Cap Growth Fund, which was filed with the Securities
and Exchange Commission pursuant to Section 30(b) of the Investment Company Act
of 1940, as amended, on or about March 29, 2007.
8
PRO FORMA FINANCIAL STATEMENTS FOR THE PERIOD ENDED JULY 31, 2006 (UNAUDITED)
INTRODUCTION
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of Federated Large Cap Growth Fund
and Federated MDT Large Cap Growth Fund (individually referred to as the "Fund"
or collectively as the "Funds"), for the period ended July 31, 2006. MDT Large
Cap Growth Fund (the "Predecessor Fund") was reorganized into Federated MDT
Large Cap Growth Fund as of the close of business on December 8, 2006. Prior to
the reorganization, Federated MDT Large Cap Growth Fund had no investment
operations. Federated MDT Large Cap Growth Fund is the successor to the
Predecessor Fund, which commenced operations on September 15, 2005. For the
purposes of these Pro Forma Financial Statements, the financial information
covers the period from September 15, 2005 (date of initial public investment of
the Predecessor Fund) to July 31, 2006. These statements have been derived from
the books and records utilized in calculating daily net asset values at July 31,
2006.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Class A Shares, Class B Shares and Class C Shares of Federated Large
Cap Growth Fund for Class A Shares, Class B Shares and Class C Shares of
Federated MDT Large Cap Growth Fund. Under generally accepted accounting
principles, Federated MDT Large Cap Growth Fund will be the surviving entity for
accounting purposes with its historical cost of investment securities and
results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the anticipated
advisory fee arrangement for the surviving entity. Certain other operating costs
have also been adjusted to reflect anticipated expenses of the combined entity.
Other costs which may change as a result of the reorganization are currently
undeterminable.
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
JULY 31, 2006 (UNAUDITED)
FEDERATED LARGE CAP FEDERATED MDT LARGE CAP PRO FEDERATED LARGE CAP FEDERATED MDT LARGE CAP PRO
GROWTH FUND GROWTH FUND (1) FORMA GROWTH FUND GROWTH FUND (1) FORMA
COMBINED COMBINED
- ----------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE
COMMON STOCKS - 98.9%
- ----------------------------------------
AEROSPACE & DEFENSE - 2.8%
26,000 0 26,000 LOCKHEED MARTIN CORP. $2,071,680 $0 $2,071,680
------------------------------
0 325 325 RAYTHEON CO. 0 14,648 14,648
------------------------------
40,000 0 40,000 UNITED TECHNOLOGIES CORP. 2,487,600 0 2,487,600
------------------------------
TOTAL 4,559,280 14,648 4,573,928
AIR FREIGHT & LOGISTICS - 0.8%
30,000 220 30,220 EXPEDITORS INTERNATIONAL WASHINGTON, INC. 1,364,100 10,003 1,374,103
BEVERAGES - 2.7%
0 64 64 (2)HANSEN NATURAL CORP. 0 2,943 2,943
70,000 0 70,000 PEPSICO, INC. 4,436,600 0 4,436,600
---------------------------
TOTAL 4,436,600 2,943 4,439,543
BIOTECHNOLOGY - 7.3%
80,000 0 80,000 (2)AMGEN, INC. 5,579,200 0 5,579,200
0 64 64 (2)CELGENE CORP. 0 3,065 3,065
45,000 229 45,229 (2)GENENTECH, INC. 3,636,900 18,508 3,655,408
45,000 376 45,376 (2)GILEAD SCIENCES, INC. 2,766,600 23,116 2,789,716
------------------------------
TOTAL 11,982,700 44,689 12,027,389
CAPITAL MARKETS - 4.0%
28,000 15 28,015 GOLDMAN SACHS GROUP, INC. 4,277,000 2,291 4,279,291
35,000 0 35,000 MORGAN STANLEY 2,327,500 0 2,327,500
---------------------------
TOTAL 6,604,500 2,291 6,606,791
CHEMICALS - 2.1%
90,000 0 90,000 CELANESE CORP. 1,728,900 0 1,728,900
0 36 36 SCOTTS CO. 0 1,412 1,412
33,000 0 33,000 PRAXAIR, INC. 1,809,720 0 1,809,720
---------------------------
TOTAL 3,538,620 1,412 3,540,032
COMMERCIAL SERVICES & SUPPLIES - 1.0%
0 19 19 CORPORATE EXECUTIVE BOARD CO. 0 1,786 1,786
0 122 122 PITNEY BOWES, INC. 0 5,041 5,041
0 131 131 ROBERT HALF INTERNATIONAL, INC. 0 4,239 4,239
50,000 0 50,000 WASTE MANAGEMENT, INC. 1,719,000 0 1,719,000
----------------------------
TOTAL 1,719,000 11,066 1,730,066
COMMUNICATIONS EQUIPMENT - 4.8%
90,000 0 90,000 (2)CISCO SYSTEMS, INC 1,606,500 0 1,606,500
----------------------------
130,000 0 130,000 MOTOROLA, INC. 2,958,800 0 2,958,800
----------------------------
95,000 807 95,807 QUALCOMM, INC. 3,349,700 28,455 3,378,155
----------------------------
TOTAL 7,915,000 28,455 7,943,455
COMPUTERS & PERIPHERALS - 2.9%
70,000 248 70,248 (2)APPLE, INC. 4,757,200 16,854 4,774,054
----------------------------
0 363 363 IBM CORP. 0 28,100 28,100
----------------------------
TOTAL 4,757,200 44,954 4,802,154
CONSTRUCTION & ENGINEERING - 1.6%
30,000 0 30,000 FLUOR CORP. 2,634,900 0 2,634,900
CONSTRUCTION MATERIALS - 0.0%
0 40 40 MARTIN MARIETTA MATERIALS 0 3,221 3,221
CONSUMER FINANCE - 2.1%
45,000 0 45,000 CAPITAL ONE FINANCIAL CORP. 3,480,750 0 3,480,750
0 35 35 (2)FIRST MARBLEHEAD CORP. 0 1,603 1,603
---------------------------
TOTAL 3,480,750 1,603 3,482,353
DIVERSIFIED FINANCIAL SERVICES - 1.0%
0 42 42 (2)CBOT HOLDINGS, INC. 0 5,263 5,263
37,000 0 37,000 CIT GROUP, INC. 1,698,670 0 1,698,670
0 39 39 CHICAGO MERCANTILE EXCHANGE HOLDINGS, INC. 0 17,987 17,987
TOTAL 1,698,670 23,250 1,721,920
ELECTRIC UTILITIES - 1.6%
0 110 110 (2)ALLEGHENY ENERGY, INC. 0 4,516 4,516
---------------------------
65,000 0 65,000 EDISON INTERNATIONAL 2,689,700 0 2,689,700
---------------------------
TOTAL 2,689,700 4,516 2,694,216
ELECTRONIC EQUIPMENT - 1.7%
35,000 0 35,000 EMERSON ELECTRIC CO. 2,762,200 0 2,762,200
-------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.0%
0 42 42 AMPHENOL CORP., CLASS A 0 2,355 2,355
-----------------
ENERGY EQUIPMENT & SERVICES - 6.4%
0 110 110 BAKER HUGHES, INC. 0 8,795 8,795
0 91 91 DIAMOND OFFSHORE DRILLING, INC. 0 7,183 7,183
0 83 83 ENSCO INTERNATIONAL, INC. 0 3,836 3,836
45,000 53 45,053 GLOBALSANTAFE CORP. 2,471,850 2,911 2,474,761
75,000 176 75,176 HALLIBURTON CO. 2,502,000 5,871 2,507,871
0 24 24 HELMERICH & PAYNE, INC. 0 664 664
0 38 38 (2)NATIONAL-OILWELL, INC. 0 2,548 2,548
20,000 355 20,355 SCHLUMBERGER LTD. 1,337,000 23,732 1,360,732
-----------------------------
22,000 0 22,000 (2)TRANSOCEAN SEDCO FOREX, INC. 1,699,060 0 1,699,060
-----------------------------
55,000 0 55,000 (2)WEATHERFORD INTERNATIONAL LTD. 2,576,200 0 2,576,200
-----------------------------
TOTAL 10,586,110 55,540 10,641,650
FOOD & STAPLES RETAILING - 2.5%
80,000 0 80,000 CVS CORP. 2,617,600 0 2,617,600
0 642 642 WAL-MART STORES, INC. 0 28,569 28,569
----------------------------
25,000 0 25,000 WHOLE FOODS MARKET, INC. 1,437,750 0 1,437,750
----------------------------
TOTAL 4,055,350 28,569 4,083,919
FOOD PRODUCTS - 1.6%
60,000 0 60,000 ARCHER-DANIELS-MIDLAND CO. 2,640,000 0 2,640,000
HEALTH CARE EQUIPMENT & SUPPLIES - 0.0%
0 29 29 HILLENBRAND INDUSTRIES, INC. 0 1,440 1,440
HEALTH CARE PROVIDERS & SERVICES - 4.0%
0 150 150 AETNA, INC. 0 4,723 4,723
20,000 0 20,000 CIGNA CORP. 1,825,000 0 1,825,000
0 272 272 CAREMARK RX, INC. 0 14,362 14,362
----------------------------
40,000 138 40,138 (2)EXPRESS SCRIPTS, INC., CLASS A 3,081,200 10,630 3,091,830
0 12 12 (2)HUMANA, INC. 0 671 671
----------------------------
36,000 0 36,000 UNITEDHEALTH GROUP, INC. 1,721,880 0 1,721,880
----------------------------
TOTAL 6,628,080 30,386 6,658,466
HOTELS, RESTAURANTS & LEISURE - 3.8%
25,000 0 25,000 HARRAH'S ENTERTAINMENT, INC. 1,502,750 0 1,502,750
0 331 331 (2)LAS VEGAS SAND CORP. 0 20,532 20,532
45,000 128 45,128 (2)MGM MIRAGE 1,599,300 4,549 1,603,849
62,000 0 62,000 MARRIOTT INTERNATIONAL, INC. CLASS A 2,181,160 0 2,181,160
27,000 0 27,000 MCDONALD'S CORP. 955,530 0 955,530
0 655 655 (2)STARBUCKS CORP. 0 22,440 22,440
TOTAL 6,238,740 47,521 6,286,261
HOUSEHOLD PRODUCTS - 1.5%
40,000 0 40,000 COLGATE-PALMOLIVE CO. 2,372,800 0 2,372,800
----------------------------
0 356 356 KIMBERLY-CLARK CORP. 0 21,734 21,734
----------------------------
TOTAL 2,372,800 21,734 2,394,534
IT SERVICES - 0.0%
0 68 68 (2)ALLIANCE DATA SYSTEMS CORP. 0 3,490 3,490
-----------------
0 78 78 (2)CHECKFREE CORP. 0 3,471 3,471
-----------------
0 34 34 (2)COGNIZANT TECHNOLOGY SOLUTIONS CORP. 0 2,227 2,227
-----------------
TOTAL 0 9,188 9,188
INDUSTRIAL CONGOLMERATES - 4.5%
65,000 416 65,416 3M CO. 4,576,000 29,286 4,605,286
----------------------------
32,000 0 32,000 TEXTRON, INC. 2,877,120 0 2,877,120
----------------------------
TOTAL 7,453,120 29,286 7,482,406
INSURANCE - 1.7%
0 67 67 AFLAC, INC. 0 2,957 2,957
50,000 0 50,000 ALLSTATE CORP. 2,841,000 0 2,841,000
---------------------------
TOTAL 2,841,000 2,957 2,843,957
INTERNET SOFTWARE & SERVICES - 5.7%
0 0 0 (2)EBAY, INC. 0 0 0
14,000 0 14,000 (2)GOOGLE, INC. 5,412,400 0 5,412,400
150,000 0 150,000 (2)YAHOO, INC. 4,071,000 0 4,071,000
-------------------------
TOTAL 9,483,400 0 9,483,400
LIFE SCIENCES TOOLS & SERVICES - 0.0%
0 25 25 (2)COVANCE, INC. 0 1,594 1,594
0 36 36 PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. 0 1,385 1,385
-----------------
TOTAL 0 2,979 2,979
MACHINERY - 0.8%
0 44 44 CUMMINS, INC. 0 5,148 5,148
35,000 77 35,077 JOY GLOBAL, INC. 1,313,200 2,889 1,316,089
---------------------------
TOTAL 1,313,200 8,037 1,321,237
MEDIA - 0.0%
0 741 741 (2)COMCAST CORP., CLASS A 0 25,476 25,476
0 481 481 (2)DIRECTV GROUP, INC. 0 8,201 8,201
0 413 413 NEWS CORP., INC. 0 7,946 7,946
-------------------
TOTAL 0 41,623 41,623
METALS & MINING- 3.7%
60,000 0 60,000 ALCOA, INC. 1,797,000 0 1,797,000
---------------------------
40,000 43 40,043 ALLEGHENY TECHNOLOGIES, INC. 2,555,600 2,747 2,558,347
---------------------------
20,000 0 20,000 NEWMONT MINING CORP. 1,024,600 0 1,024,600
---------------------------
13,000 0 13,000 UNITED STATES STEEL CORP. 819,910 0 819,910
---------------------------
TOTAL 6,197,110 2,747 6,199,857
MULTI-LINE RETAIL- 2.4%
0 219 219 (2)KOHL'S CORP. 0 12,402 12,402
----------------------------
85,000 81 85,081 TARGET CORP. 3,903,200 3,720 3,906,920
----------------------------
TOTAL 3,903,200 16,122 3,919,322
OIL, GAS & CONSUMABLE FUELS - 1.2%
0 10 10 CONSOL ENERGY, INC. 0 412 412
----------------------------
40,000 242 40,242 PEABODY ENERGY, INC. 1,996,000 12,076 2,008,076
----------------------------
0 64 64 XTO ENERGY, INC. 0 3,007 3,007
----------------------------
TOTAL 1,996,000 15,495 2,011,495
PHARMACEUTICALS - 8.6%
90,000 0 90,000 (2)FOREST LABORATORIES, INC., CLASS A 4,167,900 0 4,167,900
90,000 0 90,000 JOHNSON & JOHNSON 5,629,500 0 5,629,500
0 650 650 SCHERING PLOUGH CORP. 0 13,286 13,286
90,000 0 90,000 WYETH 4,362,300 0 4,362,300
TOTAL 14,159,700 13,286 14,172,986
ROAD & RAIL - 1.7%
45,000 50 45,050 CSX CORP. 2,730,600 3,034 2,733,634
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.8%
0 113 113 (2)ALTERA CORP. 0 1,956 1,956
0 216 216 ANALOG DEVICES, INC. 0 6,983 6,983
100,000 0 100,000 APPLIED MATERIALS, INC. 1,574,000 0 1,574,000
0 89 89 KLA-TENCOR CORP. 0 1,814 1,814
20,000 89 20,089 (2)LAM RESEARCH CORP. 831,800 3,702 835,502
0 196 196 LINEAR TECHNOLOGY CORP. 0 6,341 6,341
55,000 0 55,000 (2)MEMC ELECTRONIC MATERIALS, INC. 1,673,100 0 1,673,100
120,000 0 120,000 (2)MARVELL TECHNOLOGY GROUP LTD. 2,226,000 0 2,226,000
0 207 207 MAXIM INTEGRATED PRODUCTS, INC. 0 6,082 6,082
0 191 191 (2)NVIDIA CORP. 0 4,227 4,227
0 798 798 TEXAS INSTRUMENTS, INC. 0 23,764 23,764
TOTAL 6,304,900 54,869 6,359,769
SOFTWARE - 4.5%
75,000 214 75,214 (2)AUTODESK, INC. 2,558,250 7,300 2,565,550
---------------------------
200,000 0 200,000 MICROSOFT CORP. 4,806,000 0 4,806,000
---------------------------
TOTAL 7,364,250 7,300 7,371,550
SPECIALTY RETAIL - 1.0%
30,000 0 30,000 ABERCROMBIE & FITCH CO., CLASS A 1,588,800 0 1,588,800
0 221 221 BEST BUY CO., INC. 0 10,020 10,020
0 54 54 (2)CARMAX, INC. 0 1,879 1,879
----------------------------
0 530 530 LOWE'S COS., INC. 0 15,026 15,026
----------------------------
TOTAL 1,588,800 26,925 1,615,725
TEXTILES, APPAREL & LUXURY GOODS - 1.4 %
0 281 281 (2)COACH, INC. 0 8,068 8,068
30,000 0 30,000 NIKE, INC., CLASS B 2,370,000 0 2,370,000
---------------------------
TOTAL 2,370,000 8,068 2,378,068
TOBACCO - 1.7 %
34,300 0 34,300 ALTRIA GROUP, INC. 2,742,971 0 2,742,971
TRADING COMPANIES & DISTRIBUTORS - 0.0 %
0 61 61 GRAINGER (W.W.), INC. 0 3,787 3,787
0 33 33 MSC INDUSTRIAL DIRECT CO. 0 1,361 1,361
0 30 30 (2)WESCO INTERNATIONAL, INC. 0 1,747 1,747
TOTAL 0 6,895 6,895
TOTAL COMMON STOCKS (IDENTIFIED COST $155,573,048) 163,112,551 629,407 163,741,958
MUTUAL FUNDS - 0.0%
------
---------------------------------------------
0 1,330 1,330 |SSGA MONEY MARKET FUND 0 1,330 1,330
--------------------------------------------------------------
0 25,258 25,258|SSGA PRIME MONEY MARKET FUND 0 25,258 25,258
--------------------------------------------------------------
TOTAL MUTUAL FUNDS (AT NET ASSET VALUE) 0 26,588 26,588
REPURCHASE AGREEMENT - 4.0%
------
$6,688,000 $0 $6,688,000 BANK OF AMERICA N.A., 5.29%, DATED 7/31/2006, DUE 6,688,000 0 6,688,000
8/1/2006 (AT COST)
TOTAL INVESTMENTS - 102.9% (IDENTIFIED COST 169,800,551 655,995 170,456,546
$162,287,636)(3)
OTHER ASSETS AND LIABILITIES - (2.9)% (4,824,415) (21,216) (4,845,631)
TOTAL NET ASSETS - 100% $ $
164,976,136 634,779 $165,610,915
(1) MDT LARGE CAP GROWTH FUND WAS REORGANIZED INTO FEDERATED MDT LARGE CAP
GROWTH FUND AS OF THE CLOSE OF BUSINESS ON DECEMBER 8, 2006. PRIOR TO THE
REORGANIZATION, FEDERATED MDT LARGE CAP GROWTH FUND HAD NO INVESTMENT
OPERATIONS. FEDERATED MDT LARGE CAP GROWTH FUND IS THE SUCCESSOR TO MDT LARGE
CAP GROWTH FUND.
(2) Non-income producing security.
(3) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of total net
assets ($165,610,915) at July 31, 2006.
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS & LIABILITIES
JULY 31, 2006 (UNAUDITED)
*---------------------------- -- --
FEDERATED FEDERATED MDT
LARGE CAP LARGE CAP PRO FORMA PROFORMA
GROWTH FUND GROWTH FUND (A) ADJUSTMENT COMBINED
Assets:
Investments in securities, at value $169,800,551 $655,995 $0 $170,456,546
Cash 0 14,959 0 14,959
Income receivable 38,958 204 0 39,162
Receivable for investments sold 0 13,088 0 13,088
Receivable for shares sold 47,010 0 0 47,010
Total assets 169,886,519 684,246 0 170,570,765
LIABILITIES:
Payable for investments purchased 4,402,242 41,005 0 4,443,247
Payable to bank 563 0 0 563
Payable for shares redeemed 138,611 0 0 138,611
Payable for Directors'/Trustees' fees 0 122 0 122
Payable for distribution services fees
65,843 315 0 66,158
Payable for shareholder services fees
13,448 0 0 13,448
Accrued expenses 289,676 8,025 0 297,701
Total liabilities 4,910,383 49,467 0 4,959,850
NET ASSETS $164,976,136 $634,779 $0 $165,610,915
NET ASSETS CONSIST OF:
Paid-in capital $567,828,661 $632,723 $0 $568,461,384
Net unrealized appreciation (depreciation) of investments
8,181,958 (13,048) 0 8,168,910
Accumulated net realized gain (loss) on investments
(409,960,541) 15,104 0 (409,945,437)
Undistributed net investment income (loss)
(1,073,942) 0 0 (1,073,942)
Total Net Assets $164,976,136 $634,779 $0 $165,610,915
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
NET ASSETS $0 $305,327 $0 $305,327
SHARES OUTSTANDING 0 29,927 0 29,927
NET ASSET VALUE PER SHARE $0.00 $10.20 $10.20
OFFERING PRICE PER SHARE $0.00 $10.20 $10.20
REDEMPTION PROCEEDS PER SHARE $0.00 $10.20 $10.20
CLASS A SHARES:
NET ASSETS $94,837,485 $182,542 $0 $95,020,027
SHARES OUTSTANDING 11,875,574 17,950 (2,550,354) (f) 9,343,170
NET ASSET VALUE PER SHARE $7.99 $10.17 $10.17
OFFERING PRICE PER SHARE $8.46 (b) $10.76 (b) $10.76 (b)
REDEMPTION PROCEEDS PER SHARE $7.99 $10.17 $10.17
CLASS B SHARES:
NET ASSETS $60,091,176 $0 $0 $60,091,176
SHARES OUTSTANDING 7,932,663 0 (2,041,371) (f) 5,891,292
NET ASSET VALUE PER SHARE $7.58 $0.00 $10.20
OFFERING PRICE PER SHARE $7.58 $0.00 $10.20
REDEMPTION PROCEEDS PER SHARE $7.16 (c) $0.00 $10.79 (c)
CLASS C SHARES:
NET ASSETS $10,047,475 $146,910 $0 $10,194,385
SHARES OUTSTANDING 1,326,436 14,549 (331,636) (f) 1,009,349
NET ASSET VALUE PER SHARE $7.57 $10.10 $10.10
OFFERING PRICE PER SHARE $7.65 (d) $10.10 $10.10
REDEMPTION PROCEEDS PER SHARE $7.49 (e) $10.00 (e) $10.00 (e)
Investments, at identified cost $161,618,593 $669,043 $0 $162,287,636
(a) MDT Large Cap Growth Fund was reorganized into Federated MDT Large Cap
Growth Fund as of the close of business on December 8, 2006. Prior to the
Reorganization, Federated MDT Large Cap Growth Fund had no investment
operations. Federated MDT Large Cap Growth Fund is the successor to MDT Large
Cap Growth Fund.
(b) Computation of offering price per share: 100/94.5 of net asset value.
(c) Computation of redemption proceeds per share: 94.5/100 of net asset value.
(d) Computation of offering price per share: 100/99 of net asset value.
(e) Computation of redemption proceeds per share: 99/100 of net asset value.
(f) Adjustment to reflect share balance as a result of combination.
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
PERIOD ENDED JULY 31, 2006* (UNAUDITED)
FEDERATED FEDERATED MDT
LARGE CAP LARGE CAP PRO FORMA PRO FORMA
GROWTH FUND GROWTH FUND** ADJUSTMENT COMBINED
*--------------------------------------------------
Investment Income:
Dividends $1,656,245 $3,660 $0 $1,659,905
Interest 88,614 590 0 89,204
TOTAL INVESTMENT INCOME: 1,744,859 4,250 0 1,749,109
EXPENSES:
Investment advisory fee 1,263,718 2,936 0 1,266,654
Administrative personnel and services fee 201,643 9,879 (33,153) (a) 178,369
Custodian fees 10,267 5,290 36,849 (b) 52,406
Transfer and dividend disbursing agent fees and expenses
506,249 2,469 (375,175) (c) 133,543
Directors'/Trustees' fees 2,593 408 33,220 (d) 36,221
Auditing fees 23,518 16,067 (17,085) (e) 22,500
Legal fees 6,019 5,609 1,872 (f) 13,500
Portfolio accounting fees 70,522 3,405 43,592 (g) 117,519
Distribution services fee - Class A Shares 233,678 128 0 233,806
Distribution services fee - Class B Shares 485,148 0 0 485,148
Distribution services fee - Class C Shares 77,536 206 25,840 (h) 103,582
Shareholder services fee- Class B Shares 161,716 0 0 161,716
Shareholder services fee- Class C Shares 25,003 0 (25,003) (i) 0
Share registration costs 41,509 41,088 (20,945) (j) 61,652
Printing and postage 16,687 261 9,429 (k) 26,377
Insurance premiums 7,602 46 5,693 (l) 13,341
Miscellaneous 3,951 79 1,261 (m) 5,291
TOTAL EXPENSES 3,137,359 87,871 (313,605) 2,911,625
WAIVERS--
Waiver of investment adviser fee (4,117) (2,936) 7,053 (n) 0
Waiver of administrative personnel and services fee (42,234) (9,428) 42,234 (o) (9,428)
Waiver of custodian fees 0 (202) 0 (202)
Waiver of transfer and dividend disbursing agent fees and expenses
0 (1,591) 0 (1,591)
Waiver of portfolio accounting fees 0 (2,661) 0 (2,661)
REIMBURSEMENT --
Reimbursement of other operating expenses
0 (63,805) 63,805 (p) 0
FEES PAID INDIRECTLY FROM DIRECTED BROKERAGE ARRANGEMENTS (16,659) 0 16,659 (q) 0
TOTAL WAIVERS, REIMBURSEMENT AND EXPENSE REDUCTION (63,010) (80,623) 129,751 (13,882)
NET EXPENSES 3,074,349 7,248 (183,854) 2,897,743
NET INVESTMENT INCOME(LOSS) ($1,329,490) ($2,998) $183,854 ($1,148,634)
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS:
Net realized gain on investments 14,961,489 18,102 0 14,979,591
Net change in unrealized appreciation (depreciation) of investments
(20,167,865) (13,048) 0 (20,180,913)
Net realized and unrealized gain on investments (5,206,376) 5,054 0 (5,201,322)
Change in net assets resulting from operations ($6,535,866) $2,056 $183,854 ($6,349,956)
* Reflects operations for the period from September 15, 2005 to July 31, 2006.
** MDT Large Cap Growth Fund was reorganized into Federated MDT Large Cap Growth
Fund as of the close of business on December 8, 2006. Prior to the
reorganization, Federated MDT Large Cap Growth Fund had no investment
operations. Federated MDT Large Cap Growth Fund is the successor to MDT Large
Cap Growth Fund.
(See Notes to Pro Forma Financial Statements)
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JULY 31, 2006 (UNAUDITED)
NOTE 1. DESCRIPTION OF THE FUND
Federated Large Cap Growth Fund, a series of Federated Equity Funds, is
registered under the Investment Company Act of 1940, as amended (the "Act), as
an open-end management investment company. Federated Large Cap Growth Fund
consists of three classes of shares: Class A Shares, Class B Shares and Class C
Shares.
Federated MDT Large Cap Growth Fund, a series of Federated MDT Series, is
registered under the Act as an open-end, management investment company. MDT
Large Cap Growth Fund (the "Predecessor Fund") was reorganized into Federated
MDT Large Cap Growth Fund as of the close of business on December 8, 2006.
Prior to the reorganization, the Federated MDT Large Cap Growth Fund had no
investment operations. Federated MDT Large Cap Growth Fund is the successor to
the Predecessor Fund, which commenced operations on September 15, 2005. For
the purposes of these Pro Forma Financial Statements, the financial information
covers the period from September 15, 2005 (date of initial public investment of
the Predecessor Fund) to July 31, 2006. Federated MDT Large Cap Growth Fund
consists of four classes of shares: Class A Shares, Class B Shares, Class C
Shares and Institutional Shares.
NOTE 2. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of Federated Large Cap Growth Fund
and Federated MDT Large Cap Growth Fund (individually referred to as the
"Fund", or collectively as the "Funds"), for the period ended July 31, 2006.
These statements have been derived from the books and records utilized in
calculating daily net asset values at July 31, 2006.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of Federated Large Cap Growth Fund and Federated
MDT Large Cap Growth Fund which have been incorporated by reference in the
Statement of Additional Information. The Funds follow generally accepted
accounting principles in the United States of America applicable to management
investment companies which are disclosed in the historical financial statements.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Class A, Class B Shares and Class C Shares of Federated Large Cap
Growth Fund for Class A Shares, Class B Shares and Class C Shares of Federated
MDT Large Cap Growth Fund. Under generally accepted accounting principles,
Federated MDT Large Cap Growth Fund will be the surviving entity for accounting
purposes with its historical cost of investment securities and results of
operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the investment
advisory fee arrangement for the surviving entity. Certain other operating
costs have also been adjusted to reflect anticipated expenses of the combined
entity. Other costs which may change as a result of the reorganization are
currently undeterminable.
For the period ended July 31, 2006, Federated Large Cap Growth Fund and
Federated MDT Large Cap Growth Fund paid investment advisory fees computed at
the annual rate of 0.75% as a percentage of average daily net assets.
All costs with respect to the exchange will be borne by Federated
Investors, Inc. and its affiliates.
8
NOTE 3. PORTFOLIO VALUATION
Market values of each Fund's portfolio securities are determined as follows:
{circle}for equity securities, according to the last sale price or official
closing price reported in the market in which they are primarily traded
(either a national securities exchange or the over-the-counter market), if
available;
{circle}in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
{circle}futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of
trading on such exchanges. Options traded in the over-the-counter market
are generally valued according to the mean between the last bid and the
last asked price for the option as provided by an investment dealer or
other financial institution that deals in the option. The Board of
Trustees (the "Trustees") may determine in good faith that another method
of valuing such investments is necessary to appraise their fair market
value;
{circle}prices for total return swaps are furnished by an independent pricing
service and are based upon a valuation model incorporating underlying
reference indexes, interest rates, yield curves and other market data or
factors. Prices for credit default swaps are furnished by an independent
pricing service and are based upon a valuation model incorporating default
probabilities, recovery rates and other market data or factors;
{circle}for mortgage-backed securities, based on the aggregate investment value
of the projected cash flows to be generated by the security, as furnished
by an independent pricing service;
{circle}for investments in other open-end regulated investment companies, based
on net asset value (NAV);
{circle}for other fixed-income securities, according to prices as furnished by
an independent pricing service, except that fixed-income securities with
remaining maturities of less than 60 days at the time of purchase are
valued at amortized cost; and
{circle}for all other securities at fair value as determined in accordance with
procedures established by and under the general supervision of the
Trustees.
Prices for fixed-income securities furnished by a pricing service may be based
on a valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Such prices (other than prices of
mortgage-backed securities) are generally intended to be indicative of the bid
prices currently offered to institutional investors for the securities, except
that prices for corporate fixed-income and asset-backed securities traded in the
United States are generally intended to be indicative of the mean between such
bid prices and asked prices. The Trustees have approved the use of such pricing
services. A number of pricing services are available, and the Fund may use
various pricing services or discontinue the use of any pricing service.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities using the latest closing price on the exchange on
which they are traded immediately prior to the closing of the NYSE. Certain
foreign currency exchange rates are generally determined at the latest rate
prior to the closing of the NYSE. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at current rates. Events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Trustees, although the actual
calculation may be done by others.
8
NOTE 4. SHARES OF BENEFICIAL INTEREST
The Pro Forma Class A Shares, Class B Shares and Class C Shares net asset value
per share assumes the issuance of 9,325,220 Class A Shares, 5,891,292 Class B
Shares and 994,800 Class C Shares, respectively, of Federated MDT Large Cap
Growth Fund in exchange for 11,875,574 Class A Shares, 7,932,663 Class B Shares
and 1,326,436 Class C Shares of Federated Large Cap Growth Fund which would have
been outstanding at July 31, 2006 in connection with the proposed
reorganization, assuming the two Funds had been combined.
NOTE 5. FEDERAL INCOME TAXES
Each Fund has elected to be taxed as a "regulated investment company" under the
Internal Revenue Code. After the acquisition, Federated MDT Large Cap Growth
Fund intends to continue to qualify as a regulated investment company, if such
qualification is in the best interests of its shareholders, by complying with
the Subchapter M provision of the Internal Revenue Code and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provision for federal income tax is necessary.
The identified cost of investments for the funds is substantially the same for
both financial accounting and federal income tax purposes. The tax cost of
investments will remain unchanged for the combined fund.
NOTE 6. PRO FORMA ADJUSTMENTS
(a) Effective July 15, 2005, Federated Administrative Services (FAS), under the
Administrative Services Agreement, provides Federated MDT Large Cap Growth Fund
with certain administrative personnel and services necessary to operate the
Fund. The fee paid to FAS is based on the average aggregate daily net assets of
certain Federated funds. The administrative fee received during any fiscal year
shall be at least $150,000 per portfolio and $40,000 per each additional class
of Shares. Under a similar plan, FAS provides Federated Large Cap Growth Fund
with certain administrative personnel and services necessary to operate the
Fund. Prior to July 15, 2005, a previous administrator provided administrative
services to Federated MDT Large Cap Growth Fund. An adjustment to the combined
administrative personnel and services fee reflects the fee structure of
Federated MDT Large Cap Growth Fund to the Federated MDT Pro Forma Combined
Fund's average daily net assets.
(b) Adjustment to reflect custodian fees resulting from combining two Funds
into one.
(c) Adjustment to reflect transfer and dividend disbursing agent fees and
expenses resulting from combining two Funds into one.
(d) Adjustment to reflect directors'/trustees' fees resulting from combining
two Funds into one.
(e) Adjustment to reflect auditing fees resulting from combining two Funds into
one.
(f) Adjustment to reflect legal fees resulting from combining of two Funds into
one.
(g) Adjustment to reflect portfolio accounting fees resulting from combining
two Funds into one.
(h) Under a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the
Act, Federated MDT Large Cap Growth Fund may incur distribution expenses of
0.25% and 0.75% of the daily net assets of the Fund's Class A Shares and Class C
Shares, respectively, to compensate Federated Securities Corp. (FSC), the
principal distributor. Prior to the reorganization of the Fund on December 8,
2006, the Predecessor Fund incurred distribution expenses of 0.25% and 1.00% of
the daily net assets of the Fund's Class A Shares and Class C Shares,
respectively. FSC may voluntarily choose to waive any portion of its fee.
Under a similar plan, Federated Large Cap Growth Fund may incur distribution
expenses up to 0.25% of the Class A Shares and 0.75% of the Class C Shares
average daily net assets. Adjustment is to apply the expense structure of
Federated MDT Large Cap Growth Fund to the average daily net assets of the
Federated MDT Pro Forma Combined Fund.
(i) Effective December 11, 2006, under the terms of a Shareholder Services
Agreement, Federated MDT Large Cap Growth Fund may pay fees up to 0.25% of the
average daily net assets of Fund's Class A and Class C shares to financial
intermediaries or to Federated Shareholder Services Company (FSSC). Prior to
the reorganization, the Predecessor Fund did not incur a shareholder services
fee. Under a similar plan, Federated Large Cap Growth Fund may pay fees up to
0.25% of the average daily net assets of Fund's Class A and Class C shares to
financial intermediaries or to FSSC. FSSC or these financial intermediaries may
voluntarily choose to waive any portion of their fee. Adjustment is to apply
the expense structure of Federated MDT Large Cap Growth Fund to the average
daily net assets of the Federated MDT Pro Forma Combined Fund.
(j) Adjustment to reflect share registration costs resulting from combining two
Funds into one.
(k) Adjustment to reflect share printing and postage resulting from combining
two Funds into one.
(l) Adjustment to reflect share insurance premiums resulting from combining two
Funds into one.
(m) Adjustment to reflect share miscellaneous expenses resulting from combining
two Funds into one.
(n) Under the investment advisory contract, Federated MDTA LLC (the "Adviser")
is contractually obligated to waive, to the extent of its adviser fee, the
amount, if any, in order to limit the aggregate annual operating expenses
(excluding interest, taxes and brokerage commissions) for the Federated MDT
Large Cap Growth Fund's Class A Shares, Class C Shares and Institutional Shares
to not more than 2.05%, 2.80% and 1.80%, respectively, of average daily net
assets. The Adviser has agreed to keep these contractual limitations in place
through December 8, 2008. In addition, the Advisor may also voluntarily choose
to waive a portion of its fee and/or reimburse certain operating expenses of the
Federated MDT Large Cap Growth Fund. The Advisor can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion. An
adjustment to the combined waiver of investment adviser fee reflects the
application of the fee structure of Federated MDT Large Cap Growth Fund to the
Federated MDT Pro Forma Combined Fund's average daily net assets.
(o) Effective July 15, 2005, FAS contractually agreed to waive the portion of
its fee which it would otherwise be entitled to receive from the Fund under the
Agreement. The level of fees payable by the Fund to FAS for the period will not
exceed the level of fees which the Fund would have paid during the period to its
previous service provider under its previous administrative services agreement.
In addition, FAS may voluntarily choose to waive any portion of its fee. FAS can
modify or terminate its voluntary waiver at any time at its sole discretion. An
adjustment to the combined waiver of administrative personnel and services fee
reflects the application of the fee structure of the Federated MDT Large Cap
Growth Fund to the Federated MDT Pro Forma Combined Fund's average daily net
assets.
(p) Adjustment to reflect reimbursement of other operating expenses resulting
from combining two Funds into one.
(q) Federated Large Cap Growth Fund directs portfolio trades to a broker that
in turn pays a portion of the Fund's operating expenses. Federated MDT Large
Cap Growth Fund does not utilize this type of brokerage arrangements. This
adjustment reflects the reduction of fees paid indirectly from directed
brokerage arrangement.
8
PRO FORMA FINANCIAL STATEMENTS FOR THE PERIOD ENDED JANUARY 31, 2007
INTRODUCTION
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of Federated Large Cap Growth Fund
and Federated MDT Large Cap Growth Fund (individually referred to as the "Fund"
or collectively as the "Funds"), for the six months ended January 31, 2007.
These statements have been derived from the books and records utilized in
calculating daily net asset values at January 31, 2007.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Class A Shares, Class B Shares and Class C Shares of Federated Large
Cap Growth Fund for Class A Shares, Class B Shares and Class C Shares of
Federated MDT Large Cap Growth Fund. Under generally accepted accounting
principles, Federated MDT Large Cap Growth Fund will be the surviving entity for
accounting purposes with its historical cost of investment securities and
results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the anticipated
advisory fee arrangement for the surviving entity. Certain other operating costs
have also been adjusted to reflect anticipated expenses of the combined entity.
Other costs which may change as a result of the reorganization are currently
undeterminable.
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
JANUARY 31, 2007 (UNAUDITED)
FEDERATED LARGE CAP FEDERATED MDT LARGE CAP PRO FORMA FEDERATED LARGE CAP FEDERATED MDT LARGE CAP PRO FORMA
GROWTH FUND GROWTH FUND COMBINED GROWTH FUND GROWTH FUND COMBINED
- ---------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE
COMMON STOCKS - 100.0%
- ---------------------------------------
AEROSPACE & DEFENSE - 4.5%
0 759 759 BOEING CO. $0 $67,976 $67,976
-----------------------------
26,000 0 26,000 LOCKHEED MARTIN CORP. 2,526,940 0 2,526,940
-----------------------------
0 186 186 PRECISION CASTPARTS CORP. 0 16,534 16,534
-----------------------------
0 608 608 RAYTHEON CO. 0 31,555 31,555
-----------------------------
66,500 0 66,500 UNITED TECHNOLOGIES CORP. 4,523,330 0 4,523,330
-----------------------------
TOTAL 7,050,270 116,065 7,166,335
AIR FREIGHT & LOGISTICS - 0.0%
0 338 338 FEDEX CORP. 0 37,315 37,315
BEVERAGES - 6.7%
34,000 0 34,000 BROWN-FORMAN CORP., CLASS B 2,230,060 0 2,230,060
99,500 0 99,500 (1)(2)HANSEN NATURAL CORP. 3,789,955 0 3,789,955
70,000 0 70,000 PEPSICO, INC. 4,566,800 0 4,566,800
---------------------------
TOTAL 10,586,815 0 10,586,815
BIOTECHNOLOGY - 7.1%
80,000 0 80,000 (1)AMGEN, INC. 5,629,600 0 5,629,600
26,100 0 26,100 (1)(2)CEPHALON, INC 1,889,901 0 1,889,901
0 229 229 (1)GENENTECH, INC. 0 20,008 20,008
36,700 852 37,552 (1)GILEAD SCIENCES, INC. 2,360,544 54,801 2,415,345
0 203 203 (1)MEDIMMUNE, INC. 0 7,036 7,036
35,100 0 35,100 (1)VERTEX PHARMACEUTICALS, INC. 1,240,785 0 1,240,785
------------------------------
TOTAL 11,120,830 81,845 11,202,675
CAPITAL MARKETS - 1.8%
35,000 0 35,000 MORGAN STANLEY 2,897,650 0 2,897,650
CHEMICALS - 1.4%
0 907 907 MONSANTO CO. 0 49,967 49,967
33,000 0 33,000 PRAXAIR, INC. 2,080,980 0 2,080,980
----------------------------
TOTAL 2,080,980 49,967 2,130,947
COMMERCIAL BANKS - 1.8%
84,500 0 84,500 (2)COMMERCE BANCORP, INC. 2,854,410 0 2,854,410
COMMERCIAL SERVICES & SUPPLIES - 0.0%
0 72 72 CORPORATE EXECUTIVE BOARD CO. 0 6,533 6,533
0 300 300 ROBERT HALF INTERNATIONAL, INC. 0 12,210 12,210
-------------------
TOTAL 0 18,743 18,743
COMMUNICATIONS EQUIPMENT - 3.4%
125,500 0 125,500 (1)CISCO SYSTEMS, INC 3,337,045 0 3,337,045
----------------------------
0 849 849 (1)CORNING, INC. 0 17,693 17,693
----------------------------
91,400 0 91,400 NOKIA OYJ, CLASS A, ADR 2,019,940 0 2,019,940
----------------------------
TOTAL 5,356,985 17,693 5,374,678
COMPUTERS & PERIPHERALS - 4.6%
21,500 424 21,924 (1)APPLE, INC. 1,843,195 36,349 1,879,544
----------------------------
60,800 0 60,800 (1)DELL, INC. 1,474,400 0 1,474,400
----------------------------
167,800 0 167,800 EMC CORP. MASS 2,347,522 0 2,347,522
----------------------------
37,100 0 37,100 HEWLETT-PACKARD CO. 1,605,688 0 1,605,688
----------------------------
0 606 606 (1)NETWORK APPLIANCE, INC. 0 22,786 22,786
----------------------------
TOTAL 7,270,805 59,135 7,329,940
CONSTRUCTION & ENGINEERING - 1.0%
20,000 0 20,000 FLUOR CORP. 1,652,000 0 1,652,000
CONSUMER FINANCE - 2.3%
45,000 0 45,000 CAPITAL ONE FINANCIAL CORP. 3,618,000 0 3,618,000
0 207 207 (1)FIRST MARBLEHEAD CORP. 0 11,261 11,261
0 315 315 SLM CORP. 0 14,477 14,477
----------------------------
TOTAL 3,618,000 25,738 3,643,738
DIVERSIFIED CONSUMER SERVICES - 0.0%
0 81 81 (1)ITT EDUCATIONAL SERVICES, INC. 0 6,286 6,286
DIVERSIFIED FINANCIAL SERVICES - 2.4%
37,000 0 37,000 CIT GROUP, INC. 2,181,520 0 2,181,520
0 58 58 CHICAGO MERCANTILE EXCHANGE HOLDINGS, INC. 0 32,671 32,671
7,200 117 7,317 GOLDMAN SACHS GROUP, INC. 1,527,552 24,823 1,552,375
TOTAL 3,709,072 57,494 3,766,566
ELECTRIC UTILITIES - 1.9%
0 300 300 (1)ALLEGHENY ENERGY, INC. 0 13,956 13,956
----------------------------
65,000 0 65,000 EDISON INTERNATIONAL 2,923,700 0 2,923,700
----------------------------
TOTAL 2,923,700 13,956 2,937,656
ELECTRONIC EQUIPMENT - 0.0%
0 112 112 (1)THOMAS & BETTS CORP. 0 5,364 5,364
-----------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.0%
0 185 185 AMPHENOL CORP., CLASS A 0 12,528 12,528
-------------------
ENERGY EQUIPMENT & SERVICES - 2.0%
0 193 193 (1)CAMERON INTERNATIONAL CORP. 0 10,132 10,132
0 244 244 (1)NATIONAL-OILWELL, INC. 0 14,796 14,796
0 1,170 1,170 SCHLUMBERGER LTD. 0 74,283 74,283
0 44 44 (1)SEACOR HOLDINGS, INC. 0 4,454 4,454
0 95 95 TIDEWATER, INC. 0 4,899 4,899
19,800 0 19,800 (1)TRANSOCEAN SEDCO FOREX, INC. 1,531,926 0 1,531,926
37,100 0 37,100 (1)WEATHERFORD INTERNATIONAL LTD. 1,498,098 0 1,498,098
TOTAL 3,030,024 108,564 3,138,588
FOOD & STAPLES RETAILING - 0.1%
0 1,515 1,515 WAL-MART STORES, INC. 0 72,250 72,250
HEALTH CARE EQUIPMENT & SUPPLIES - 4.1%
56,900 0 56,900 BAXTER INTERNATIONAL, INC. 2,825,654 0 2,825,654
0 82 82 HILLENBRAND INDUSTRIES, INC. 0 4,675 4,675
0 108 108 (1)KINETIC CONCEPTS, INC. 0 5,313 5,313
69,500 0 69,500 MEDTRONIC, INC. 3,714,775 0 3,714,775
---------------------------
TOTAL 6,540,429 9,988 6,550,417
HEALTH CARE PROVIDERS & SERVICES - 5.0%
0 238 238 AETNA, INC. 0 10,034 10,034
36,500 0 36,500 CARDINAL HEALTH, INC. 2,606,830 0 2,606,830
0 278 278 (1)COVENTRY HEALTH CARE, INC. 0 14,331 14,331
----------------------------
0 146 146 (1)DAVITA, INC. 0 7,972 7,972
28,800 0 28,800 (1)EXPRESS SCRIPTS, INC., CLASS A 2,002,176 0 2,002,176
53,100 0 53,100 (1)MEDCO HEALTH SOLUTIONS, INC. 3,144,051 0 3,144,051
----------------------------
0 719 719 UNITEDHEALTH GROUP, INC. 0 37,575 37,575
----------------------------
TOTAL 7,753,057 69,912 7,822,969
HOTELS, RESTAURANTS & LEISURE - 1.0%
36,600 0 36,600 MCDONALD'S CORP. 1,623,210 0 1,623,210
0 250 250 (1)WYNN RESORTS LTD. 0 27,935 27,935
----------------------------
TOTAL 1,623,210 27,935 1,651,145
HOUSEHOLD PRODUCTS - 2.0%
45,200 0 45,200 COLGATE-PALMOLIVE CO. 3,087,160 0 3,087,160
----------------------------
0 590 590 KIMBERLY-CLARK CORP. 0 40,946 40,946
----------------------------
TOTAL 3,087,160 40,946 3,128,106
IT SERVICES - 2.8%
0 169 169 (1)ALLIANCE DATA SYSTEMS CORP. 0 11,480 11,480
25,000 233 25,233 (1)COGNIZANT TECHNOLOGY SOLUTIONS CORP. 2,132,250 19,873 2,152,123
57,100 0 57,100 PAYCHEX, INC. 2,284,571 0 2,284,571
TOTAL 4,416,821 31,353 4,448,174
INDUSTRIAL CONGOLMERATES - 5.4%
0 474 474 3M CO. 0 35,218 35,218
179,700 2,049 181,749 GENERAL ELECTRIC CO. 6,478,185 73,866 6,552,051
0 95 95 (1)MCDERMOTT INTERNATIONAL, INC. 0 4,906 4,906
19,800 189 19,989 TEXTRON, INC. 1,844,766 17,609 1,862,375
TOTAL 8,322,951 131,599 8,454,550
INSURANCE - 2.5%
0 389 389 AFLAC, INC. 0 18,520 18,520
22,300 0 22,300 AMBAC FINANCIAL GROUP, INC. 1,964,630 0 1,964,630
37,400 0 37,400 RENAISSANCERE HOLDINGS LTD. 1,992,298 0 1,992,298
----------------------------
TOTAL 3,956,928 18,520 3,975,448
INTERNET & CATALOG RETAIL - 1.3%
52,600 0 52,600 (1)(2)AMAZON.COM, INC. 1,981,442 0 1,981,442
INTERNET SOFTWARE & SERVICES - 3.3%
0 2,224 2,224 (1)EBAY, INC. 0 72,035 72,035
10,100 0 10,100 (1)(2)GOOGLE INC. 5,063,130 0 5,063,130
----------------------------
TOTAL 5,063,130 72,035 5,135,165
MACHINERY - 0.0%
0 229 229 DOVER CORP. 0 11,358 11,358
0 1,117 1,117 ILLINOIS TOOL WORKS, INC. 0 56,956 56,956
-------------------
TOTAL 0 68,314 68,314
MEDIA - 2.3%
0 1,048 1,048 (1)DIRECTV GROUP, INC. 0 25,561 25,561
152,600 1,842 154,442 NEWS CORP., INC. 3,547,950 42,827 3,590,777
----------------------------
TOTAL 3,547,950 68,388 3,616,338
MULTI-LINE RETAIL- 3.2%
51,600 0 51,600 FAMILY DOLLAR STORES, INC. 1,671,840 0 1,671,840
----------------------------
0 824 824 (1)KOHL'S CORP. 0 58,430 58,430
----------------------------
0 301 301 PENNEY (J.C.) CO., INC. 0 24,453 24,453
----------------------------
54,800 0 54,800 TARGET CORP. 3,362,528 0 3,362,528
----------------------------
TOTAL 5,034,368 82,883 5,117,251
OIL, GAS & CONSUMABLE FUELS - 2.1%
24,500 0 24,500 APACHE CORP. 1,787,765 0 1,787,765
-------------------------
51,100 0 51,100 CHESAPEAKE ENERGY CORP. 1,513,071 0 1,513,071
-------------------------
TOTAL 3,300,836 0 3,300,836
PHARMACEUTICALS - 5.9%
0 1,318 1,318 ELI LILLY & CO. 0 71,330 71,330
22,800 162 22,962 (1)FOREST LABORATORIES, INC., CLASS A 1,279,308 9,090 1,288,398
66,200 106 66,306 JOHNSON & JOHNSON 4,422,160 7,081 4,429,241
36,000 0 36,000 ROCHE HOLDING AG, ADR 3,397,500 0 3,397,500
0 2,101 2,101 SCHERING PLOUGH CORP. 0 52,525 52,525
0 149 149 (1)SEPRACOR, INC. 0 8,502 8,502
TOTAL 9,098,968 148,528 9,247,496
ROAD & RAIL - 2.1%
0 394 394 BURLINGTON NORTHERN SANTA FE CORP. 0 31,662 31,662
90,000 0 90,000 CSX CORP. 3,311,100 0 3,311,100
---------------------------
0 401 401 NORFOLK SOUTHERN CORP. 0 19,910 19,910
---------------------------
TOTAL 3,311,100 51,572 3,362,672
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 4.9%
63,400 0 63,400 (1)BROADCOM CORP. 2,023,728 0 2,023,728
0 167 167 KLA-TENCOR CORP. 0 8,221 8,221
54,800 0 54,800 LINEAR TECHNOLOGY CORP. 1,696,060 0 1,696,060
121,200 0 121,200 (1)(2)MARVELL TECHNOLOGY GROUP LTD. 2,216,748 0 2,216,748
58,600 223 58,823 (1)NVIDIA CORP. 1,796,090 6,835 1,802,925
0 64 64 (1)VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC. 0 2,634 2,634
TOTAL 7,732,626 17,690 7,750,316
SOFTWARE - 6.9%
97,300 0 97,300 (1)ACTIVISION, INC. 1,657,019 0 1,657,019
80,100 0 80,100 (1) AMDOCS LTD. 2,777,868 0 2,777,868
0 274 274 (1)AUTODESK, INC. 0 11,979 11,979
69,600 0 69,600 (1) CITRIX SYSTEMS, INC. 2,204,232 0 2,204,232
0 747 747 (1)ELECTRONIC ARTS, INC. 0 37,350 37,350
0 54 54 FACTSET RESEARCH SYSTEMS 0 3,136 3,136
------------------------------
138,300 0 138,300 MICROSOFT CORP. 4,267,938 0 4,267,938
------------------------------
TOTAL 10,907,057 52,465 10,959,522
SPECIALTY RETAIL - 2.6%
30,000 0 30,000 ABERCROMBIE & FITCH CO., CLASS A 2,386,200 0 2,386,200
0 158 158 (1)CARMAX, INC. 0 9,074 9,074
31,000 0 31,000 (1)GAMESTOP CORP. 1,656,330 0 1,656,330
0 56 56 (1)GUESS?, INC. 0 4,038 4,038
----------------------------
0 442 442 STAPLES, INC. 0 11,368 11,368
----------------------------
TOTAL 4,042,530 24,480 4,067,010
TEXTILES, APPAREL & LUXURY GOODS - 1.6 %
53,800 703 54,503 (1)COACH, INC. 2,467,268 32,240 2,499,508
0 107 107 POLO RALPH LAUREN CORP., CLASS A 0 8,779 8,779
TOTAL 2,467,268 41,019 2,508,287
TOTAL COMMON STOCKS (IDENTIFIED COST $136,800,154) 156,339,372 1,640,570 157,979,942
REPURCHASE AGREEMENTS - 10.5%
------
$383,000 $0 $383,000 BANK OF AMERICA N.A., 5.29%, DATED 1/31/2007, DUE 2/1/2007 383,000 0 383,000
8,000,000 0 8,000,000 BEAR STEARNS AND CO., INC., 5.29%, DATED 1/31/2007, DUE 2/1/2007 8,000,000 0 8,000,000
(PURCHASED WITH PROCEEDS FROM SECURITIES LENDING COLLATERAL)
8,187,000 0 8,187,000 ING FINANCIAL MARKETS LLC, 5.29%, DATED 1/31/2007, DUE 2/1/2007 8,187,000 0 8,187,000
(PURCHASED WITH PROCEEDS FROM SECURITIES LENDING COLLATERAL)
TOTAL REPURCHASE AGREEMENTS (AT COST) 16,570,000 0 16,570,000
TOTAL INVESTMENTS - 110.5% (IDENTIFIED COST $153,370,154)(3) 172,909,372 1,640,570 174,549,942
OTHER ASSETS AND LIABILITIES - (10.5)% (16,539,870) (58,632) (16,598,502)
TOTAL NET ASSETS - 100% 156,369,502 1,581,938 157,951,440
(1) Non-income producing security.
(2) All or a portion of these securities are temporarily on loan to unaffiliated
broker/dealers. As of January 31, 2007, securities subject to this type of
arrangement and related collateral were as follows:
MARKET VALUE OF MARKET VALUE
SECURITIES LOANED COLLATERAL
$15,666,340 $16,187,000
(3) Also represents cost for federal tax purposes.
Note:The categories of investments are shown as a percentage of total net assets
($157,951,440) at January 31, 2007.
The following acronym is used throughout this portfolio:
ADR - American Depositary Receipt
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS & LIABILITIES
JANUARY 31, 2007 (UNAUDITED)
FEDERATED FEDERATED
MDT
LARGE CAP LARGE CAP PRO FORMA PROFORMA
GROWTH FUND GROWTH FUND ADJUSTMENT COMBINED
ASSETS:
Investments in repurchase agreements $16,570,000 $0 $0 $16,570,000
Investments in securities 156,339,372 1,640,570 0 157,979,942
Total investments in securities, at value 172,909,372 1,640,570 0 174,549,942
Cash 6,052 18,072 0 24,124
Income receivable 54,715 249 0 54,964
Receivable for investments sold 0 95,940 0 95,940
Receivable for shares sold 8,329 0 0 8,329
Total assets 172,978,468 1,754,831 0 174,733,299
LIABILITIES:
Payable for investments purchased 0 95,334 0 95,334
Payable for shares redeemed 167,624 0 0 167,624
Payable for securities lending 16,187,000 0 0 16,187,000
Payable for administrative personnel and services fee
0 31,822 0 31,822
Payable for transfer and dividend disbursing agent fees and
expenses 55,083 20,423 0 75,506
Payable for Directors'/Trustees' fees 0 1,048 0 1,048
Payable for audit fees 5,373 20,935 0 26,308
Payable for distribution services fees 72,250 1,360 0 73,610
Payable for shareholder services fees 5,362 289 0 5,651
Accrued expenses 116,274 1,682 0 117,956
Total liabilities 16,608,966 172,893 0 16,781,859
NET ASSETS $156,369,502 $1,581,938 0 $157,951,440
NET ASSETS CONSIST OF:
Paid-in capital $541,470,370 $1,479,017 $0 $542,949,387
Net unrealized appreciation (depreciation) of investments
21,095,066 84,722 0 21,179,788
Accumulated net realized gain (loss) on investments 20,449 0
(404,579,593) (404,559,144)
Undistributed net investment income (loss) (1,616,341) (2,250) 0 (1,618,591)
Total Net Assets $156,369,502 $1,581,938 $0 $157,951,440
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE
INSTITUTIONAL SHARES:
NET ASSETS $0 $775,153 $0 $775,153
SHARES OUTSTANDING 0 68,208 0 68,208
NET ASSET VALUE PER SHARE $0 $11.36 $11.36
OFFERING PRICE PER SHARE $0 $11.36 $11.36
REDEMPTION PROCEEDS PER SHARE $0 $11.36 $11.36
CLASS A SHARES:
NET ASSETS $91,308,962 $578,232 $0 $91,887,194
SHARES OUTSTANDING 10,220,933 51,107 (2,147,638) (e) 8,124,402
NET ASSET VALUE PER SHARE $8.93 $11.31 $11.31
OFFERING PRICE PER SHARE $9.45 (a) $11.97 (a) $11.97 (a)
REDEMPTION PROCEEDS PER SHARE $8.93 $11.31 $11.31
CLASS B SHARES:
NET ASSETS $55,772,747 $0 $0 $55,772,747
SHARES OUTSTANDING 6,606,500 0 (1,696,927) (e) 4,909,573
NET ASSET VALUE PER SHARE $8.44 $0.00 $11.36
OFFERING PRICE PER SHARE $8.44 $0.00 $11.36
REDEMPTION PROCEEDS PER SHARE $7.98 (b) $0.00 $12.02 (b)
CLASS C SHARES:
NET ASSETS $9,287,793 $228,553 $0 $9,516,346
SHARES OUTSTANDING 1,100,117 20,426 (270,109) (e) 850,434
NET ASSET VALUE PER SHARE $8.44 $11.19 $11.19
OFFERING PRICE PER SHARE $8.53 (c) $11.30 (c) $11.30
REDEMPTION PROCEEDS PER SHARE $8.36 (d) $11.08 (d) $11.08 (d)
Investments, at identified cost $151,814,306 $1,555,848 $0 $153,370,154
(a) Computation of offering price per share 100/94.5 of net asset value.
(b) Computation of redemption proceeds per share 94.5/100 of net asset value.
(c) Computation of offering price per share 100/99 of net asset value.
(d) Computation of redemption proceeds per share 99/100 of net asset value.
(e) Adjustment to reflect share balance as a result of combination.
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 2007 (UNAUDITED)
FEDERATED FEDERATED MDT
LARGE CAP LARGE CAP PRO FORMA PRO FORMA
GROWTH FUND GROWTH FUND* ADJUSTMENT COMBINED
INVESTMENT INCOME:
Dividends $905,097 $6,109 $0 $911,206
Interest 50,596 338 0 50,934
TOTAL INVESTMENT INCOME: 955,693 6,447 0 962,140
EXPENSES:
Investment advisory fee 610,130 4,219 0 614,349
Administrative personnel and services fee 115,946 115,946 (95,782) (a) 136,110
Custodian fees 5,495 11,737 (11,152) (b) 6,080
Transfer and dividend disbursing agent fees and expenses 250,403 32,955 0 283,358
Directors'/Trustees' fees 1,553 734 (686) (c) 1,601
Auditing fees 12,473 7,310 (12,473) (d) 7,310
Legal fees 6,130 4,538 (5,627) (e) 5,041
Portfolio accounting fees 35,864 34,777 (27,484) (f) 43,157
Distribution services fee - Class A Shares 117,895 378 (42,992) (g) 75,281
Distribution services fee - Class B Shares 220,135 0 0 220,135
Distribution services fee - Class C Shares 36,310 860 8,252 (g) 45,422
Shareholder services fee- Class A Shares 0 215 43,834 (h) 44,049
Shareholder services fee- Class B Shares 73,379 0 0 73,379
Shareholder services fee- Class C Shares 10,701 74 (6,879) (h) 3,896
Share registration costs 24,096 22,519 (15,774) (i) 30,841
Printing and postage 35,078 9,149 (14,384) (j) 29,843
Insurance premiums 4,050 3,413 (4,050) (k) 3,413
Miscellaneous 2,050 1,929 (2,050) (l) 1,929
TOTAL EXPENSES 1,561,688 250,753 (187,247) 1,625,194
WAIVERS--
Waiver of investment adviser fee (729) (4,219) (11,098) (m) (16,046)
Waiver of administrative personnel and services fee (21,871) (84,110) 16,825 (n) (89,156)
Waiver of transfer and dividend disbursing agent fees and 0 (12,933) 0 (12,933)
expenses
Waiver of portfolio accounting fees 0 (21,423) 0 (21,423)
REIMBURSEMENT --
Reimbursement of other operating expenses 0 (119,371) 119,371 (o) 0
FEES PAID INDIRECTLY FROM DIRECTED BROKERAGE ARRANGEMENTS (51,228) 0 51,228 (p) 0
TOTAL WAIVERS, REIMBURSEMENTS AND EXPENSE REDUCTION (73,828) (242,056) 176,326 (139,558)
NET EXPENSES 1,487,860 8,697 (10,921) 1,485,636
NET INVESTMENT INCOME (LOSS) ($532,167) ($2,250) $10,921 ($523,496)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 5,380,948 21,561 0 5,402,509
Net change in unrealized appreciation of investments 12,913,108 97,770 0 13,010,878
Net realized and unrealized gain on investments 18,294,056 119,331 0 18,413,387
Change in net assets resulting from operations $17,761,889 $117,081 $10,921 $17,889,891
* MDT Large Cap Growth Fund was reorganized into Federated MDT Large Cap
Growth Fund as of the close of business on December 8, 2006.
Prior to the Reorganization, Federated MDT Large Cap Growth Fund had no
investment operations. Federated MDT Large Cap Growth Fund is the successor to
MDT Large Cap Growth Fund.
(See Notes to Pro Forma Financial Statements)
8
FEDERATED LARGE CAP GROWTH FUND
FEDERATED MDT LARGE CAP GROWTH FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
SIX MONTHS ENDED JANUARY 31, 2007 (UNAUDITED)
NOTE 1. DESCRIPTION OF THE FUND
Federated Large Cap Growth Fund, a series of Federated Equity Funds, is
registered under the Investment Company Act of 1940, as amended (the "Act), as
an open-end management investment company. Federated Large Cap Growth Fund
consists of three classes of shares: Class A Shares, Class B Shares and Class C
Shares.
Federated MDT Large Cap Growth Fund, a series of Federated MDT Series, is
registered under the Act as an open-end, management investment company. MDT
Large Cap Growth Fund (the "Predecessor Fund") was reorganized into Federated
MDT Large Cap Growth Fund as of the close of business on December 8, 2006.
Prior to the reorganization, the Federated MDT Large Cap Growth Fund had no
investment operations. Federated MDT Large Cap Growth Fund is the successor to
the Predecessor Fund, which commenced operations on September 15, 2005.
Federated MDT Large Cap Growth Fund consists of four classes of shares: Class A
Shares, Class B Shares, Class C Shares and Institutional Shares.
NOTE 2. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of Federated Large Cap Growth Fund
and Federated MDT Large Cap Growth Fund (individually referred to as the
"Fund", or collectively as the "Funds"), for the six months ended January 31,
2007. These statements have been derived from the books and records utilized in
calculating daily net asset values at January 31, 2007.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of Federated Large Cap Growth Fund and
Federated MDT Large Cap Growth Fund which have been incorporated by reference in
the Statement of Additional Information. The Funds follow generally accepted
accounting principles in the United States of America applicable to management
investment companies which are disclosed in the historical financial statements.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Class A, Class B Shares and Class C Shares of Federated Large Cap
Growth Fund for Class A Shares, Class B Shares and Class C Shares of Federated
MDT Large Cap Growth Fund. Under generally accepted accounting principles,
Federated MDT Large Cap Growth Fund will be the surviving entity for accounting
purposes with its historical cost of investment securities and results of
operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the investment
advisory fee arrangement for the surviving entity. Certain other operating
costs have also been adjusted to reflect anticipated expenses of the combined
entity. Other costs which may change as a result of the reorganization are
currently undeterminable.
For the six months ended January 31, 2007, Federated Large Cap Growth Fund and
Federated MDT Large Cap Growth Fund paid investment advisory fees computed at
the annual rate of 0.75% as a percentage of average daily net assets.
All costs with respect to the exchange will be borne by Federated Investors,
Inc. and its affiliates.
NOTE 3. PORTFOLIO VALUATION
Market values of each Fund's portfolio securities are determined as follows:
{circle}for equity securities, according to the last sale price or official
closing price reported in the market in which they are primarily traded
(either a national securities exchange or the over-the-counter market), if
available;
{circle}in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
{circle}futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. Options traded in the over-the-counter market are generally
valued according to the mean between the last bid and the last asked price for
the option as provided by an investment dealer or other financial institution
that deals in the option. The Board of Trustees (the "Trustees") may determine
in good faith that another method of valuing such investments is necessary to
appraise their fair market value;
{circle}prices for total return swaps are furnished by an independent pricing
service and are based upon a valuation model incorporating underlying reference
indexes, interest rates, yield curves and other market data or factors. Prices
for credit default swaps are furnished by an independent pricing service and are
based upon a valuation model incorporating default probabilities, recovery rates
and other market data or factors;
{circle}for mortgage-backed securities, based on the aggregate investment value
of the projected cash flows to be generated by the security, as furnished by an
independent pricing service;
{circle}for investments in other open-end regulated investment companies, based
on net asset value (NAV);
{circle}for other fixed-income securities, according to prices as furnished by
an independent pricing service, except that fixed-income securities with
remaining maturities of less than 60 days at the time of purchase are valued at
amortized cost; and
{circle}for all other securities at fair value as determined in accordance with
procedures established by and under the general supervision of the Trustees.
Prices for fixed-income securities furnished by a pricing service may be based
on a valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Such prices (other than prices of
mortgage-backed securities) are generally intended to be indicative of the bid
prices currently offered to institutional investors for the securities, except
that prices for corporate fixed-income and asset-backed securities traded in the
United States are generally intended to be indicative of the mean between such
bid prices and asked prices. The Trustees have approved the use of such pricing
services. A number of pricing services are available, and the Fund may use
various pricing services or discontinue the use of any pricing service.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities using the latest closing price on the exchange on
which they are traded immediately prior to the closing of the NYSE. Certain
foreign currency exchange rates are generally determined at the latest rate
prior to the closing of the NYSE. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at current rates. Events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Trustees, although the actual
calculation may be done by others.
NOTE 4. SHARES OF BENEFICIAL INTEREST
The Pro Forma Class A Shares, Class B Shares and Class C Shares net asset value
per share assumes the issuance of 8,073,295 Class A Shares, 4,909,573 Class B
Shares and 830,008 Class C Shares, respectively, of Federated MDT Large Cap
Growth Fund in exchange for 10,220,933 Class A Shares, 6,606,500 Class B Shares
and 1,100,117 Class C Shares of Federated Large Cap Growth Fund which would have
been outstanding at January 31, 2007 in connection with the proposed
reorganization, assuming the two Funds had been combined.
NOTE 5. FEDERAL INCOME TAXES
Each Fund has elected to be taxed as a "regulated investment company" under the
Internal Revenue Code. After the acquisition, Federated MDT Large Cap Growth
Fund intends to continue to qualify as a regulated investment company, if such
qualification is in the best interests of its shareholders, by complying with
the Subchapter M provision of the Internal Revenue Code and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provision for federal income tax is necessary.
The identified cost of investments for the funds is substantially the same for
both financial accounting and federal income tax purposes. The tax cost of
investments will remain unchanged for the combined fund.
NOTE 6. PROFORMA ADJUSTMENTS
(a) Federated Administrative Services (FAS), under the Administrative Services
Agreement, provides Federated MDT Large Cap Growth Fund with certain
administrative personnel and services necessary to operate the Fund. The fee
paid to FAS is based on the average aggregate daily net assets of certain
Federated funds. The administrative fee received during any fiscal year shall
be at least $150,000 per portfolio and $40,000 per each additional class of
Shares. An adjustment to the combined administrative personnel and services fee
reflects the fee structure of the Federated Funds to the Federated MDT Pro Forma
Combined Fund's average daily net assets.
(b) Adjustment to reflect custodian fees resulting from combining two Funds
into one.
(c) Adjustment to reflect directors'/trustees' fees resulting from combining
two Funds into one.
(d) Adjustment to reflect auditing fees resulting from combining two Funds into
one.
(e) Adjustment to reflect legal fees resulting from combining two Funds into
one.
(f) Adjustment to reflect portfolio accounting fees resulting from combining
two Funds into one.
(g) Under a Distribution Plan (the "Plan") pursuant to Rule 12B-1 under the
Act, Federated MDT Large Cap Growth Fund may incur distribution expenses of
0.25% and 0.75% of the daily net assets of the Fund's Class A Shares and Class C
Shares, respectively, to compensate Federated Securities Corp. (FSC), the
principal distributor. Prior to the reorganization of the Fund on December 8,
2006, the Predecessor Fund incurred distribution expenses of 0.25% and 1.00% of
the daily net assets of the Fund's Class A Shares and Class C Shares,
respectively. FSC may voluntarily choose to waive any portion of its fee. For
the period from December 11, 2006 to January 31, 2007, Federated MDT Large Cap
Growth Fund did not incur distribution expenses for Class A Shares. Federated
MDT Large Cap Growth Fund has no present intention of accruing or paying the
distribution services fee on the Class A Shares. Under a similar plan,
Federated Large Cap Growth Fund may incur distribution expenses up to 0.25% of
the Class A Shares and 0.75% of the Class C Shares average daily net assets.
Adjustment is to apply the expense structure of Federated MDT Large Cap Growth
Fund to the average daily net assets of the Federated MDT Pro Forma Combined
Fund.
(h) Effective December 11, 2006, under the terms of a Shareholder Services
Agreement, Federated MDT Large Cap Growth Fund may pay fees up to 0.25% of the
average daily net assets of Fund's Class A and Class C shares to financial
intermediaries or to Federated Shareholder Services Company (FSSC). Prior to
the reorganization, the Predecessor Fund did not incur a shareholder services
fee. Under a similar plan, Federated Large Cap Growth Fund may pay fees up to
0.25% of the average daily net assets of Fund's Class A and Class C shares to
financial intermediaries or to FSSC. FSSC or these financial intermediaries may
voluntarily choose to waive any portion of their fee. Adjustment is to apply
the expense structure of Federated MDT Large Cap Growth Fund to the average
daily net assets of the Federated MDT Pro Forma Combined Fund.
(i) Adjustment to reflect share registration costs resulting from combining two
Funds into one.
(j) Adjustment to reflect share printing and postage resulting from combining
two Funds into one.
(k) Adjustment to reflect share insurance premiums resulting from combining two
Funds into one.
(l) Adjustment to reflect share miscellaneous expenses resulting from
combining two Funds into one.
(m) Under the investment advisory contract, Federated MDTA LLC (the "Adviser")
is contractually obligated to waive, to the extent of its adviser fee, the
amount, if any, in order to limit the aggregate annual operating expenses
(excluding interest, taxes and brokerage commissions) for the Federated MDT
Large Cap Growth Fund's Class A Shares, Class C Shares and Institutional Shares
to not more than 2.05%, 2.80% and 1.80%, respectively, of average daily net
assets. The Adviser has agreed to keep these contractual limitations in place
through December 8, 2008. In addition, the Advisor may also voluntarily choose
to waive a portion of its fee and/or reimburse certain operating expenses of the
Federated MDT Large Cap Growth Fund. The Advisor can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion. An
adjustment to the combined waiver of investment adviser fee reflects the
application of the fee structure of Federated MDT Large Cap Growth Fund to the
Federated MDT Pro Forma Combined Fund's average daily net assets.
(n) For the period from July 15, 2006 to December 8, 2006, FAS contractually
agreed to waive the portion of its fee which it would otherwise be entitled to
receive from the Fund under the Administrative Services Agreement. The level of
fees payable by the Fund to FAS for the period will not exceed the level of fees
which the Fund would have paid during the period to its previous service
provider under its previous administrative services agreement. In addition, FAS
may voluntarily choose to waive any portion of its fee. FAS can modify or
terminate its voluntary waiver at any time at its sole discretion. An
adjustment to the combined waiver of administrative personnel and services fee
reflects the application of the fee structure of the Federated MDT Large Cap
Growth Fund to the Federated MDT Pro Forma Combined Fund's average daily net
assets.
(o) Adjustment to reflect reimbursement of other operating expenses resulting
from combining two Funds into one.
(p) Federated Large Cap Growth Fund directs portfolio trades to a broker that
in turn pays a portion of the Fund's operating expenses. Federated MDT Large
Cap Growth Fund does not utilize this type of brokerage arrangements. This
adjustment reflects the reduction of fees paid indirectly from directed
brokerage arrangements.
8
FEDERATED LARGE CAP GROWTH FUND
A PORTFOLIO OF FEDERATED EQUITY FUNDS
INVESTMENT ADVISER
Federated Equity Management Company of Pennsylvania
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
ADMINISTRATOR
Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
8
PART C. OTHER INFORMATION.
Item 15. Indemnification:
Indemnification is provided to Trustees and officers of the Registrant
pursuant to the Registrant's Declaration of Trust and Bylaws, except where
such indemnification is not permitted by law. However, the Declaration of
Trust and Bylaws do not protect the Trustees or officers from liability based
on willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their office. Trustees and officers of
the Registrant are insured against certain liabilities, including liabilities
arising under the Securities Act of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to Trustees, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by Trustees, officers, or
controlling persons of the Registrant in connection with the successful
defense of any act, suit, or proceeding) is asserted by such Trustees,
officers, or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for Trustees, officers, or
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition
to complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or
other body before which the proceeding was brought, that an indemnification
payment will not be made unless in the absence of such a decision, a
reasonable determination based upon factual review has been made (i)by a
majority vote of a quorum of non-party Trustees who are not interested
persons of the Registrant or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties. The Registrant
further undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately determined
that indemnification is appropriate) against an officer, Trustee, or
controlling person of the Registrant will not be made absent the fulfillment
of at least one of the following conditions: (i)the indemnitee provides
security for his undertaking; (ii)the Registrant is insured against losses
arising by reason of any lawful advances; or (iii)a majority of a quorum of
disinterested non-party Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.
Item 16. Exhibits:
1. Conformed copy of Declaration of Trust of the Registrant; (1)
2. Copy of By-Laws of the Registrant; (1)
3. Not Applicable
4. Agreement and Plan of Reorganization between Federated MDT Series, on
behalf of its portfolio, Federated MDT Large Cap Growth Fund and
Federated Equity Funds, on behalf of its portfolio, Federated Large
Cap Growth Fund, is included as Exhibit A to the Prospectus Proxy
Statement included as part of this Registration Statement; (*)
5. Not Applicable
6.1 Form of Investment Advisory Contract of the Registrant; (2)
6.2 Conformed copy of Investment Advisory Contract Letter Agreement; (4)
7. Conformed copy of Distributors Contract of the Registrant; (3)
8. Not applicable
9.1 Conformed copy of Custodian Agreement of the Registrant; (3)
9.2 Conformed copy of Custodian Schedule; (3)
10. Conformed copy of Distribution Plan of the Registrant; (3)
10.1 The Registrant hereby incorporates the Copy of the Multiple Class Plan
and attached Exhibits from Item (n) of the Federated Total Return
Government Bond Fund Registration Statement on Form N-1A, filed with
the Commission on April 26, 2006. (File Nos. 33-60411 and 811-07309)
11. Form of Opinion and Consent of Counsel regarding the legality of
Shares being issued; (*)
12. Form of Opinion regarding tax consequences of Reorganization; (to be
filed by amendment)
13.1 The Registrant hereby incorporates by reference the conformed copy of
the Agreement for Administrative Services, with Exhibit 1 and
Amendments 1 and 2 attached, between Federated Administrative Services
and the Registrant from Item 23(h)(iv) of the Federated Total Return
Series, Inc. Registration Statement on Form N-1A, filed with the
Commission on November 29, 2004. (File Nos. 33-50773 and 811-7115);
13.2 The Registrant hereby incorporates by reference the conformed copy of
Amendment No. 3 to the Agreement for Administrative Services between
Federated Administrative Services Company and the Registrant dated
June 1, 2005, from Item 23 (h) (ii) of the Cash Trust Series, Inc.
Registration Statement on Form N-1A, filed with the Commission on July
27, 2005. (File Nos. 33- 29838 and 811-5843);
13.3 The Registrant hereby incorporates the conformed copy of the Transfer
Agency and Service Agreement between the Federated Funds listed on
Schedule A revised 3/1/06, from Item 23 (h) (ix) of the Federated
Total Return Government Bond Fund Registration Statement on Form N-1A,
filed with the Commission on April 26, 2006. (File Nos. 33-60411 and
811-07309);
13.4 The Registrant hereby incorporates the conformed copy of the Financial
Administration and Accounting Services Agreement with attached Exhibit
A revised 3/1/06, from Item 23(h)(viii)of the Federated Total Return
Government Bond Fund Registration Statement on Form N-1A, filed with
the Commission on April 26, 2006 (File Nos. 33-60411 and 811-07309);
14.1 Conformed copy of Consent of Independent Registered Public Accounting
Firm of Federated MDT Large Cap Growth Fund; (*)
14.2 Conformed copy of Consent of Independent Registered Public Accounting
Firm of Federated Large Cap Growth Fund; (*)
15. Not applicable
16.1 Conformed copy of Power of Attorney of Registrant; (*)
16.2 Conformed copy of Unanimous Consent of Trustees to appoint a President
and Treasurer; (1)
16.3 Conformed copy of Unanimous Consent of Trustees to appoint a Secretary
and Assistant Secretary; (*)
17.1 Form of Proxy (*)
17.2 Form of Ballot (*)
_________________________________________________________
* All exhibits are being filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed May 25, 2006. (File Nos. 333-134468 and
811-21904).
2. Response is incorporated by reference to Registrant's Pre-effective
Amendment #1 to its Initial Registration Statement on Form N-1A filed July
27, 2006. (File Nos. 333-134468 and 811-21904)
3. Response is incorporated by reference to Registrant's Pre-effective
Amendment #2 to its Initial Registration Statement on Form N-1A filed
August 8, 2006. (File Nos. 333-134468 and 811-21904)
4. Response is incorporated by reference to Registrant's Post-effective
Amendment #1 to its Initial Registration Statement on Form N-1A filed
November 29, 2006. (File Nos. 333-134468 and 811-21904)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be a new Registration
Statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
of them.
(3) The undersigned Registrant agrees to file by Post-Effective
Amendment the opinion of counsel regarding the tax consequences of the
proposed reorganization required by Item 16(12) of Form N-14 within a
reasonable time after receipt of such opinion.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, FEDERATED MDT SERIES, has duly caused its Registration
Statement on Form N-14 to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania,
on the 6th day of April, 2007.
FEDERATED MDT SERIES
By: /s/ Todd P. Zerega
Todd P. Zerega, Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Todd P. Zerega Attorney In Fact April 6, 2007
Todd P. Zerega For the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Trustee
J. Christopher Donahue* President and Trustee
(Principal Executive Officer)
Richard A. Novak* Treasurer
(Principal Financial Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
Nicholas P. Constantakis* Trustee
John F. Cunningham* Trustee
Lawrence D. Ellis, M.D.* Trustee
Peter E. Madden* Trustee
Charles F. Mansfield, Jr.* Trustee
John E. Murray, Jr., J.D., S.J.D.* Trustee
Thomas M. ONeil* Trustee
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
James F. Will* Trustee
* By Power of Attorney