As filed with the Securities and Exchange Commission on November 29, 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:
MELANIE C. MALONEY, ESQUIRE
JENNIFER ECK
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 Small Cap Growth Fund
It is proposed that this filing will become effective on December 14, 2007
pursuant to Rule 488.
______________________________________________________________________________
NO FILING FEE IS DUE BECAUSE REGISTRANT IS RELYING ON SECTION 24(F) OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED
FEDERATED TECHNOLOGY FUND, A PORTFOLIO OF FEDERATED EQUITY FUNDS
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE . . . VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP AVOID ADDITIONAL EXPENSE.
Federated Technology Fund ("Technology Fund), a portfolio of Federated Equity
Funds, will hold a special meeting of shareholders on February 29, 2008. IT IS
IMPORTANT FOR YOU TO VOTE. We recommend that you read the Prospectus/Proxy
Statement in its entirety.
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 AM I BEING ASKED TO VOTE ON?
To approve or disapprove a proposed Agreement and Plan of Reorganization
pursuant to which Federated MDT Small Cap Growth Fund ("MDT Fund"), a portfolio
of Federated MDT Series, would acquire all of the assets of Technology Fund in
exchange for Class A Shares, Class B Shares and Class C Shares of MDT Fund to be
distributed pro rata by Technology Fund in complete liquidation and termination
of Technology Fund (such proposal hereafter referred to as the "Reorganization"
or "Proposed Reorganization").
WHY IS THE REORGANIZATION BEING PROPOSED?
The Board of Trustees (the "Board") of Federated Equity Funds has determined
that a reorganization of Technology Fund into MDT Fund is in the best interest
of the Technology Fund and its shareholders and is recommending that
shareholders of Technology Fund approve the Reorganization.
The Reorganization is being proposed to shareholders of Technology Fund
primarily because, in the opinion of the Technology Adviser, the long continuing
net redemption activity in Technology Fund's shares (which has caused its net
assets to decrease to $66.6 million at October 8, 2007 from $546.5 million at
December 31, 2000) raises questions as to Technology Fund's long-term viability.
Technology Fund was initially launched as the Federated Communications
Technology Fund ("FCTF") in September 1999, with the strategy of investing in
shares of issuers engaged in the information technology and telecommunication
services businesses. FCTF initially experienced large inflows of investor
subscriptions, as well as a high rate of capital appreciation of its portfolio
holdings, and by March 2000 its net assets exceeded $1 billion. With the
bursting of the "tech bubble" in March 2000, however, FCTF's performance and
assets began a sustained downward trend. In order to reposition FCTF for
further growth, on December 31, 2003 the Fund was renamed and its strategy was
broadened so that it could focus on the entire technology sector (rather than
just communications technology), but the revised strategy has not succeeded in
attracting additional investments into Technology Fund.
Technology Adviser believes that Technology Fund shareholders would
benefit from becoming shareholders of MDT Fund, whose net assets have, since its
inception in 2005, steadily increased to $26.6 million at October 8, 2007. Like
Technology Fund, MDT Fund seeks to achieve capital appreciation by investing
primarily in securities that exhibit promising long-term potential ("growth
stocks"), but, unlike Technology Fund, MDT Fund is permitted to invest its
assets in a full range of industry sectors (including a substantial portion in
technology stocks), thereby providing shareholders with greater industry sector
diversification within the growth stock sphere.
WHAT ARE SOME OF THE FACTORS THAT THE BOARD CONSIDERED IN RECOMMENDING THE
PROPOSED REORGANIZATION?
The Board considered various factors in reviewing this proposal including the
following factors:
{circle}the compatibility of Technology Fund's and MDT Fund's investment
objectives, policies and limitations;
{circle}the greater long-term viability of MDT Fund based on its asset
growth trend versus Technology Fund's declining asset trend;
{circle}that the Reorganization will not result in recognition of any
gain or loss for federal income tax purposes either to Technology Fund
or MDT Fund or to shareholders of Technology Fund;
{circle}that Technology Fund's capital loss carry forward for federal
income tax purposes will remain available to MDT Fund following the
Reorganization subject to any applicable limitations under the
Internal Revenue Code;
{circle}that Technology Fund will incur brokerage costs as a result of
its plan to sell and repurchase certain of its portfolio securities
prior to the Reorganization in order to more fully utilize its capital
loss carry-forward and that MDT Fund will also incur brokerage costs
as a result of its Plan to sell, immediately following the
Reorganization, all Technology Fund's securities acquired by MDT Fund
in the Reorganization, and to purchase different securities with the
proceeds of such sales; and
{circle}that the per share expenses after waivers of MDT Fund following
the Reorganization are projected to be less than those of Technology
Fund prior to the Reorganization.
HOW DO I VOTE MY SHARES?
You may vote by telephone at the toll-free number shown on your ballot, in
person at the meeting, or by completing and returning the enclosed proxy card.
If you:
1. Choose to help save time and postage costs by voting by
telephone; please do not return your proxy card.
2. Do not respond at all, we may contact you by telephone to
request that you cast your vote.
3. Sign and return the proxy card without indicating a
preference, your vote will be cast "for" the Reorganization.
WHAT DO I HAVE TO DO FOR 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.
We request that you do not attempt to make the exchange yourself, as this will
disrupt the management of the Funds' portfolio.
WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT?
Call your Investment Professional or a Federated Client Service Representative.
Federated's toll-free number is 1-800-341-7400.
The Board of Directors of Federated Word Investment Series, Inc. recommends that
you read the enclosed materials carefully and vote FOR the Reorganization.
FEDERATED EQUITY FUNDS
FEDERATED TECHNOLOGY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 29, 2008
TO SHAREHOLDERS OF FEDERATED TECHNOLOGY FUND, a portfolio of Federated Equity
Funds.
A special meeting of the shareholders of Federated Technology Fund ("Technology
Fund") will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-
7000, at 2:00 p.m. (Eastern time), on February 29, 2008, for the following
purposes:
1. To approve or disapprove a proposed Agreement and Plan of Reorganization
pursuant to which Federated MDT Small Cap Growth Fund ("MDT Fund"), a
portfolio of Federated MDT Series, would acquire all of the assets of
Technology Fund in exchange for Class A Shares, Class B Shares and Class C
Shares of MDT Fund to be distributed pro rata by Technology Fund in
complete liquidation and termination of Technology Fund; 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 January 2, 2008 as the record date for
determination of shareholders entitled to vote at the special meeting.
By Order of the Board of
Directors,
/s/ John W. McGonigle
John W. McGonigle
Secretary
January 23, 2007
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.
- 1 -
PROSPECTUS/PROXY STATEMENT
JANUARY 23, 2007
ACQUISITION OF THE ASSETS OF
FEDERATED TECHNOLOGY 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 SHARES OF
FEDERATED MDT SMALL 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 Prospectus/Proxy Statement describes the proposal whereby Federated
Technology Fund ("Technology Fund"), a portfolio of Federated Equity Funds (the
"Trust"), would transfer all of its assets to Federated MDT Small Cap Growth
Fund ("MDT Fund"), a portfolio of Federated MDT Series (the "MDT Trust") in
exchange for Class A Shares, Class B Shares and Class C Shares of MDT Fund (the
"Reorganization"). MDT Fund shares will be distributed pro rata by Technology
Fund to its shareholders in complete liquidation and dissolution of Technology
Fund. As a result of the Reorganization, each owner of Technology Fund's Class
A Shares, Class B Shares and Class C Shares will become the owner of Class A
Shares, Class B Shares and Class C Shares of MDT Fund, having a total net asset
value ("NAV") equal to the total NAV of his or her holdings in Technology Fund
on the date of the Reorganization (the "Closing Date").
The Board of Trustees (the "Board") of the Trust has determined that a
reorganization of Technology Fund into MDT Fund is in the best interest of
Technology Fund and its shareholders and is recommending that shareholders of
Technology Fund approve the Reorganization.
Technology Fund's investment objective is to achieve capital appreciation.
Similarly, MDT Fund's investment objective is to seek long-term capital
appreciation. Technology Fund and MDT Fund each uses the "growth" style of
investing, seeking to select those securities within its investment universe
that exhibit the most promising long-term growth potential.
Technology Fund pursues its investment objective by investing primarily in
companies that rely extensively on technology in their products, services or
operations while MDT Fund pursues its investment objective by investing
primarily in common stock of small U.S. companies. For a comparison of the
investment policies and objectives of Technology Fund and MDT Fund (each a
"Fund" and collectively the "Funds"), see "Summary -- Comparison of Investment
Objectives, Policies and Limitations." Information concerning MDT Fund shares,
as compared to the shares of Technology Fund, is included in this
Prospectus/Proxy Statement in the sections entitled "Summary -- Comparative Fee
Tables" and "Information about the Reorganization - Description of MDT Fund
Shares and Capitalization."
The investment adviser for Technology Fund is Federated Equity Management
Company of Pennsylvania (the "Technology Adviser") and the investment adviser
for MDT Fund is Federated MDTA LLC (the "MDT Adviser"). 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 Prospectuses
for MDT Fund's Class A and Class C Shares dated September 30, 2007 and the
Prospectus for MDT Fund's Class B Shares dated December 17, 2007, each of which
is incorporated herein by reference. Statements of Additional Information
("SAIs") dated September 30, 2007 for Class A and Class C Shares and dated
December 17, 2007 for Class B Shares, as well as an SAI dated January 23, 2008
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 Technology Fund is also incorporated herein by reference. Further
information about Technology Fund's performance is contained in its Annual
Report dated October 31, 2006 and its Semi Annual Report dated April 30, 2007,
which is incorporated herein by reference. Further information about MDT
Fund's Class A Shares and Class C Shares performance is contained in its Annual
Report dated July 31, 2007, which is incorporated herein by reference. Since
MDT Fund's Class B Shares is a newly created share class of MDT Fund, an Annual
Report for Class B Shares is not currently available.
Copies of these materials and other information about Technology Fund and
MDT Fund may be obtained without charge by writing to or calling Technology Fund
and/or MDT Fund at the address and telephone number shown on the previous page.
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.
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.
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.
TABLE OF CONTENTS
PAGE
SUMMARY........................................................................1
Reasons For The Proposed Reorganization..................................1
Tax Consequences.........................................................2
Comparison Of Investment Objectives, Policies And Limitations............2
Comparison Of Principal Risks...........................................8
Procedures For Purchasing, Redeeming And Exchanging Shares...............8
Comparative Fee Tables...................................................9
Comparison Of Potential Risks And Rewards: Performance
Information15.......................................................
Financial Highlights......................................................
Investment Adviser......................................................24
Portfolio Manager Information...........................................24
Advisory Fees, Service Fees, Shareholder Fees and Other Expenses........25
Purchase, Redemption and Exchange Procedures............................27
Dividends and Distributions; Tax Information; Frequent Trading;
Portfolio Holdings; Disclosure Policy ............................29
INFORMATION ABOUT THE REORGANIZATION
DESCRIPTION OF THE PLAN OF REORGANIZATION.....................................29
DESCRIPTION OF MDT FUND'S SHARE CLASSES AND CAPITALIZATION....................30
FEDERAL INCOME TAX CONSEQUENCES...............................................31
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS.................................33
INFORMATION ABOUT MDT FUND AND TECHNOLOGY FUND................................37
Where to Find Additional Information....................................37
Legal Proceedings.......................................................37
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING..........................38
Proxies, Quorum and Voting at the Special Meeting.......................39
Share Ownership of the Funds............................................40
Interests of Certain Persons............................................41
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY..................41
AGREEMENT AND PLAN OF REORGANIZATION (EXHIBIT A) .............................A1
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (EXHIBIT B).....................A-14
B
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 and a copy of Technology Fund's Management's
Discussion of Fund Performance is attached to this Prospectus/Proxy Statement
as Exhibit B. The Prospectus for MDT Fund's Class A Shares and Class C
Shares or the Prospectus for MDT Fund's Class B Shares, as the case may be,
accompanies this Prospectus/Proxy Statement.
REASONS FOR THE PROPOSED REORGANIZATION
The Reorganization is being proposed to shareholders of Technology Fund
primarily because, in the opinion of the Technology Adviser, the long continuing
net redemption activity in Technology Fund's shares (which has caused its net
assets to decrease to $66.6 million at October 8, 2007 from $546.5 million at
December 31, 2000) raises questions as to Technology Fund's long-term viability.
Technology Fund was initially launched as the Federated Communications
Technology Fund ("FCTF") in September 1999, with the strategy of investing in
shares of issuers engaged in the information technology and telecommunication
services businesses. FCTF initially experienced large inflows of investor
subscriptions, as well as a high rate of capital appreciation of its portfolio
holdings, and by March 2000 its net assets exceeded $1 billion. With the
bursting of the "tech bubble" in March 2000, however, FCTF's performance and
assets began a sustained downward trend. In order to reposition FCTF for
further growth, on December 31, 2003 the Fund was renamed and its strategy was
broadened so that it could focus on the entire technology sector (rather than
just communications technology), but the revised strategy has not succeeded in
attracting additional investments into Technology Fund.
Technology Adviser believes that Technology Fund shareholders would
benefit from becoming shareholders of MDT Fund, whose net assets have, since its
inception in 2005, steadily increased to $26.6 million at October 8, 2007. Like
Technology Fund, MDT Fund seeks to achieve capital appreciation by investing
primarily in securities that exhibit promising long-term potential ("growth
stocks"), but, unlike Technology Fund, MDT Fund is permitted to invest its
assets in a full range of industry sectors (including a substantial portion in
technology stocks), thereby providing shareholders with greater industry sector
diversification within the growth stock sphere.
Holders of Class A Shares and Class C Shares of Technology Fund will
receive in the Reorganization an equivalent net asset value of Class A Shares or
Class C shares of MDT Fund, both existing classes. In the Reorganization,
holders of Class B shares of Technology Fund will receive an equivalent net
asset value of Class B Shares of MDT Fund, which is a new share class of MDT
Fund created for the Reorganization.
The Board has voted to recommend to holders of shares of Technology Fund
the approval of the Plan, pursuant to which MDT Fund would acquire all of the
assets of Technology Fund in exchange for Class A Shares, Class B Shares and
Class C Shares of MDT Fund (the "Exchange"). Immediately following the Exchange,
Technology Fund will distribute the Class A Shares, Class B Shares and Class C
Shares of MDT Fund 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 Technology Fund. As a result of the
Reorganization, each holder of Class A Shares, Class B Shares and Class C Shares
of Technology Fund will become the owner of Class A Shares, Class B Shares and
Class C Shares of MDT Fund, respectively, in each case having a total net asset
value equal to the total net asset value of his or her holdings in Technology
Fund on the date of the Reorganization. Following the consummation of the
Reorganization, the Trust will amend its Declaration of Trust to remove
Technology Fund as a series of the Trust.
In considering the proposed Reorganization, the Board took into
consideration a number of factors, including: (1) the compatibility of
Technology Fund's and MDT Fund's investment objectives, policies and
limitations; (2) the greater long-term viability of MDT Fund based on its asset
growth trend versus Technology Fund's declining asset trend; (3) that the
Reorganization will not result in recognition of any gain or loss for federal
income tax purposes either to Technology Fund or MDT Fund or to shareholders of
Technology Fund; (4) that Technology Fund's capital loss carry forwards for
federal income tax purposes will remain available to MDT Fund following the
Reorganization subject to any applicable limitations under the Internal Revenue
Code; (5) that the per share expenses after waivers of MDT Fund immediately
following the Reorganization are projected to be less than those of Technology
Fund prior to the Reorganization (although there can be no assurance that MDT
Fund's expense waivers will continue at their current levels for future
periods); and (6) that Technology Fund will incur brokerage costs as a result of
its plan to sell certain of its portfolio securities (and possibly purchase
replacement securities) prior to the Reorganization in order to more fully
utilize capital gains against its capital loss carry-forwards and that MDT Fund
will also incur brokerage costs as a result of its Plan to sell, immediately
following the Reorganization, substantially all Technology Fund's securities
acquired by MDT Fund in the Reorganization, and to purchase different securities
with the proceeds of such sales. The Board concluded to recommend to
shareholders of Technology Fund that they vote to approve the Reorganization.
Pursuant to Rule 17a-8 under the Investment Company Act of 1940 (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 Technology Fund and its
shareholders, and that the interests of existing Technology shareholders would
not be diluted as a result of the Reorganization.
The Board of Trustees (the "Trustees") of MDT Fund likewise approved the
Reorganization on behalf of MDT Fund. Pursuant to Rule 17a-8 under the 1940
Act, the Trustees of MDT Fund, including a majority of the Trustees who are not
"interested persons," determined that the Reorganization is in the best interest
of MDT Fund and its shareholders, and that the interests of existing MDT Fund
shareholders would not be diluted as a result of the Reorganization.
TAX CONSEQUENCES
As a condition of the Reorganization, each Fund will receive an opinion of
counsel that the Reorganization will be considered a tax-free "reorganization"
under applicable provision of the Internal Revenue Code of 1986, as amended, so
that no gain or loss will be recognized upon the Reorganization by either Fund
or by Technology Fund shareholders. The tax basis of MDT Fund's Class A Shares,
Class B Shares and Class C Shares received by Technology Fund's shareholders
will be the same as the tax basis of their shares in Technology Fund. Because
Technology Fund has a capital loss carry-forward greatly in excess of its
unrealized capital gains, there will be no capital gains distributions by
Technology Fund before the Closing Date, even if gains are realized on
dispositions of portfolio securities in connection with the Reorganization.
Technology Fund will distribute to shareholders any previously undistributed
ordinary income accumulated prior to the Reorganization.
THE BOARD OF TRUSTEES OF TECHNOLOGY FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE REORGANIZATION.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND LIMITATIONS
The investment objectives of the two Funds are, for practical purposes,
identical. The investment objective of MDT Fund is long-term capital
appreciation, while the investment objective of Technology Fund is to achieve
capital appreciation. Both Funds invest substantially all their net assets in
common stocks. Both Funds use the "growth" style of investing, seeking to
select securities that exhibit the most promising long-term growth potential.
MDT Fund seeks to achieve its objective by investing primarily in common
stock of small U.S. companies, i.e., those with a market capitalization range
similar to those companies included in the Russell 2000 Growth Index ($133
million to $3.5 billion as of July 31, 2007). MDT Fund may not change its
investment policy to normally invest at least 80% of its net assets in small
capitalization issuers without 60 days advance notice to shareholders. MDT Fund
seeks to control risk by limiting the extent to which the MDT Fund's exposure to
any one business, industry or sector varies from that of the Russell 2000 Growth
Index.
Technology Fund seeks to achieve its objective by investing primarily in
securities of companies considered by Technology Adviser, at the time of the
investment, to rely extensively on technology in their products, services or
operations. Technology Fund may not change its investment policy to normally
invest at least 80% of its net assets in technology investments without 60 days
advance notice to shareholders. In general, issuers selected by Technology
Adviser will have a market capitalization of $100 million, but there is no
minimum or maximum capitalization constraint on the size of the issuers
selected. Technology Adviser attempts to diversify investments by allocating
among companies in different technology related industries and by limiting the
amount invested in any one issuer.
While both Funds invest primarily in common stocks using the growth style
of investing, the Funds differ in their stock selection processes. MDT Fund
selects stocks for inclusion in its portfolio by 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 MDT Adviser believes
might be indicative of an attractive investment opportunity. The selection
process factors in trading costs (particularly market impact) by biasing MDT
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 Technology Adviser also uses quantitative metrics to screen stocks
for Technology Fund's portfolio, its process is less quantitative and more
judgment based. Technology Adviser attempts to identify those areas within the
technology industries which present the best opportunities for growth.
Technology Adviser performs traditional fundamental analysis to select
securities that exhibit the most promising long-term growth potential for
Technology Fund's portfolio. In selecting securities, Technology Adviser focuses
primarily on the projected future cash flow and earnings of the issuing company,
in addition to examining each issuer's current financial condition, business and
product strength, competitive position, and management expertise.
While each Fund will normally invest primarily in common stocks of U.S.
issuers, each Fund may invest a portion of its assets in securities of companies
outside the United States to diversify its holdings and to take advantage of
opportunities in the foreign market. Securities of foreign companies may be
more affected by foreign economic and political conditions, taxation policies,
and accounting and auditing standards then those of U.S. companies. In
addition, each Fund may use derivative contracts and/or hybrid instruments to
implement elements of its investment strategy. For example, each Fund may use
derivative contracts and/or hybrid instruments to increase or decrease the
allocation of the portfolio to securities, currencies or types of securities in
which each Fund may invest directly. Each Fund may also, for example, use
derivative contracts to:
{circle}obtain premiums from the sale of derivative contracts;
{circle}realize gains from trading a derivative contract; or
{circle}hedge against potential losses.
There can be no assurance that either Fund's use of derivative contracts or
hybrid instruments will work as intended.
In addition to common stocks, derivative contracts and hybrid instruments,
the Prospectus of MDT Fund also lists preferred stocks, foreign securities and
securities of other investment companies, including exchange traded funds, as
categories or securities in which MDT Fund may principally invest, while the
Prospectus of Technology Fund lists foreign securities as principal investments.
The Prospectus of MDT Fund also lists securities lending as a principal
investment strategy.
INVESTMENT LIMITATIONS
Each Fund has fundamental investment limitations which may not be changed
without shareholder approval. With three exceptions, the fundamental
limitations of the two Funds are identical. The first difference between the
fundamental imitations of the two funds concerns lending. Technology Fund's
fundamental limitations prohibit it from making loans, while MDT Fund's
fundamental limitations permit it to make loans in amounts up to one-third of
its total assets. Neither Fund's lending limitation prohibits it from investing
in debt obligations, entering into repurchase agreements or lending securities.
MDT Fund 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. Technology Fund'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, Technology Fund's non-fundamental investment limitation provides
that investments in transactions involving futures contracts, options and other
financial contracts that settle by payment of cash are not considered
investments in commodities. MDT Fund's fundamental limitations permit MDT Fund
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. MDT Fund has not in the past invested directly in
commodities, and MDT Adviser has no present intention of doing so.
The third difference relates to the Funds' respective concentration of
investments policy, where MDT Fund is not permitted to "concentrate" (i.e.,
invest more than 25% of its total assets) in the securities of issuers primarily
engaged in the same industry whereas Technology Fund is permitted to invest more
than 25% of its total assets in the communications technology industry (but is
not otherwise permitted to concentrate).
The following chart compares the fundamental limitations of Technology
Fund and MDT Fund. 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.
INVESTMENT LIMITATIONS
TECHNOLOGY FUND MDT FUND
DIVERSIFICATION OF INVESTMENTS (fundamental) DIVERSIFICATION
With respect to securities comprising 75% of the value of its total assets, the Fund will not purchase securities OF INVESTMENTS
of any one issuer (other than cash; cash items; securities issued or guaranteed by the government of the United (fundamental)
States or its agencies or instrumentalities and repurchase agreements collateralized by such U.S. government Same
securities; and securities of other investment companies) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of that issuer, or the Fund would own more than 10% of the outstanding
voting securities of that issuer.
BORROWING MONEY AND ISSUING SENIOR SECURITIES (fundamental) BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities to the maximum extent permitted AND ISSUING
under the Investment Company Act of 1940 (1940 Act), any rule or order thereunder, or any SEC staff interpretation SENIOR
thereof. SECURITIES
(fundamental)
Same
INVESTING IN REAL ESTATE (fundamental) INVESTING IN
The Fund may not purchase or sell real estate, provided that this restriction does not prevent the Fund from REAL ESTATE
investing in issuers which invest, deal, or otherwise engage in transactions in real estate or interests therein, (fundamental)
or investing in securities that are secured by real estate or interests therein. The Fund may exercise its rights Same
under agreements relating to such securities, including the right to enforce security interests and to hold real
estate acquired by reason of such enforcement until that real estate can be liquidated in an orderly manner.
INVESTING IN COMMODITIES (fundamental) INVESTING IN
The Fund may not purchase or sell physical commodities, provided that the Fund may purchase securities of COMMODITIES
companies that deal in commodities. For purposes of this restriction, investments in transactions involving futures (fundamental)
contracts and options, forward currency contracts, swap transactions and other financial contracts that settle by The Fund may
payment of cash are not deemed to be investments in commodities. invest in
commodities to
the maximum
extent permitted
under the 1940
Act.
UNDERWRITING (fundamental) UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the Fund may engage in transactions (fundamental)
involving the acquisition, disposition or resale of its portfolio securities, under circumstances where it may be Same
considered to be an underwriter under the Securities Act of 1933.
CONCENTRATION (fundamental) CONCENTRATION
The Fund will not invest more than 25% of its total assets (valued at the time of investment) in securities of (fundamental)
companies engaged principally in any one industry other than the communications technology industry, except that The Fund will
this restriction does not apply to cash or cash items and securities issued or guaranteed by the United States not make
government or its agencies or instrumentalities. investments that
will result in
the
concentration of
its investment
in the
securities of
issuers
primarily
engaged in the
same industry.
Government
securities,
municipal
securities and
bank instruments
will not be
deemed to
constitute an
industry.
LENDING (fundamental) LENDING
The Fund may not make loans, provided that this restriction does not prevent the Fund from purchasing debt (fundamental)
obligations, entering into repurchase agreements, lending its assets to broker/dealers or institutional investors The Fund may not
and investing in loans, including assignments and participation interests. make loans if,
as a result,
more than 33
1/3% of the
Fund's total
assets would be
loaned to other
parties, except
that the fund
may (i) purchase
or hold debt
instruments in
accordance with
its investment
objective and
policies; (ii)
enter into
repurchase
agreements;
(iii) lend its
securities; and
(iv) it may make
loans to
affiliated
investment
companies in
accordance with
SEC exemptive
relief.
COMPARISON OF PRINCIPAL RISKS
All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in either Fund. Since both Technology Fund and MDT Fund
invest in common stocks and use the growth style of investing, an investment in
MDT Fund presents many of the same types of investment risks as investing in
Technology Fund. A principal risk factor applicable to an investment in either
Fund is stock market risk. 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. Moreover, since Technology Fund must invest at least 80% of its net
assets in technology related investments, Technology Fund may be deemed to be
more limited in its ability to diversify its investments among industry
categories than MDT Fund, which has the ability to invest in all industry
categories.
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. Each Fund 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.
Since MDT Fund must invest 80% of its assets in stocks of small
capitalization companies, the risks related to company size are a significant
risk in that Fund. Specifically, investment in smaller capitalization issuers
exposes MDT Fund to a greater risk that its share price may be affected by the
fact that the smaller the capitalization of a company, the fewer the number of
shares traded daily, the less liquid its stock and the more volatile its price.
In addition, smaller capitalization companies tend to have unproven track
records, a limited product or service base and limited access to capital. On
the other hand, since Technology Fund must invest 80% of its assets in
technology companies, sector risk is a significant risk in that Fund.
Specifically, such investments expose Technology Fund to the risk that as its
Adviser allocates more of the Fund's portfolio to a particular sector (i.e.,
technology stocks) Technology Fund's performance will be more susceptible to any
economic, business or other developments which affect the technology sector.
The technology sector may be significantly affected by intense competition,
rapid obsolescence, failure to obtain, or delay in obtaining financing or
regulatory approval, the success or failure of research and development, product
capability and customer preference.
In addition, each Fund has the ability to invest in other types of
securities, including principally derivative contracts and hybrid instruments,
and in the case of MDT Fund, securities of other investment companies, including
exchange-traded funds. The following are some additional risks of these
additional categories of principal investments:
* RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS. A Fund's
use of derivative contracts and hybrid instruments involves risks different
from, or possibly greater than, the risks associated with investing directly
in stocks. In addition to stock market and currency risks, investments in
derivatives and hybrids may involve credit, liquidity and leverage risks.
* CREDIT RISKS. Credit risk includes the possibility that a party to a
transaction (such as a derivative transaction) involving the Fund will fail
to meet its obligations. This could cause the Fund to lose the benefit of
the transaction or prevent the Fund from selling or buying other securities
to implement its investment strategy.
* LIQUIDITY RISKS. Liquidity risk refers to the possibility that the Fund may
not be able to sell a security or close out a derivative contract when it
wants to.
* LEVERAGE RISKS. Leverage risk is created when an investment (such as a
derivative transaction) exposes the Fund to a level of risk that exceeds the
amount invested. Changes in the value of such an investment magnify the
Fund's risk of loss and potential for gain.
* EXCHANGE-TRADED FUNDS. An investment in an ETF generally presents the same
primary risks as an investment in a conventional fund (i.e., one that is not
exchange-traded). As with traditional mutual funds, ETFs charge asset-based
fees. The Fund will indirectly pay a proportional share of the asset-based
fees of the ETFs in which the Fund invests. The net asset value of a Fund
will fluctuate with the changes in the value of the ETFs in which the Fund
invests. The change in value of the ETFs are due to the change in price of
the securities in which the ETFs invest. Therefore, the Fund net asset
value will be indirectly affected by the change in value of the securities
in which the ETF invests.
PROCEDURES FOR PURCHASING, REDEEMING AND EXCHANGING SHARES
The procedures for purchasing, redeeming and exchanging Shares of MDT Fund
are the same as those for purchasing, redeeming and exchanging shares of
Technology Fund. See "Purchase, Redemption and Exchange Procedures" below.
COMPARATIVE FEE TABLES
Like all mutual funds, Technology Fund and MDT Fund 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 Technology Fund and Class A Shares,
Class B Shares and Class C Shares of MDT Fund, respectively, and pro forma fees
for MDT Fund after giving effect to the Reorganization.
- 1 -
FEES AND EXPENSES
This table describes (1) the actual fees and expenses for Technology Fund Class
A Shares for its most recent fiscal year ended October 31, 2006; (2) the
anticipated fees and expenses that you may pay if you buy and hold Class A
Shares of MDT Fund as of its most recent prospectus dated September 30, 2007;
and (3) the pro forma fees and expenses of Class A Shares of MDT Fund on a
combined basis after giving effect to the merger. As described below, the pro
forma operating expenses of MDT Fund are shown after giving effect to a
contractual waiver of expenses by Federated MDTA LLC to limit total operating
expenses to not more than 2.05% which will continue through December 8, 2008.
MDT FUND
TECHNOLOGY PRO FORMA
SHAREHOLDER FEES FUND- CLASS MDT COMBINED
A SHARES FUND - -
CLASS A CLASS A
SHARES SHARES
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% 5.50% 5.50%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or
redemption proceeds, as applicable) 0.00% 0.00% 0.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as
a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (Before Waivers, Reimbursements and Reductions)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.75%2 1.15%3 1.15%3
Distribution (12b-1) Fee 0.25% 0.25%4 0.25%4
Other Expenses 1.39%5 3.41%6 1.72%6
Total Annual Fund Operating Expenses 2.39% 4.81% 3.12%
Fee Waivers and/or Expense Reimbursement (contractual) 0.00% 2.76% 1.07%
Net Annual Fund Operating Expenses (after contractual waiver and reimbursement) 2.39% 2.05%3,7 2.05%3,7
1 With respect to Technology Fund, 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 Adviser, administrator and
shareholder services provider waived, reimbursed and/or did not 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 MDT Fund and MDT Fund 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
administrator expect to waive and/or reimburse certain amounts. Additionally, the distributor expects not to charge the
distribution (12b-1) fee for Class A Shares. These waivers, reimbursements and /or reductions are shown below along with the net
expenses the Fund expects to pay for the fiscal year ending July 31, 2008.
Total Waivers, Reimbursements and Reductions of Fund Expenses (voluntary) 0.37% 0.30% 0.30%
Total Actual/Anticipated Annual Fund Operating Expenses (after waivers, reimbursements and 2.02% 1.75% 1.75%
reductions)
2 The Adviser for Technology Fund voluntarily waived/reimbursed a portion of the management fee. The Adviser can terminate this
voluntary waiver/reimbursement at any time. The management fee paid by the Fund (after the voluntary waiver/reimbursement) was
0.44% for the fiscal year ended October 31, 2006.
3 Under the investment advisory contract, the Adviser of MDT Fund and MDT Fund 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 and expense reduction 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. This commitment will expire on December 8, 2008.
Pursuant to this contractual commitment, the Adviser of MDT Fund expects to waive its management fee for the fiscal year ending
July 31, 2008. The management fee paid by MDT Fund (after the contractual waiver) is expected to be 0.00% for the fiscal year
ending July 31, 2008. Pursuant to this contractual commitment, the Adviser of MDT Fund Pro Forma Combined expects to waive a
portion of its management fee for the fiscal year ending July 31, 2008. Additionally, the Adviser expects to voluntarily waive a
portion of the management fee for the fiscal year ending July 31, 2008. The management fee paid by MDT Fund Pro Forma Combined
(after the contractual and voluntary waivers) is expected to be 0.10% for the fiscal year ending July 31, 2008.
4 With respect to MDT Fund, Class A Shares did not pay or accrue the distribution (12b-1) fee for the fiscal year ended July 31,
2007. With respect to MDT Fund and MDT Fund Pro Forma Combined, although not contractually obligated to do so, the distributor
expects to voluntarily elect not to charge, and therefore the Fund will not accrue, the distribution (12b-1) fee for the Class A
Shares for the fiscal year ending July 31, 2008.
5 With respect to Technology Fund, this includes a shareholder services/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 record keeping services. The administrator voluntarily waived a portion of its fee. Additionally,
the shareholder services provider did not charge, and therefore the Fund did not accrue, a portion of its fee. The administrator
and shareholder services provider can terminate this voluntary waiver and/or reduction at any time. Total other expenses paid by
Technology Fund's Class A Shares (after the voluntary waiver and reduction) were 1.33% for the fiscal year ended October 31, 2006.
6 With respect to MDT Fund and MDT Fund Pro Forma Combined, this includes a shareholder services/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. With respect to MDT Fund, pursuant to its contractual
commitment, the Adviser expects to reimburse 1.07% of certain operating expenses of the Fund. Additionally, although not
contractually obligated to do so, the Adviser expects to voluntarily reimburse certain operating expenses of the Fund. This
voluntary reimbursement can be terminated at any time. For both MDT Fund and MDT Fund Pro Forma Combined, 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 MDT Fund's Class A Shares and MDT Fund Pro Forma Combined's Class A Shares (after the anticipated voluntary waiver and
reimbursement) are expected to be 1.75% and 1.65%, respectively, for the fiscal year ending July 31, 2008.
7 The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating
expenses (including distribution (12b-1) fees) paid by MDT Fund Class A Shares and MDT Fund Pro Forma Combined Class A Shares
(after the voluntary waivers and reimbursements) will not exceed 1.75% for the fiscal year ending July 31, 2008. Although these
actions are voluntary, the Adviser and its affiliates have agreed not to terminate these waivers or reimbursements until after
September 30, 2008.
EXAMPLE
This example is intended to help you compare the cost of investing in the
indicated Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund 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 the operating expenses of Technology Fund are before voluntary
waivers, reimbursements and reductions as shown in the Table and remain the
same. For MDT Fund and MDT Fund Pro Forma Combined, the one-year dollar
amount and the dollar amounts for the first year of the 3, 5 and 10 Years
columns reflect the contractually imposed expense limitation of 2.05% for
Class A Shares. The second 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 Class A Shares without any waivers,
reimbursements or reductions for the remainder of the year. The third and
later years within the 5 and 10 Years columns reflect the "Total Annual Fund
Operating Expenses" of the Class A Shares without any waivers, reimbursements
or reductions. 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|
| |
| |
| |
|TECHNOLOGY FUND, CLASS A SHARES $779 $1,254 $1,755 $3,126 |
------------------------------------------------------------------------
| |
| MDT FUND, CLASS A SHARES $747 $1,601 $2,551 $4,941 |
------------------------------------------------------------------------
| |
| MDT FUND PRO FORMA |
| COMBINED, CLASS A SHARES $747 $1,601 $2,551 $4,941 |
------------------------------------------------------------------------
- 2 -
FEES AND EXPENSES
This table describes (1) the actual fees and expenses for Technology Fund Class
B Shares for its most recent fiscal year ended October 31, 2006; (2) the
anticipated fees and expenses that you may pay if you buy and hold Class B
Shares of MDT Fund as of its most recent prospectus dated December 17, 2007; and
(3) the pro forma fees and expenses of Class B Shares of MDT Fund on a combined
basis after giving effect to the merger.
MDT
TECHNOLOGY FUND
SHAREHOLDER FEES FUND- CLASS MDT FUND PRO FORMA
B SHARES - CLASS COMBINED
B SHARES -
CLASS B
SHARES
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
None None None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or
redemption proceeds, as applicable) 5.50% 5.50% 5.50%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as
a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (Before Waivers, Reimbursements and Reductions)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.75%2 1.15%3 1.15%3
Distribution (12b-1) Fee 0.75% 0.75% 0.75%
Other Expenses 1.64%4 3.41%5 1.72%5
Total Annual Fund Operating Expenses 3.14%6 5.31%3,6 3.62%3,6
1 With respect to Technology Fund, 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 Adviser, administrator and
shareholder services provider waived, reimbursed and/or did not 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 MDT Fund and MDT Fund Pro Forma
Combined, the percentages shown are based on anticipated expenses for the fiscal period 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
administrator expect to waive and/or reimburse certain amounts. These waivers and reimbursements are shown below along with the
net expenses the Fund expects to pay for the fiscal period ending July 31, 2008.
Total Waivers, Reimbursements and Reductions of Fund Expenses (voluntary) 0.37% 2.81% 1.12%
Total Actual/Anticipated Annual Fund Operating Expenses (after waivers, reimbursements and 2.77% 2.50% 2.50%
reductions)
2 The Adviser for Technology Fund voluntarily waived/reimbursed a portion of the management fee. The Adviser can terminate this
voluntary waiver/reimbursement at any time. The management fee paid by the Fund (after the voluntary waiver/reimbursement) was
0.44% for the fiscal year ended October 31 2006.
3 Under the investment advisory contract, the Adviser of MDT Fund and MDT Fund 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 Share
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. This
commitment will expire on December 8, 2008. Pursuant to this contractual commitment, the Adviser of MDT Fund expects to waive its
management fee for the fiscal year ending July 31, 2008. The management fee paid by MDT Fund (after the contractual waiver) is
expected to be 0.00% for the fiscal year ending July 31, 2008. Pursuant to this contractual commitment, the Adviser of MDT Fund
Pro Forma Combined expects to waive a portion of its management fee for the fiscal year ending July 31, 2008. Additionally, the
Adviser expects to voluntarily waive a portion of the management fee for the fiscal year ending July 31, 2008. The management fee
paid by MDT Fund Pro Forma Combined (after the contractual and voluntary waivers) is expected to be 0.10% for the fiscal year
ending July 31, 2008.
4 With respect to Technology Fund, this includes a shareholder services/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 record keeping services. The administrator voluntarily waived a portion of its fee. Additionally,
the shareholder services provider did not charge, and therefore the Fund did not accrue, a portion of its fee. The administrator
and shareholder services provider can terminate this voluntary waiver and/or reduction at any time. Total other expenses paid by
Technology Fund's Class B Shares (after the voluntary waiver and reduction) were 1.58% for the fiscal year ended October 31, 2006.
5 With respect to MDT Fund and MDT Fund Pro Forma Combined, this includes a shareholder services/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. With respect to MDT Fund, pursuant to its contractual
commitment, the Adviser expects to reimburse 1.07% of certain operating expenses of the Fund. Additionally, although not
contractually obligated to do so, the Adviser expects to voluntarily reimburse certain operating expenses of the Fund. This
voluntary reimbursement can be terminated at any time. For both MDT Fund and MDT Fund Pro Forma Combined, 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 MDT Fund's Class B Shares and MDT Fund Pro Forma Combined's Class B Shares (after the anticipated voluntary waiver and
reimbursement) are expected to be 1.75% and 1.65%, respectively, for the fiscal year ending July 31, 2008.
6 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
indicated Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund 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 the operating expenses of each Fund are BEFORE VOLUNTARY
WAIVERS, REIMBURSEMENTS AND REDUCTIONS as shown in the Table and remain the
same. 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|
|TECHNOLOGY FUND, |
|CLASS B SHARES: |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING REDEMPTION $867 $1,369 $1,845 $3,275 |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING NO REDEMPTION $317 $969 $1,645 $3,275 |
--------------------------------------------------------------------------------
| MDT FUND, CLASS B SHARES: |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING REDEMPTION $1,078 $1,986 $2,835 $5,136 |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING NO REDEMPTION $530 $1,586 $2,635 $5,136 |
--------------------------------------------------------------------------------
| MDT FUND PRO FORMA COMBINED, CLASS B SHARES: |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING REDEMPTION $915 $1,509 $2,074 $3,770 |
--------------------------------------------------------------------------------
| EXPENSES ASSUMING NO REDEMPTION $365 $1,109 $1,874 $3,770 |
--------------------------------------------------------------------------------
- 3 -
FEES AND EXPENSES
This table describes (1) the actual fees and expenses for Technology Fund Class
C Shares for its most recent fiscal year ended October 31, 2006; (2) the
anticipated fees and expenses that you may pay if you buy and hold Class C
Shares of MDT Fund as of its most recent prospectus dated September 30, 2007;
and (3) the pro forma fees and expenses of Class C Shares of MDT Fund on a
combined basis after giving effect to the merger. As described below, the pro
forma operating expenses of MDT Fund are shown after giving effect to a
contractual waiver of expenses by Federated MDTA LLC to limit total operating
expenses to not more than 2.80% which will continue through December 8, 2008.
MDT
TECHNOLOGY FUND
FUND- CLASS MDT PRO FORMA
SHAREHOLDER FEES C SHARES FUND - COMBINED
CLASS C -
SHARES CLASS C
SHARES
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 1.00%1 None None
Through January 31, 2007
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None1 None None
Beginning February 1, 2007
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or
redemption proceeds, as applicable) 1.00% 1.00% 1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as
a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (Before Waivers, Reimbursements and Reductions)2
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.75%3 1.15%4 1.15%4
Distribution (12b-1) Fee 0.75% 0.75% 0.75%
Other Expenses 1.64%5 3.41%6 1.72%6
Total Annual Fund Operating Expenses 3.14% 5.31% 3.62%
Fee Waiver and/or Expense Reimbursement (contractual) 0.00% 2.51% 0.82%
Net Annual Fund Operating Expenses (after contractual waiver and reimbursement) 3.14% 2.80%4,7 2.80%4,7
1 There is a 1.00% front-end sales charge applicable to purchases of Class C Shares on or before 1/31/2007. Effective 2/1/2007,
this front-end sales charge is eliminated.
2 With respect to Technology Fund, 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 Adviser, administrator and
shareholder services provider waived, reimbursed and/or did not 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 MDT Fund and MDT Fund 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 4), the Adviser and
administrator expect to waive and/or reimburse certain amounts. These waivers and reimbursements are shown below along with the
net expenses the Fund expects to pay for the fiscal year ending July 31, 2008.
Total Waivers, Reimbursements and Reductions of Fund Expenses (voluntary) 0.39% 0.30% 0.30%
Total Actual/Anticipated Annual Fund Operating Expenses (after waivers, reimbursements and 2.75% 2.50% 2.50%
reductions)
3 The Adviser for Technology Fund voluntarily waived/reimbursed a portion of the management fee. The Adviser can terminate this
voluntary waiver/reimbursement at any time. The management fee paid by the Fund (after the voluntary waiver/reimbursement) was
0.44% for the fiscal year ended October 31 2006.
4 Under the investment advisory contract, the Adviser of MDT Fund and MDT Fund 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. This commitment will expire on December 8, 2008. Pursuant to this contractual commitment, the
Adviser of MDT Fund expects to waive its management fee for the fiscal year ending July 31, 2008. The management fee paid by MDT
Fund (after the contractual waiver) is expected to be 0.00% for the fiscal year ending July 31, 2008. Pursuant to this
contractual commitment, the Adviser of MDT Fund Pro Forma Combined expects to waive a portion of its management fee for the fiscal
year ending July 31, 2008. Additionally, the Adviser expects to voluntarily waive a portion of the management fee for the fiscal
year ending July 31, 2008. The management fee paid by MDT Fund Pro Forma Combined (after the contractual and voluntary waivers)
is expected to be 0.10% for the fiscal year ending July 31, 2008.
5 With respect to Technology Fund, this includes a shareholder services/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 record keeping services. The administrator voluntarily waived a portion of its fee. Additionally,
the shareholder services provider did not charge, and therefore the Fund did not accrue, a portion of its fee. The administrator
and shareholder services provider can terminate this voluntary waiver and/or reduction at any time. Total other expenses paid by
Technology Fund's Class C Shares (after the voluntary waiver and reduction) were 1.56% for the fiscal year ended October 31, 2006.
6 With respect to MDT Fund and MDT Fund Pro Forma Combined, this includes a shareholder services/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. With respect to MDT Fund, pursuant to its contractual
commitment, the Adviser expects to reimburse 1.07% of certain operating expenses of the Fund. Additionally, although not
contractually obligated to do so, the Adviser expects to voluntarily reimburse certain operating expenses of the Fund. This
voluntary reimbursement can be terminated at any time. For both MDT Fund and MDT Fund Pro Forma Combined, the administrator
expects to voluntarily waive a portion of its fee. This voluntary waiver can be terminated any time. Total other expenses paid by
MDT Fund's Class C Shares and MDT Fund Pro Forma Combined's Class C Shares (after the anticipated voluntary waiver and
reimbursement) are expected to be 1.75% and 1.65%, respectively, for the fiscal year ending July 31, 2008.
7 The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating
expenses (including distribution (12b-1) fees) paid by MDT Fund Class C Shares and MDT Fund Pro Forma Combined Class C Shares
(after the voluntary waivers and reimbursements) will not exceed 2.50% for the fiscal year ending July 31, 2008. Although these
actions are voluntary, the Adviser and its affiliates have agreed not to terminate these waivers or reimbursements until after
September 30, 2008.
EXAMPLE
This example is intended to help you compare the cost of investing in the
indicated Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund 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 the operating expenses of Technology Fund are before voluntary
waivers, reimbursements and reductions as shown in the Table and remain the
same. For MDT Fund and MDT Fund Pro Forma Combined, the one-year dollar
amount and the dollar amounts for the first year of the 3, 5 and 10 Years
columns reflect the contractually imposed expense limitation of 2.80% for
Class C Shares. The second 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 Class C Shares without any waivers,
reimbursements or reductions for the remainder of the year. The third and
later years within the 5 and 10 Years columns reflect the "Total Annual Fund
Operating Expenses" of the Class C Shares without any waivers, reimbursements
or reductions. 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
TECHNOLOGY FUND, CLASS C SHARES THROUGH JANUARY 31, 20071:
EXPENSES ASSUMING REDEMPTION $514 $1,059 $1,728 $3,514
EXPENSES ASSUMING NO REDEMPTION $414 $1,059 $1,728 $3,514
TECHNOLOGY FUND, CLASS C SHARES BEGINNING
FEBRUARY 1, 20071:
EXPENSES ASSUMING REDEMPTION $417 $969 $1,645 $3,448
EXPENSES ASSUMING NO REDEMPTION $317 $969 $1,645 $3,448
MDT FUND, CLASS C SHARES:
EXPENSES ASSUMING REDEMPTION $383 $1,286 $2,370 $5,052
EXPENSES ASSUMING NO REDEMPTION $283 $1,286 $2,370 $5,052
MDT FUND PRO FORMA COMBINED, CLASS C SHARES:
EXPENSES ASSUMING REDEMPTION $383 $1,286 $2,370 $5,052
EXPENSES ASSUMING NO REDEMPTION $283 $1,286 $2,370 $5,052
1 There is a 1.00% front-end sales charge applicable to purchases of Class C
Shares on or before 1/31/2007. Effective
2/1/2007, this front-end sales charge is eIiminated.
- 4 -
COMPARISON OF POTENTIAL RISKS AND REWARDS: PERFORMANCE INFORMATION
TECHNOLOGY FUND
RISK/RETURN BAR CHART AND TABLE
The performance information shown below will help you analyze the Fund's
investment risks in light of its historical returns. The bar chart shows the
variability of the Fund's Class A Shares total returns on a calendar year-by-
year basis. The Average Annual Total Return table shows returns averaged over
the stated periods, and includes comparative performance information. The Fund's
performance will fluctuate, and past performance (before and after taxes) is no
guarantee of future results.
The "y" axis reflects the "% Total Return" beginning with "-60%" and increasing
in increments of 10% up to 60%.
The "x" axis represents calculation periods from the earliest first full
calendar year end of the Technology Fund's Start of Performance through the
calendar year ended 2006. The light gray shaded chart features seven distinct
vertical bars, each shaded in black, and each visually representing by height
the total return percentages for the calendar year. The calculated total
return percentage for the Technology Fund is stated at the top of each
respective bar for the calendar years ended 2000 through 2006. The percentages
notes are (45.18)%, (46.53)%, (39.85)%, 56.23%, 5.84%, 0.37%, and 4.24%,
respectively.
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.
THE FUND'S CLASS A SHARES TOTAL RETURN FOR THE NINE-MONTH PERIOD FROM JANUARY 1,
2007 TO SEPTEMBER 30, 2007 WAS 20.35%.
WITHIN THE PERIOD SHOWN IN THE BAR CHART, THE FUND'S CLASS A SHARES HIGHEST
QUARTERLY RETURN WAS 25.71% (QUARTER ENDED JUNE 30, 2003). ITS LOWEST QUARTERLY
RETURN WAS (39.32)% (QUARTER ENDED DECEMBER 31, 2000).
AVERAGE ANNUAL TOTAL RETURN TABLE
The Average Annual Total Returns for the Fund's Class A Shares, Class B Shares
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 the Fund'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 NASDAQ Composite Index (NCI), a broad-based market index, the
Merrill Lynch 100 Technology Index (MLT 100), an index measuring the
performance of a cross section of large, actively traded technology stocks and
ADRs, and the Lipper Science & Technology Funds Average (LSTFA), an average of
funds with similar objectives. The LSTFA returns do not reflect taxes and sales
charges but do reflect other expenses and fees that the SEC requires to be
reflected in a fund's performance. Index returns do not reflect taxes, sales
charges, expenses or other fees that the SEC requires to be reflected in the
fund's performance. Indexes are unmanaged and it is not possible to invest
directly in an index or an average.
- 5 -
(For the periods ended December 31, 2006)
1 YEAR 5 YEAR START OF PERFORMANCE1
CLASS A SHARES:
Return Before Taxes (1.57)% (0.49)% (8.24)%
Return After Taxes on Distributions2 (1.57)% (0.49)% (8.25)%
Return After Taxes on Distributions and Sale of Fund Shares2
(1.02)% (0.41)% (6.68)%
CLASS B SHARES:
Return Before Taxes (2.02)% (0.51)% (8.21)%
CLASS C SHARES:
Return Before Taxes3 1.50% (0.30)% (8.34)%
NCI4 10.39% 4.98% (1.64)%
MLT 1004 11.24% 4.70% (1.90)%
LSTFA5 7.28% 1.17% (7.98)%
1 The Fund's Class A, Class B and Class C Shares start of performance date
was September 21, 1999.
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 for Class B Shares and Class C Shares will
differ from those shown above for Class A Shares. After-tax returns are
not relevant to investors holding Shares through tax-deferred programs,
such as IRA or 401(k) plans.
3 The returns shown for Class C Shares include the effect of a 1.00% front-
end sales charge on Class C Shares purchased on or before January 31,
2007. Effective February 1, 2007, this front-end sales charge was
eliminated.
4 The NCI is an unmanaged index that measures all NASDAQ domestic and non-
U.S. based common stocks listed on the NASDAQ Stock Market. The MLT 100 is
an unmanaged, equal dollar weighted index of 100 stocks designed to
measure the performance of a cross section of large, actively traded
technology stocks and ADRs, The index was developed with a base value of
200 as of January 30, 1998.
5 Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper, Inc. as falling into the
category indicated. These figures do not reflect sales charges.
- 6 -
MDT FUND
{capital-tau}RISK/RETURN BAR CHART AND TABLE CLASS A SHARES
The Fund is the successor to MDT Small Cap Growth Fund pursuant to a
reorganization that was completed on the close of business on December 8, 2006.
Prior to that date, the Fund 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 MDT Small
Cap Growth Fund. MDT Small Cap Growth Fund was managed by MDT Advisers and had
similar investment objectives and strategies as the Fund.
The performance information shown below will help you analyze the Fund's
investment risks in light of its historical returns. The bar chart shows the
variability of the Fund's Class A Shares total return on a calendar year-by-year
basis. The Average Annual Total Return table shows returns averaged over the
stated periods, and includes comparative performance information. The Fund's
performance will fluctuate, and past performance (before and after taxes) is no
guarantee of future results.
The "y" axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 2% up to 10%.
The "x" axis represents calculation periods from the earliest first full
calendar year end of the MDT Fund's Start of Performance through the calendar
year ended 2006. The light gray shaded chart features one distinct vertical
bar, shaded in black, and each visually representing by height the total return
percentage for the calendar year. The calculated total return percentage for
the MDT Fund is stated at the top of the respective bar for the calendar year
ended 2006. The percentage notes is 9.45%.
THE TOTAL RETURN SHOWN IN THE BAR CHART DOES NOT REFLECT THE PAYMENT OF ANY
SALES CHARGES OR RECURRING SHAREHOLDER ACCOUNT FEES. IF THESE CHARGES OR FEES
HAD BEEN INCLUDED, THE RETURN SHOWN WOULD HAVE BEEN LOWER.
THE FUND'S CLASS A SHARES TOTAL RETURN FOR THE SIX-MONTH PERIOD FROM JANUARY 1,
2007 TO JUNE 30, 2007 WAS 17.09%.
WITHIN THE PERIOD SHOWN IN THE BAR CHART, THE FUND'S CLASS A SHARES HIGHEST
QUARTERLY RETURN WAS 15.91% (QUARTER ENDED MARCH 31, 2006). ITS LOWEST QUARTERLY
RETURN WAS (7.62)% (QUARTER ENDED SEPTEMBER 30, 2006).
{capital-tau}AVERAGE ANNUAL TOTAL RETURN TABLE
The Average Annual Total Returns for the Fund's Class A Shares are reduced to
reflect all applicable sales charges. Return Before Taxes is shown for all
Classes. In addition, Return After Taxes is shown for the Fund'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
2000{reg-trade-mark} Growth Index and the Lipper Small-Cap Growth Funds Index.
Returns of the Russell 2000{reg-trade-mark} Growth Index do not reflect taxes,
sales charges, expenses or other fees that the SEC requires to be reflected in
the Fund's performance. The Russell 2000{reg-trade-mark} Growth Index is
unmanaged and, unlike the Fund, is not affected by cash flows. It is not
possible to invest directly in an index.
{capital-tau}(For the Periods Ended December 31, 2006)
1 YEAR START OF
PERFORMANCE1
CLASS A SHARES:
Return Before Taxes 3.46% 5.57%
Return After Taxes on Distributions2 3.46% 5.57%
Return After Taxes on Distributions and Sale of Fund Shares2 2.25% 4.74%
CLASS C SHARES:3
Return Before Taxes 7.70% 9.51%
RUSSELL 2000{reg-trade-mark} GROWTH INDEX4 13.35% 12.30%
LIPPER SMALL-CAP GROWTH FUNDS INDEX5 10.65% 9.95%
{capital-tau}
1 The start of performance date for the Fund's Class A Shares and Class C Shares
was 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 Historical returns do not include the effect of a 1.00% front-end sales charge
on Class C Shares purchased prior to February 1, 2007. Effective February 1,
2007, this sales charge was eliminated.
4 The Russell 2000{reg-trade-mark} Growth Index measures the performance of
those Russell 2000 companies with higher price-to-book ratios and higher
forecasted growth values.
5 The Lipper Small-Cap Growth Funds Index is an average of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies
with market capitalizations (on a three-year weighted basis) less than 250% of
the dollar-weighted median of the smallest 500 of the middle 1,000 securities
of the S&P SuperComposite 1500 Index. Small-cap growth funds typically have an
average price-to-earnings ratio, price-to-book ratio, and three-year sales-
per-share growth value, compared to the S&P SmallCap 600 Index.
- 7 -
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Attached as Exhibit B to this Prospectus/Proxy Statement is the
Management's Discussion of Fund Performance and a line graph for the most recent
fiscal year for Technology Fund and MDT Fund.
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its 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 the Fund, 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 the Fund's audited financial statements, is included in the Annual Report.
As discussed in the Annual Report, the information for prior years was audited
by Deloitte & Touche LLP, another independent registered public accounting firm.
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 ending October 31, 2006. On the same date,
the Fund's former auditor, Deloitte & Touche LLP resigned. See the Fund's Annual
Report for further information regarding the change in independent registered
public accounting firm.
- 8 -
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 PERIOD $5.20 $5.06 $4.96 $3.33 $4.76
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.08 )2 (0.07 ) (0.09 )2 (0.06 )2 (0.08 )2
Net realized and unrealized gain (loss) on investments, 0.41 0.21 0.19 1.69 (1.35 )
futures contracts and foreign currency transactions
TOTAL FROM INVESTMENT OPERATIONS 0.33 0.14 0.10 1.63 (1.43 )
NET ASSET VALUE, END OF PERIOD $5.53 $5.20 $5.06 $4.96 $3.33
TOTAL RETURN3 6.35 % 2.77 % 2.02 %4 48.95 % (30.04 )%
RATIOS TO AVERAGE NET ASSETS:
Net expenses 2.02 %5 2.00 %5 2.01 %5 2.01 %5 2.04 %5
Net investment income (loss) (1.49 )% (1.24 )% (1.72 )% (1.66 )% (1.68 )%
Expense waiver/reimbursement6 0.37 % 0.16 % 0.19 % 0.35 % 0.12 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $21,809 $27,412 $33,111 $43,274 $29,632
Portfolio turnover 87 % 71 % 78 % 96 % 174 %
1 For the year ended October 31, 2006, the Fund was audited by KPMG LLP. The
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 During the period, the Fund was reimbursed by the Adviser, which had an impact
of 0.21% on the total return.
5 The net expense ratio is calculated without reduction for fees paid indirectly
for directed brokerage arrangements. The net expense ratios are 2.01%, 1.99%,
2.00%, 2.01%, and 2.04% after taking into account these expense reductions for
the years ended October 31, 2006, 2005, 2004, 2003, and 2002, respectively.
6 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 2006, which can be obtained free of charge.
- 9 -
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 PERIOD $4.97 $4.87 $4.81 $3.25 $4.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.12 )2 (0.12 ) (0.12 )2 (0.09 )2 (0.11 )2
Net realized and unrealized gain (loss) on investments, 0.40 0.22 0.18 1.65 (1.32 )
futures contracts and foreign currency transactions
TOTAL FROM INVESTMENT OPERATIONS 0.28 0.10 0.06 1.56 (1.43 )
NET ASSET VALUE, END OF PERIOD $5.25 $4.97 $4.87 $4.81 $3.25
TOTAL RETURN3 5.63 % 2.05 % 1.25 %4 48.00 % (30.56 )%
RATIOS TO AVERAGE NET ASSETS:
Net expenses 2.77 %5 2.75 %5 2.76 %5 2.76 %5 2.79 %5
Net investment income (loss) (2.24 )% (1.98 )% (2.47 )% (2.41 )% (2.43 )%
Expense waiver/reimbursement6 0.37 % 0.16 % 0.19 % 0.35 % 0.12 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $38,621 $51,836 $68,981 $84,252 $66,179
Portfolio turnover 87 % 71 % 78 % 96 % 174 %
1 For the year ended October 31, 2006, the Fund was audited by KPMG LLP. The
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 During the year, the Fund was reimbursed by the Adviser, which had an impact
of 0.21% on the total return.
5 The net expense ratio is calculated without reduction for fees paid indirectly
for directed brokerage arrangements. The net expense ratios are 2.76%, 2.74%,
2.75%, 2.76%, and 2.79% after taking into account these expense reductions for
the years ended October 31, 2006, 2005, 2004, 2003 and 2002, respectively.
6 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 2006, which can be obtained free of charge.
- 10 -
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 PERIOD $4.97 $4.87 $4.81 $3.25 $4.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.11 )2 (0.12 ) (0.12 )2 (0.09 )2 (0.11 )2
Net realized and unrealized gain (loss) on investments, futures 0.39 0.22 0.18 1.65 (1.32 )
contracts and foreign currency transactions
TOTAL FROM INVESTMENT OPERATIONS 0.28 0.10 0.06 1.56 (1.43 )
NET ASSET VALUE, END OF PERIOD $5.25 $4.97 $4.87 $4.81 $3.25
TOTAL RETURN3 5.63 % 2.05 % 1.25 %4 48.00 % (30.56 )%
RATIOS TO AVERAGE NET ASSETS:
Net expenses 2.75 %5 2.75 %5 2.76 %5 2.76 %5 2.79 %5
Net investment income (loss) (2.22 )% (1.97 )% (2.47 )% (2.41 )% (2.43 )%
Expense waiver/reimbursement6 0.37 % 0.16 % 0.19 % 0.35 % 0.12 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $7,291 $9,265 $12,551 $16,096 $13,055
Portfolio turnover 87 % 71 % 78 % 96 % 174 %
1 For the year ended October 31, 2006, the Fund was audited by KPMG LLP. The
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 During the year, the Fund was reimbursed by the Adviser, which had an impact
of 0.21% on the total return.
5 The net expense ratio is calculated without reduction for fees paid indirectly
for directed brokerage arrangements. The net expense ratios are 2.74%, 2.74%,
2.75%, 2.76%, and 2.79% after taking into account these expense reductions for
the years ended October 31, 2006, 2005, 2004, 2003, and 2002, respectively.
6 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 2006, which can be obtained free of charge.
- 11 -
MDT FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's Class A Shares and
Class C Shares financial performance for its past five fiscal years, or since
inception, if the life of the Fund is shorter. The Fund's fiscal year end is
July 31. The effective date of the Fund's Class B Shares is December 17, 2007.
As the Class B shares first fiscal year end is July 31, 2008, the audited
financial information for the Class B shares is not yet available.
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
the Fund, assuming reinvestment of any dividends and capital gains.
This information has been audited by Ernst & Young LLP, an independent
registered public accounting firm, whose report, along with the Fund's audited
financial statements, is included in the Annual Report.
MDT Small Cap Growth Fund (Predecessor Fund) was reorganized into Federated MDT
Small Cap Growth Fund (Fund), a portfolio of Federated MDT Series, as of the
close of business on December 8, 2006. Prior to the reorganization, the Fund had
no investment operations. The Fund is the successor to the Predecessor Fund. The
information presented incorporates all operations of the Predecessor Fund,
which, as a result of the reorganization, are the Fund's operations.
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED 1 PERIOD 2
7/31/2007 ENDED
7/31/2006
NET ASSET VALUE, BEGINNING OF PERIOD $10.59 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.14 )3 (0.17 )3
Net realized and unrealized gain on investments 2.50 0.76
TOTAL FROM INVESTMENT OPERATIONS 2.36 0.59
NET ASSET VALUE, END OF PERIOD $12.95 $10.59
TOTAL RETURN4 22.29 % 5.90 %
RATIOS TO AVERAGE NET ASSETS:
Net expenses 1.75 % 2.02 %5
Net investment income (loss) (1.16 )% (1.50 )%5
Expense waiver/reimbursement6 25.97 % 22.65 %5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $532 $157
Portfolio turnover 157 % 157 %
1 MDT Small Cap Growth Fund (the "Predecessor Fund") was reorganized into
Federated MDT Small Cap Growth Fund (the "Fund") as of the close of business
on December 8, 2006. Prior to the reorganization, the Fund had no investment
operations. The Fund is the successor to the Predecessor Fund. The perfor-
mance information and financial information presented incorporates the
operations of the Predecessor Fund, which, as a result of the reorganization,
are the Fund's operations.
2 Reflects operations for the period from September 15, 2005 (date of initial
public investment) to
July 31, 2006.
3 Per share numbers have been calculated using the average shares method.
4 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 are not annualized.
5 Computed on an annualized basis.
6 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated July 31, 2007, which can be obtained free of charge.
- 12 -
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED 1 PERIOD 2
7/31/2007 ENDED
7/31/2006
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.23 )3 (0.26 )3
Net realized and unrealized gain on investments 2.48 0.78
TOTAL FROM INVESTMENT OPERATIONS 2.25 0.52
NET ASSET VALUE, END OF PERIOD $12.77 $10.52
TOTAL RETURN4 21.39 % 5.20 %
RATIOS TO AVERAGE NET ASSETS:
Net expenses 2.50 % 2.77 %5
Net investment income (loss) (1.92 )% (2.25 )%5
Expense waiver/reimbursement6 27.07 % 25.65 %5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $702 $348
Portfolio turnover 157 % 157 %
1 The Predecessor Fund was reorganized into the Fund as of the close of business
on December 8, 2006. Prior to the reorganization, the Fund had no investment
operations. The Fund is the successor to the Predecessor Fund. The performance
information and financial information presented incorporates the operations of
the Predecessor Fund, which, as a result of the reorganization, are the Fund's
operations.
2 Reflects operations for the period from September 15, 2005 (date of initial
public investment) to
July 31, 2006.
3 Per share numbers have been calculated using the average shares method.
4 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 are not annualized.
5 Computed on an annualized basis.
6 This expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated July 31, 2007, which can be obtained free of charge.
- 13 -
INVESTMENT ADVISER
The investment adviser for MDT Fund is MDT Adviser. The Board of MDT Fund
selects and oversees MDT Adviser. MDT Adviser manages MDT Fund's assets,
including buying and selling portfolio securities. MDT Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940. The address of
MDT Adviser is 125 Cambridge Park Drive, Cambridge, MA 02140.
The investment adviser for Technology Fund is Technology Adviser. The
Board of Technology Fund selects and oversees Technology Adviser. Technology
Adviser manages Technology Fund's assets, including buying and selling portfolio
securities. Technology Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940. The address of Technology Adviser is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
Each Adviser is a subsidiary 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 MANAGER INFORMATION
TECHNOLOGY FUND
The following individuals serve as portfolio managers for Technology Fund:
{capital-tau}MICHAEL R. TUCKER
Michael R. Tucker has been Technology Fund's Portfolio Manager since March
2000. Mr. Tucker joined Federated in June 1993 as a Research Assistant. He
became a Vice President of Technology Adviser in January 2005 and served as
Assistant Vice President to Technology Adviser from March 2000 through 2004. Mr.
Tucker has been a Portfolio Manager 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.
{capital-tau}DANA L. MEISSNER
Dana L. Meissner has been Technology Fund's Portfolio Manager since
January 2003. Mr. Meissner joined Federated in May 2000 as an Investment Analyst
of Technology Adviser. Mr. Meissner was an engineering consultant with AEA
Technology Engineering Software from December 1994 through August 1998. Mr.
Meissner is a Chartered Financial Analyst and received an M.S. in Industrial
Administration, with concentrations in Finance and Accounting, from Carnegie
Mellon University in May 2000. He also holds an M.S. and B.S. in Mechanical
Engineering from the University of Toledo.
The Fund's SAI provides additional information about the Portfolio
Managers' compensation, management of other accounts, and ownership of
securities in the Fund.
MDT FUND:
The following individuals serve as portfolio managers for MDT Fund:
MDT Fund is managed by the Federated MDTA LLC Investment Team (the
"Investment Team"), headed by Dr. David M. Goldsmith, who is primarily
responsible for the day-to-day management of the Fund.
MDT Fund is the successor to MDT Small Cap Growth Fund pursuant to a
reorganization that was completed on December 8, 2006. Prior to that date the
Fund had no investment operations. Dr. Goldsmith has been the portfolio manager
of the Fund since December 11, 2006, and prior thereto was the portfolio manager
of MDT Small Cap Growth Fund since its inception in September 2005.
Dr. David M. Goldsmith, Ph.D., Chief Investment Officer, joined MDT
Advisers (the predecessor to the MDT Adviser) 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.
The Fund's SAI provides additional information about the Portfolio
Manager's 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 Technology Fund is 0.75% of
Technology Fund's average daily net assets. Technology Adviser may voluntarily
choose to waive a portion of its advisory fee or reimburse other expenses of
Technology Fund. This voluntary waiver or reimbursement may be terminated by
Technology Adviser at any time in its sole discretion.
The annual investment advisory fee for MDT Fund is 1.15% of MDT Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Board of Trustees of Federated MDT Series, MDT
Adviser will waive the amount, limited to the amount of the advisory fee, by
which MDT Fund's aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions, expenses of
registering or qualifying MDT Fund and its shares under federal and state laws
and regulations, expenses of withholding taxes, and extraordinary expenses
exceed 2.05% for Class A Shares and 2.80% for Class C Shares of its average
daily net assets. MDT Adviser has agreed to keep these contractual limitations
in place through December 8, 2008. The advisory fee for MDT Fund'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. In addition, MDT Adviser may
voluntarily choose to waive a portion of its advisory fee or reimburse other
expenses of MDT Fund. This voluntary waiver or reimbursement may be terminated
by MDT Adviser at any time in its sole discretion.
A discussion of the review of Technology Fund's investment advisory
contract by the Board of Trustees of the Trust is available in Technology Fund's
Semi-Annual Report dated April 30, 2007. A discussion of the review of MDT
Fund's investment advisory contract by the Board of Trustees of MDT Trust is
available in MDT Fund's Annual Report dated July 31, 2007.
ADMINISTRATIVE FEES
Federated Administrative Services ("FAS"), an affiliate of the Technology
Adviser and MDT Adviser, serves as administrator to each of Technology Fund and
MDT Fund 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 Technology Fund's fiscal year ended October 31, 2007 was $185,638, or 0.29%
of average daily net assets.
The administrative fee for the period from July 15, 2006 through July 31,
2006 was pro-rated for MDT Fund. During the period from July 15, 2006 through
July 31, 2006, FAS contractually agreed to waive the portion of its fee which it
would otherwise be entitled to receive from MDT Fund. The net administrative
fee expense charged by FAS for MDT Fund for its fiscal year ended July 31, 2007
was $123,643 or 2.39% of average daily net assets.
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
Technology Fund and MDT Fund may pay a Service Fee of up to 0.25% of
average net assets to financial intermediaries, or to Federated Shareholder
Services Company (FSSC), a subsidiary of Federated, for providing services to
shareholders and maintaining shareholder accounts. Intermediaries that receive
Service Fees may include a company affiliated with management of Federated. If
a financial intermediary receives Service Fees on an account, it is not eligible
to also receive Account Administration Fees on the same account.
RULE 12B-1 FEES
Federated Securities Corp. ("FSC"), an affiliate of the Advisers, is the
principal distributor (the "Distributor") for shares of the Funds. Both Funds
have adopted a Rule 12b-1 Distribution Plan (the "Distribution Plan") which
allows them to pay marketing fees of up to 0.25% of average net assets of the
Fund's Class A Shares and 0.75% of average net assets of the Fund's Class B
Shares and Class C Shares to the Distributor for the sale, distribution,
administration and customer servicing of the Fund's Class A, Class B and Class C
Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all
of them to financial intermediaries whose customers purchase Shares. Because
the Fund pays marketing fees in respect of these share classes on an ongoing
basis, your investment cost in these shares may be higher over time than would
be an investment in other shares with different sales charges and marketing
fees.
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 the Funds' 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 Funds to you. In some cases, such payments may be made by or funded from
the resources of companies affiliated with the Distributor (including the
Advisers). These payments are not reflected in the fees and expenses listed in
the fee table section of the Funds' prospectuses and described above because
they are not paid by the Funds.
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 Funds 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 Funds 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
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 MDT Fund's Shares are substantially the same as the procedures
applicable to the purchase, exchange, and redemption of Technology Fund's
Shares. Reference is made to the Prospectuses of MDT Fund and the Prospectus of
Technology Fund, each of which is incorporated by reference, for a complete
description of the purchase, exchange, and redemption procedures applicable to
MDT Fund's Shares and Technology Fund's Shares, respectively. Set forth below
is a brief description of the significant purchase, exchange, and redemption
procedures applicable to MDT Fund's and Technology Fund's Shares.
PURCHASES
Shares of Technology Fund and MDT Fund may be purchased 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). When the Funds hold securities that trade in foreign
markets on days the NYSE is closed, the value of the Funds' assets may change on
days you cannot purchase or redeem Shares. NAV 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 an 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 Funds' 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 and are 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.
- 14 -
There is no front-end sales charge upon purchase of Class B or Class C
Shares. However, upon redemption, holders of both MDT Fund's and Technology
Fund'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:
-----------------------------------------------------
|SHARES HELD UP TO:|CONTINGENT DEFERRED 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
minimum amounts for each Fund:
FUND INITIAL SUBSEQUENT SYSTEMATIC INVESTMENT PROGRAM INITIAL/SUBSEQUENT
INVESTMENT INVESTMENT MINIMUM INVESTMENT MINIMUM
MINIMUM
TECHNOLOGY FUND/ MDT FUND - CLASS $1,500 $100 $50/$50
A SHARES
TECHNOLOGY FUND/ MDT FUND - CLASS $1,500 $100 $50/$50
B SHARES
TECHNOLOGY FUND/ MDT FUND - CLASS $1,500 $100 $50/$50
C SHARES
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 MDT
Adviser, and former members of the Memorial Drive Trust, the required minimum
initial investment of MDT Fund shares is $1,000.
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) Systematic
Investment Program: all classes 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, the Funds at 1-800-341-7400.
DIVIDENDS AND DISTRIBUTIONS; TAX INFORMATION; FREQUENT TRADING; PORTFOLIO
HOLDINGS DISCLOSURE POLICY
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
It is anticipated that both Funds' distributions will be primarily capital
gains. The Funds' distributions of dividends and capital gains are taxable to
you whether paid in cash or reinvested in the Fund. Dividends are taxable at
different rates depending on the source of dividend income. Capital gains are
taxable at different rates depending upon the length of time the Fund holds 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 them 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 distributions by the Funds. Investors engaged in such
trading may also seek to profit by anticipating changes in a Fund's 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 its 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 February 22, 2008. On the Closing Date, all
of the assets of Technology Fund will be transferred to MDT Fund. In exchange
for the transfer of these assets, MDT Fund will simultaneously issue to
Technology Fund a number of full and fractional Class A Shares, Class B Shares
and Class C Shares of MDT Fund equal in value to the aggregate NAV of the Class
A, Class B Shares and Class C Shares, respectively, of Technology Fund
calculated as of 4:00 p.m. on the Closing Date.
The value of Technology Fund's assets to be acquired by MDT Fund shall be
the value of such assets at the Closing Date of the Reorganization using the
valuation procedures set forth in MDT Fund's Declaration of Trust and its
current Prospectus and SAI, or such other valuation procedures as Technology
Fund and MDT Fund shall mutually agree. There are no material differences
between the valuation procedures of Technology Fund and MDT Fund. The Funds
generally value 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). 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.
The Funds generally value total return swaps based upon a valuation model
determined by management incorporating underlying reference indexes, interest
rates, yield curves and other market data or factors. The Funds value
investments in other registered open-end investment companies at NAV. If prices
are not available from an independent pricing service, securities and derivative
contracts 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 security or
contract as provided by an investment dealer or other financial institution that
deals in the security or contract.
Technology Fund will discharge all of its liabilities and obligations
prior to consummation of the Reorganization. Following the transfer of its
assets in exchange for Class A Shares, Class B Shares and Class C Shares of MDT
Fund, Technology Fund will distribute the Class A Shares, Class B Shares and
Class C Shares of MDT Fund pro rata to shareholders of record of Class A Shares,
Class B Shares and Class C Shares of Technology Fund, respectively, in complete
liquidation of Technology Fund. Shareholders of Technology Fund owning shares
on the Closing Date of the Reorganization will receive that number of Class A
Shares, Class B Shares and Class C Shares, respectively, of MDT Fund which have
the same aggregate value as the shareholder held in Technology Fund immediately
before the Reorganization. This distribution will be accomplished by the
establishment of accounts in the names of Technology Fund's shareholders on the
share records of MDT Fund's transfer agent. MDT Fund does not issue share
certificates to shareholders.
Following the consummation of the Reorganization, Technology Fund will
then be terminated; the Trust will amend its Declaration of Trust to remove
Technology Fund as a series of the Trust.
The transfer of shareholder accounts from Technology Fund to MDT Fund will
occur automatically. It is not necessary for Technology Fund 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 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 Technology
Fund's shareholders; and (ii) the receipt by the Trust and MDT Trust of an
opinion to the effect that the Reorganization will be tax-free to Technology
Fund, its shareholders and MDT Fund. 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 or the Trustees
determines that the Reorganization is not in the best interest of the
shareholders of Technology Fund or MDT Fund, respectively.
The expenses of the Reorganization will be paid by MDT 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 Technology Fund and
MDT Fund; proxy solicitation costs; and other related administrative or
operational costs. Any brokerage charges associated with the purchase or
disposition of portfolio securities by Technology Fund prior to the
Reorganization will be borne by Technology Fund.
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 MDT FUND'S SHARE CLASSES AND CAPITALIZATION
Class A Shares, Class B Shares and Class C Shares of MDT Fund to be issued
to shareholders of Technology Fund'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 MDT Fund
provided herewith for additional information about Class A Shares, Class B
Shares and Class C Shares of MDT Fund.
The following tables sets forth the unaudited capitalization of MDT
Fund's and Technology Fund's Class A Shares, Class B Shares and Class C Shares
as of November 12, 2007 and on a pro forma combined basis after giving effect to
the Reorganization as of that date:
Net Asset Value Per
Fund Total Net Shares Share
Assets* Outstanding
Federated Technology Fund - Class A Shares
$20,481,054 3,305,290 $6.20
Adjustments - (1,702,704)
Federated MDT Small Cap Growth Fund - Class A Shares
$1,623,213 126,981 $12.78
Federated MDT Small Cap Growth Fund, Pro Forma Combined - Class A
Shares
$22,104,267 1,729,567 $12.78
Federated Technology Fund - Class B Shares
$31,154,934 5,345,311 $5.83
Adjustments - (2,922,688)
Federated MDT Small Cap Growth Fund - Class B Shares
$0 0 $12.86
Federated MDT Small Cap Growth Fund, Pro Forma Combined - Class B
Shares
$31,154,934 2,422,623 $12.86
Federated Technology Fund - Class C Shares
$6,521,704 1,117,944 $5.83
Adjustments - (599,526)
Federated MDT Small Cap Growth Fund - Class C Shares
$1,265,864 100,663 $12.58
Federated MDT Small Cap Growth Fund, Pro Forma Combined - Class C
Shares
$7,787,568 619,081 $12.58
* Does not reflect additional $26,120,241 of net assets of Federated MDT Small
Cap Growth Fund represented by the Institutional Share class.
FEDERAL TAX CONSEQUENCES
As a condition to the Reorganization, MDT Fund and Technology Fund 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:
{circle}the Reorganization as set forth in the Plan will constitute a tax-
free reorganization under section 368(a) of the Code, and Technology Fund
and MDT Fund each will be a "party to a reorganization" within the meaning
of section 368(b) of the Code;
{circle}no gain or loss will be recognized by MDT Fund upon its receipt of
Technology Fund's assets in exchange for Class A Shares, Class B Shares
and Class C Shares of MDT Fund;
{circle}no gain or loss will be recognized by Technology Fund upon transfer
of its assets to MDT Fund in exchange for MDT Fund Class A Shares, Class B
Shares and Class C Shares or upon the distribution of MDT Fund's shares to
Technology Fund's shareholders in exchange for their Class A Shares, Class
B Shares and Class C Shares, respectively;
{circle}no gain or loss will be recognized by shareholders of Technology Fund
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, respectively, of MDT
Fund;
{circle}the aggregate tax basis of the Class A Shares, Class B Shares and
Class C Shares of MDT Fund received by each shareholder of Technology Fund
pursuant to the Plan will be the same as the aggregate tax basis of the
shares of Technology Fund held by such shareholder immediately prior to
the Reorganization;
{circle}the holding period of MDT Fund's Class A Shares, Class B Shares and
Class C Shares received by each shareholder of Technology Fund pursuant to
the Plan will include the period during which Technology Fund Class A
Shares, Class B Shares and Class C Shares, respectively, exchanged
therefor were held by such shareholder, provided the shares of Technology
Fund were held as capital assets on the date of the Reorganization;
{circle}the tax basis of the assets of Technology Fund acquired by MDT Fund
will be the same as the tax basis of such assets to Technology Fund
immediately prior to the Reorganization; and
{circle}the holding period of Technology Fund's assets in the hands of MDT
Fund will include the period during which those assets were held by
Technology Fund.
Based on projections as of __________, Technology Fund will have
approximately $498 million of capital loss carryforwards available to be
transferred to MDT Fund in the Reorganization. It is anticipated that any
capital loss carryforwards of Technology Fund which were generated prior to the
Reorganization and which are unutilized at the time of the Reorganization will
remain available to MDT Fund following the Reorganization, subject to any
applicable limitations under the Code, (including the annual expiration of the
various carryforward periods through 2010).
The foregoing opinion may state that no opinion is expressed as to the
effect of the Reorganization on MDT Fund, Technology Fund or Technology Fund'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 Technology Fund 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.
Because Technology Fund has a capital loss carry-forward greatly in excess
of its unrealized capital gains, there will be no capital gains distribution by
Technology Fund before the Closing Date, even if capital gains are realized in
dispositions of portfolio securities in connection with the Reorganization.
Technology Fund will distribute to shareholders any previously undistributed
ordinary income accumulated prior to the Reorganization.
- 15 -
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
Both the Trust and MDT Trust (each the "Trust" and collectively the
"Trusts") are open-end, management investment companies. The Trusts were
established under the laws of the Commonwealth of Massachusetts. The rights of
shareholders of Technology Fund and MDT Fund are defined by the respective
Funds' Declaration of Trust and Bylaws and by the Laws of the Commonwealth of
Massachusetts. The rights of the stockholders of the two Funds relating to
voting, distributions and redemptions are substantially similar. The chart
below describes some of the differences between your rights as a shareholder of
Technology Fund and your rights as a shareholder of MDT Fund.
CATEGORY TECHNOLOGY FUND MDT FUND
PREEMPTIVE RIGHTS None Same
PREFERENCES None Same
APPRAISAL RIGHTS None Same
CONVERSION RIGHTS None Same
EXCHANGE RIGHTS (other than the right to exchange for shares of the None Same
same class of other Federated mutual funds as provided in the
Funds' prospectuses)
MINIMUM ACCOUNT SIZE Class A Shares - $1,500 Same
Class B Shares - $1,500
Class C Shares - $1,500
ANNUAL MEETINGS Not required Same
RIGHT TO CALL SHAREHOLDER MEETINGS Shall be called upon the written request of the holders Same
of at least 10% of outstanding shares of the Fund
entitled to vote at the meeting.
NOTICE OF MEETINGS Mailed to each shareholder entitled to vote at least 15 Same
days before the meeting.
- 16 -
CATEGORY TECHNOLOGY FUND MDT FUND
RECORD DATE FOR The Board of Trustees may fix a date not more than 60 days The Board of Trustees may fix a date not more
MEETINGS before the meeting date as the record date for determining than 90 days before the meeting date as the
shareholders entitled to notice of or to vote at any Meeting of record date for determining Shareholders
shareholders. entitled to notice of and to vote at any meeting
of shareholders.
QUORUM FOR Except when otherwise required by law, the presence in person or Except when otherwise required by law, the
MEETINGS by proxy of the holders of one-fourth of the shares entitled to presence in person or by proxy of the holders of
vote constitutes a quorum at any meeting of shareholders. one-third of the shares entitled to vote
constitutes a quorum at any meeting of
shareholders.
VOTE REQUIRED FOR A plurality of votes cast at the meeting. Cumulative voting is A plurality of votes cast at the meeting.
ELECTION OF not permitted. Cumulative voting is not permitted.
TRUSTEES/DIRECTORS
ADJOURNMENT OF In the absence of a quorum, a majority of the shares present in In the absence of a quorum, a plurality of the
MEETINGS person or by proxy entitled to vote may adjourn the meeting from shares present in person or by proxy may adjourn
time to time without further notice than by announcement at the the meeting from time to time without further
meeting until a quorum shall be present. notice than by announcement at the meeting until
a quorum shall be present.
CATEGORY TECHNOLOGY FUND MDT FUND
REMOVAL OF A Trustee may be removed from office at any special meeting of shareholders by a vote of two-thirds of Same
TRUSTEES the outstanding shares.
DIRECTORS BY
SHAREHOLDERS
PERSONAL Provided they have acted under the belief that their actions are in the best interest of the Trust, the Trustees and
LIABILITY OF Trustees and officers shall not be responsible for or liable in any event for neglect or wrongdoing by officers of
OFFICERS AND them or any officer, agent, employee, investment adviser or principal underwriter of the Trust or of any the Trust
TRUSTEES entity providing administrative services to the Trust, but nothing herein contained shall protect any shall be
Trustee or officer against any liability to which he would otherwise be subject by reason of willful liable for
misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the their
his office. willful
misfeasance,
bad faith,
gross
negligence or
reckless
disregard of
the duties
involved in
the conduct
of the office
of Trustee or
officer, as
the case may
be, and for
nothing else.
PERSONAL Under certain circumstances, shareholders may be held personally liable as partners under Massachusetts Same
LIABILITY OF law for obligations of the Trust. To protect its shareholders, the Trust has filed legal documents with
SHAREHOLDERS Massachusetts that expressly disclaim the liability of its shareholders for acts or obligations of the
Trust.
In the unlikely event a shareholder is held personally liable for the Trust's obligations, the Trust is
required by the Declaration of Trust to use its property to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders and pay judgments against
them.
NUMBER OF Unlimited; no par value Same
AUTHORIZED
SHARES; PAR
VALUE
- 17 -
INFORMATION ABOUT MDT FUND AND TECHNOLOGY FUND
WHERE TO FIND ADDITIONAL INFORMATION
Information about Technology Fund is included in its Prospectus and its
SAI dated December 31, 2006, each of which is incorporated herein by reference.
Information about MDT Fund is included in its Prospectus and its SAI for the
Class A Shares and Class C Shares dated September 30, 2007, and in its
Prospectus and its SAI for the Class B Shares dated December 17, 2007, each of
which is incorporated herein by reference. A copy of each Prospectus for MDT
Fund accompanies this Prospectus/Proxy Statement. Copies of the SAIs of MDT
Fund, the Prospectus and SAI of Technology Fund and the SAI dated December 17,
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 Technology
Fund and MDT Fund are also available electronically at Federated's website at
FederatedInvestors.com.
MDT Trust, on behalf of MDT Fund, and the Trust, on behalf of Technology
Fund, 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 MDT Trust, on behalf of
MDT Fund and by the Trust, on behalf of Technology Fund, 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, D.C 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.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS APPROVE THE
AGREEMENT AND PLAN OF REORGANIZATION.
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
Proxies are being solicited by the Board of the Trust on behalf of its
portfolio, Technology Fund. The proxies will be voted at the special meeting of
shareholders of Technology Fund to be held at 2:00 p.m. (Eastern Time) on
February 29, 2008, 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 MDT Adviser or its affiliates. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees, and agents of MDT Adviser or its affiliates or, if necessary, a
communications firm retained for this purpose. Such solicitations may be by
telephone, through 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 of the Trust 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 January 23, 20087, to shareholders of record
at the close of business on January 2, 2008 (the "Record Date").
Technology Fund's Annual Report, which includes audited financial
statements for its fiscal year ended October 31, 2007, and its Semi-Annual
Report containing unaudited financial statements for the six-month period ended
April 30, 2007, were previously mailed to shareholders of Technology Fund. MDT
Fund's Annual Report, which includes audited financial statements for its fiscal
year ended July 31, 2007, was previously mailed to shareholders of MDT Fund.
Technology Fund and MDT Fund will 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 its Semi-Annual Report (in the
case of Technology Fund). Requests for Annual Reports or Semi-Annual Reports
for Technology Fund or MDT Fund may be made by writing to the Fund's 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. The 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 Technology Fund
is entitled to one vote. Fractional shares are entitled to proportionate shares
of one vote. The votes of shareholders of MDT Fund are not being solicited
since their approval is not required in order to effect the Reorganization.
Any person given 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 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
Technology Fund must be present. Due to the requirements of the 1940 Act
discussed in the next paragraph, holders of more than 50% of the total number of
Class A Shares, Class B Shares and Class C Shares of Technology Fund 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 the total number of Class A, Class B and
Class C Shares of Technology Fund entitled to vote, present in person or by
proxy, shall be required ot constitute a quorum for the purpose of transacting
any other business which may 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 Shares,
Class B Shares and Class C Shares of Technology Fund present at the meeting,
voting together as a single class, if the shareholders of more than 50% of the
outstanding Class A Shares, Class B Shares and Class C Shares of Technology Fund
are present or represented by proxy; or (B) more than 50% of the outstanding
Class A Shares, Class B Shares and Class C Shares of Technology Fund, 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 a date not later than 120 days after the original record date) without
further notice other than by announcement to be given at the meeting until a
quorum is met. 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 Trustees of the Trust own less than 1% of Technology Fund'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 Class A Shares
of Technology Fund:
Information to be provided
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding Class B Shares
of Technology Fund:
Information to be provided
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding Class C Shares
of Technology Fund:
Officers and Trustees of the Trust own less than 1% of each class of MDT
Fund'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 Class A Shares
of MDT Fund:
Information to be provided
Information to be provided
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding Class C Shares
of MDT Fund:
Information to be provided
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.
INTERESTS OF CERTAIN PERSONS
Each Fund is managed by its Adviser. Both Advisers are subsidiaries of
Federated Investors, Inc.. All of the voting securities of Federated 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 Trust and MDT Trust.
- 18 -
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
Technology Fund 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 Technology
Fund.
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.
By Order of the Board of Directors,
/s/ John W. McGonigle
John W. McGonigle, Secretary
January 23, 2008
- 19 -
- 20 -
EXHIBIT B
Management's Discussion of Fund Performance of Technology Fund
Management's Discussion of Fund Performance
The Federated Technology Fund produced a total return, based on net asset value,
of 6.35% for the fund's Class A Shares, 5.63% for the fund's Class B Shares and
5.63% for the fund's Class C Shares for the fiscal year ended October 31, 2006.
This return trailed the 10.21% average return for the fund's peers in the Lipper
Science & Technology Fund category 1 and the 16.02% return for the Merrill Lynch
Technology 100 Index (the "MLT 100") 2 for the same period. The fund's total
return for the fiscal year reflected actual cash flows, transaction costs and
other expenses which were not reflected in the total return of the MLT 100.
MARKET OVERVIEW
Technology stocks, as measured by the MLT 100, performed reasonably well through
the first half of the fund's fiscal year as the group continued to report strong
earnings and solid fundamentals. However, in early May the market's concerns
regarding inflation, the Federal Reserve's interest rate policy, oil prices, and
geopolitical tensions in Iran and North Korea began to pressure the dynamic
Technology group as investors worried that these issues would slow economic
growth and therefore Information Technology spending. As a result Technology
group sold off dramatically from early May through July. The sector performed
well into the fund's fiscal year end as prior market concerns began to ease,
earnings and fundamentals continued to be quite robust, and valuations remained
attractive. Overall, Technology stocks performed basically inline with the S&P
500 Index 3 over the reporting period.
1 Lipper figures represent the average of the total returns reported by all the
mutual funds designated by Lipper, Inc. as falling into the category indicated.
They do not reflect sales charges.
2 The Merrill Lynch Technology 100 Index is an equal dollar-weighted index of
100 stocks designed to measure the performance of a cross section of large,
actively traded technology stocks and American Depositary Receipts (ADRs). The
index was developed with a base value of 200 as of January 30, 1998. Indexes are
unmanaged and it is not possible to invest directly in an index.
3 The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries. It
is not possible to invest directly in an index.
PERFORMANCE REVIEW
The fund suffered from its larger-cap bias, its underweighting versus the MLT
100 in high beta sectors such as semiconductors, and its focus on valuation.
The fund's performance versus the MLT 100 was hurt by weak security selection in
Semiconductors/Semi-Cap Equipment and Communications Equipment. The fund's
performance was also hurt by its underweight in Semiconductors and Enterprise
Hardware, as both slightly outperformed Technology sector on an absolute basis
over the reporting period. The fund benefited from its overweighting and good
security selection in the Biotech and Life Sciences, Internet and Video Game and
Software sectors.
Fund management continued to focus on enterprise IT spending versus consumer
technology during the reporting period. The fund had an overweight exposure to
ELECTRONIC ARTS, INC. , ACTIVISION, INC. , GAMESTOP CORP. , and MICROSOFT CORP.
, along with several of the component suppliers of the new video game consoles.
The fund increased its exposure to the Internet group as valuations became more
attractive over the past fiscal year and added to positions in GOOGLE INC. ,
EBAY , INC. and YAHOO, INC. while also adding new positions in NETFLIX, INC. and
AMAZON.COM, INC. during the reporting period.
With respect to enterprise related technology spending, the fund continued to
have an overweight exposure to faster growth areas such as Storage and Software
during the reporting period: in Storage through investments in EMC CORP. ,
NETWORK APPLIANCE, INC. and the recent IPO of COMMVAULT SYSTEMS, INC. ; and in
Software through investments in BEA SYSTEMS, INC., ANSYS, INC., ADOBE SYSTEMS,
INC. and ORACLE CORP. The Communications Equipment area became a larger focus
for the fund over the past fiscal year as the build-out of 3G (a wireless data
service), IMS (Internet Protocol Multimedia Subsystem), and IPTV (Internet
television service) finally got underway. With respect to enterprise services,
the fund continued to focus on the outsourcing theme with two large holdings
during the reporting period: PAYCHEX, INC. (a large payroll and HR outsourcer
focused on the SMB market) and COGNIZANT TECHNOLOGY SOLUTIONS CORP. (a leading
provider of offshore application maintenance and development services in India).
Finally, the fund continued to invest in the exciting, high growth Biotech and
Life Sciences area through companies such as CEPHALON, INC. , SHIRE PLC , and
MEDICIS PHARMACEUTICAL CORP.
The securities that most positively impacted the fund included CISCO SYSTEMS,
INC. (average 2.8% of net assets) a leading provider of communications equipment
that gained 38% over the reporting period; CEPHALON, INC. (0.6% of net assets) a
developer of biopharma products to treat neurological disorders and cancer that
gained 72% during the reporting period; COGNIZANT TECHNOLOGY SOLUTIONS CORP.
(2.0% of net assets) a leading provider of offshore IT services that was up 71%
during the reporting period; ORACLE CORP. (1.8% of net assets) a leading
provider of infrastructure software that was up over 45% during the reported
period; AMDOCS (1.9% of net assets) a leading provider of telecommunications
software and related services that was up over 46% in the reporting period;
SHIRE PLC (1.6% of net assets) a developer and marketer of therapeutic
prescription medicines that was up 54% over the reporting period; and RESEARCH
IN MOTION LTD. (1.0% of net assets) the developer of the popular Blackberry
device that was up 91% during the reporting period.
The securities that most negatively impacted the fund during the reporting
period included MARVELL TECHNOLOGY GROUP LTD. (1.7% of net assets) a
communication integrated circuit provider; SYMANTEC CORP. (0.9% of net assets) a
security software provider; DELL, INC. (1.5% of net assets) a leading PC and
server manufacturer; and CHARTERED SEMICONDUCTOR MANUFACTURING LTD. (0.2% of net
assets) a provider of wafer fabrication services to semiconductor suppliers.
GROWTH OF A $10,000 INVESTMENT - CLASS A SHARES
The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Technology Fund (Class A Shares) (the "Fund") from September 21, 1999
(start of performance) to October 31, 2006, compared to the NASDAQ Composite
Index (NCI), 2 Merrill Lynch Technology 100 Index (MLT 100), 2 and the Lipper
Science & Technology Funds Average (LSTFA). 2
The graphic presentation displayed here consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Technology Fund (Class A Shares) is represented by a solid line. The NCI is
represented by a dotted line. The LSFTA is represented by a line consisting of
2 dashes and a dot. The MLT 100 is represented by a line consisting of dot dash
dot. The line graph is a visual representation of a comparison of change in
value of $10,000 hypothetical investment in the Fund, the NCI, the LSFTA and the
MLT100. The "x" axis reflects computation periods from September 21, 1999 to
October 31, 2006. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund as
compared to the NCI, LSTFA and MLT100. The ending values were $5,237, $7,328,
$8,673 and $8,406 respectively.
AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED 10/31/2006
1 Year 0.55 %
5 Years 1.87 %
Start of Performance (9/21/1999) (8.70 )%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
TOTAL RETURNS SHOWN INCLUDE THE MAXIMUM SALES CHARGE OF 5.50%, AS APPLICABLE.
1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The NCI and the MLT 100 have been adjusted to reflect
reinvestment of all dividends on securities in the indexes.
2 The NCI is an unmanaged index that measures all Nasdaq domestic and non-U.S.-
based common stocks listed on the Nasdaq Stock Market. The MLT 100 is an equal
dollar-weighted index of 100 stocks designed to measure the performance of a
cross section of large, actively traded technology stocks and ADRs. The Index
was developed with a base value of 200 as of January 30, 1998. The NCI and MLT
100 are not adjusted to reflect sales charges, expenses or other fees that the
Securities and Exchange Commission (SEC) requires to be reflected in the Fund's
performance. The LSTFA represents the average of the total returns reported by
all mutual funds designated by Lipper, Inc. as falling into the category, and is
not adjusted to reflect any sales charges. However, these total returns are
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance. The indexes are unmanaged and, unlike the Fund, are not
affected by cashflows. It is not possible to invest directly in an index or
average.
3 Total returns quoted reflect all applicable sales charges.
GROWTH OF A $10,000 INVESTMENT - CLASS B SHARES
The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Technology Fund (Class B Shares) (the "Fund") from September 21, 1999
(start of performance) to October 31, 2006, compared to the NASDAQ Composite
Index (NCI), 2 Merrill Lynch Technology 100 Index (MLT 100), 2 and the Lipper
Science & Technology Funds Average (LSTFA). 2
The graphic presentation displayed here consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Technology Fund (Class B Shares) is represented by a solid line. The NCI is
represented by a dotted line. The LSFTA is represented by a line consisting of
2 dashes and a dot. The MLT 100 is represented by a line consisting of dot dash
dot. The line graph is a visual representation of a comparison of change in
value of $10,000 hypothetical investment in the Fund, the NCI, the LSFTA and the
MLT100. The "x" axis reflects computation periods from September 21, 1999 to
October 31, 2006. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund as
compared to the NCI, LSTFA and MLT100. The ending values were $5,260, $7,328,
$8,673 and $8,406 respectively.
AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED 10/31/2006
1 Year 0.13 %
5 Years 1.96 %
Start of Performance (9/21/1999) (8.64 )%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
TOTAL RETURNS SHOWN INCLUDE THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE OF
5.50%, AS APPLICABLE.
1 Represents a hypothetical investment of $10,000 in the Fund. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one year
from the purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions. The NCI and the MLT 100 have been adjusted to
reflect reinvestment of all dividends on securities in the indexes.
2 The NCI is an unmanaged index that measures all Nasdaq domestic and non-U.S.-
based common stocks listed on the Nasdaq Stock Market. The MLT 100 is an equal
dollar-weighted index of 100 stocks designed to measure the performance of a
cross section of large, actively traded technology stocks and ADRs. The Index
was developed with a base value of 200 as of January 30, 1998. The NCI and MLT
100 are not adjusted to reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. The LSTFA represents the
average of the total returns reported by all mutual funds designated by Lipper,
Inc. as falling into the category, and is not adjusted to reflect any sales
charges. However, these total returns are reported net of expenses or other fees
that the SEC requires to be reflected in a fund's performance. The indexes are
unmanaged and, unlike the Fund, are not affected by cashflows. It is not
possible to invest directly in an index or average.
3 Total returns quoted reflect all applicable contingent deferred sales charges.
GROWTH OF A $10,000 INVESTMENT - CLASS C SHARES
The graph below illustrates the hypothetical investment of $10,000 1 in
Federated Technology Fund (Class C Shares) (the "Fund") from September 21, 1999
(start of performance) to October 31, 2006, compared to the NASDAQ Composite
Index (NCI), 2 Merrill Lynch Technology 100 Index (MLT 100), 2 and the Lipper
Science & Technology Funds Average (LSTFA). 2
The graphic presentation displayed here consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Technology Fund (Class C Shares) is represented by a solid line. The NCI is
represented by a dotted line. The LSFTA is represented by a line consisting of
2 dashes and a dot. The MLT 100 is represented by a line consisting of dot dash
dot. The line graph is a visual representation of a comparison of change in
value of $10,000 hypothetical investment in the Fund, the NCI, the LSFTA and the
MLT100. The "x" axis reflects computation periods from September 21, 1999 to
October 31, 2006. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund as
compared to the NCI, LSTFA and MLT100. The ending values were $5,209, $7,328,
$8,673 and $8,406 respectively.
AVERAGE ANNUAL TOTAL RETURNS 3 FOR THE PERIOD ENDED 10/31/2006
1 Year 3.59 %
5 Years 2.11 %
Start of Performance (9/21/1999) (8.77 )%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
TOTAL RETURNS SHOWN INCLUDE THE MAXIMUM SALES CHARGE OF 1.00%, AND THE MAXIMUM
CONTINGENT DEFERRED SALES CHARGE OF 1.00%, AS APPLICABLE.
1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1.00% ($10,000 investment minus $100 sales charge =
$9,900). A 1.00% contingent deferred sales charge would be imposed on any
redemption less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The NCI and the MLT
100 have been adjusted to reflect reinvestment of all dividends on securities in
the indexes.
2 The NCI is an unmanaged index that measures all Nasdaq domestic and non-U.S.-
based common stocks listed on the Nasdaq Stock Market. The MLT 100 is an equal
dollar-weighted index of 100 stocks designed to measure the performance of a
cross section of large, actively traded technology stocks and ADRs. The Index
was developed with a base value of 200 as of January 30, 1998. The NCI and MLT
100 are not adjusted to reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. The LSTFA represents the
average of the total returns reported by all mutual funds designated by Lipper,
Inc. as falling into the category, and is not adjusted to reflect any sales
charges. However, these total returns are reported net of expenses or other fees
that the SEC requires to be reflected in a fund's performance. The indexes are
unmanaged and, unlike the Fund, are not affected by cashflows. It is not
possible to invest directly in an index or average.
3 Total returns quoted reflect all applicable sales charges and contingent
deferred sales charges.
Performance data quoted represents past performance which is no guarantee of
future results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Mutual fund performance changes over time and current performance may be
lower or higher than what is stated. For current to the most recent month-end
performance and after-tax returns, visit FederatedInvestors.com or call 1-800-
341-7400.
- 21 -
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE OF MDT FUND
Management's Discussion of Fund Performance
The fund's total return for the fiscal year ended July 31, 2007 was 22.29% for
Class A Shares, and 21.39% for Class C Shares.1 The total return of the Russell
2000{reg-trade-mark} Growth Index was 16.83% for the same period.2 The fund's
total return for the fiscal year reflected actual cash flows, transaction costs
and other expenses which were not reflected in the total return of the Russell
2000{reg-trade-mark} Growth Index. The total return of the Lipper Small-Cap
Growth Funds Index was 19.51% for the same period.3
MARKET OVERVIEW
Over the twelve month reporting period ended July 31, 2007, domestic equity
markets enjoyed a positive, if somewhat rocky, performance highlighted by a
sudden decline in late February and another decline as the reporting period
ended in July. The Russell 3000{reg-trade-mark} Index, which represents the
performance of the 3000 largest U.S. companies by market capitalization,
finished the period up a solid 16.08%. Mid-cap stocks lead the way as
demonstrated by the 18.93% return on the Russell Midcap{reg-trade-mark} Index4,
which exceeded the 15.48% and 12.12% results for the Russell Top
200{reg-trade-mark} Index5 and the Russell 2000{reg-trade-mark} Index,6
respectively. Growth stocks outperformed value stocks by a wide margin during
the year with the Russell 3000{reg-trade-mark} Growth Index7 returning 19.24% as
compared to 12.97% for the Russell 3000{reg-trade-mark} Value Index.8
1 The fund is the successor to MDT Small Cap Growth Fund pursuant to a
reorganization that took place on December 8, 2006. Prior to that date, the fund
had no investment operations. Accordingly, the performance information provided
is historical information of MDT Small Cap Growth Fund. Small company stocks may
be less liquid and subject to greater price volatility than large capitalization
stocks.
2 The Russell 2000{reg-trade-mark} Growth Index measures the performance of
those Russell 2000 companies with higher price-to-book ratios and higher
forecasted growth values. The index is unmanaged and investments can not be made
directly in an index.
3 The Lipper Small-Cap Growth Funds Index is an average of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies with
market capitalizations (on a three-year weighted basis) less than 250% of the
dollar-weighted median of the smallest 500 of the middle 1,000 securities of the
S&P SuperComposite 1500 Index. Small-cap growth funds typically have an average
price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share
growth value, compared to the S&P SmallCap 600 Index.
4 The Russell Midcap{reg-trade-mark} Index measures the performance of the 800
smallest companies in the Russell 1000{reg-trade-mark} Index, which represent
approximately 31% of the total market capitalization of the Russell
1000{reg-trade-mark} Index. The index is unmanaged and investments can not be
made directly in an index.
5 Russell Top 200{reg-trade-mark} Index measures the performance of the 200
largest companies in the Russell 1000{reg-trade-mark} Index, which represents
approximately 69% of the total market capitalization of the Russell
1000{reg-trade-mark} Index. The index is unmanaged and investments can not be
made directly in an index.
6 The Russell 2000{reg-trade-mark} Index measures the performance of the 2,000
smallest companies in the Russell 3000{reg-trade-mark} Index, which represents
approximately 10% of the total market capitalization of the Russell
3000{reg-trade-mark} Index. The index is unmanaged and investments can not be
made directly in an index.
7 The Russell 3000{reg-trade-mark} Growth Index measures the performance of
those Russell 3000{reg-trade-mark} Index companies with higher price-to-book
ratios and higher forecasted growth values. The stocks in this index are also
members of either the Russell 1000{reg-trade-mark} Growth or the Russell
2000{reg-trade-mark} Growth indexes. The index is unmanaged and investments can
not be made directly in an index.
8 The Russell 3000{reg-trade-mark} Value Index measures the performance of those
Russell 3000{reg-trade-mark} Index companies with lower price-to-book ratios and
lower forecasted growth values. The stocks in this index are also members of
either the Russell 1000{reg-trade-mark} Value or the Russell
2000{reg-trade-mark} Value indexes. The index is unmanaged and investments can
not be made directly in an index.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400.
The best performing sectors during the reporting period in the Russell
3000{reg-trade-mark} Index were Materials (up 35.67%), Telecommunication
Services (up 30.35%) and Information Technology (up 29.43%). Underperforming
sectors included Financials (up just 2.11%, negatively influenced by a
disruption in credit markets late in the reporting period), Health Care (up
8.23%) and Consumer Staples (up 11.12%).
FUND PERFORMANCE
The most positive contributor to the fund's performance relative to the Russell
2000{reg-trade-mark} Growth Index was its stock selection in the Industrials,
Consumer Discretionary, Financials, and Health Care sectors. Additionally, the
fund's underweight in the Financial Services sector contributed positively to
relative performance. The fund's performance was negatively impacted by its
stock selection in the Consumer Staples sector. The fund's stock selection and
underweight in the Information Technology sector also detracted from
relative performance.
Individual stocks contributing to the fund's out performance relative to the
Russell 2000{reg-trade-mark} Growth Index included: CROCS INC., CHAPARRAL STEEL
CO., MANITOWOC INC., PRICELINE.COM INC., and WELLCARE GROUP INC.
Individual stocks detracting from the fund's performance relative to the Russell
2000{reg-trade-mark} Growth Index included: HANSEN NATIONAL CORP., AQUANTIVE
INC., EGL INC., DAKTRONICS INC., and LOGITECH INTERNATIONAL.
GROWTH OF A $10,000 INVESTMENT -- CLASS A SHARES
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated MDT Small Cap Growth Fund (Class A Shares) (the "Fund") from September
15, 2005 (start of performance) to July 31, 2007, compared to the Russell
2000{reg-trade-mark} Growth Index2 and the Lipper Small-Cap Growth Funds
Index.3
The graphic presentation displayed here consists of a line graph. The
corresponding components of the line graph are listed underneath. The MDT Fund
(Class A Shares) is represented by a solid line. The Russell
2000{reg-trade-mark} Growth Index represented by a dotted line. The Lipper
Small-Cap Growth Funds Index is represented by a dashed line. T The line
graph is a visual representation of a comparison of change in value of $10,000
hypothetical investment in the Fund, Russell 2000{reg-trade-mark} Growth Index
and the Lipper Small-Cap Growth Funds Index. The "x" axis reflects computation
periods from September 15, 2005 to July 31, 2007. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the Russell
2000{reg-trade-mark} Growth Index and the Lipper Small-Cap Growth Funds Index.
The ending values were $12,240, $12,011, and $12,067 respectively.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED 7/31/2007
1 Year 15.52%
Start of Performance (9/15/2005) 11.37%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
TOTAL RETURNS SHOWN INCLUDE THE MAXIMUM SALES CHARGE OF 5.50%.
1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Russell 2000{reg-trade-mark} Growth Index and the Lipper
Small-Cap Growth Funds Index have been adjusted to reflect reinvestment of
dividends on securities in the indexes.
2 The Russell 2000{reg-trade-mark} Growth Index is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange Commission
(SEC) requires to be reflected in the Fund's performance. The index is unmanaged
and, unlike the Fund, is not affected by cashflows. It is not possible to invest
directly in an index.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the respective categories indicated. Lipper figures do not reflect sales
charges.
1. GROWTH OF A $10,000 INVESTMENT -- CLASS C SHARES
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated MDT Small Cap Growth Fund (Class C Shares) (the "Fund") from September
15, 2005 (start of performance) to July 31, 2007, compared to the Russell
2000{reg-trade-mark} Growth Index2 and the Lipper Small-Cap Growth Funds Index.3
The graphic presentation displayed here consists of a line graph. The
corresponding components of the line graph are listed underneath. The MDT Fund
(Class C Shares) is represented by a solid line. The Russell
2000{reg-trade-mark} Growth Index represented by a dotted line. The Lipper
Small-Cap Growth Funds Index is represented by a dashed line. The line graph is
a visual representation of a comparison of change in value of $10,000
hypothetical investment in the Fund, Russell 2000{reg-trade-mark} Growth Index
and the Lipper Small-Cap Growth Funds Index. The "x" axis reflects computation
periods from September 15, 2005 to July 31, 2007. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the Russell
2000{reg-trade-mark} Growth Index and the Lipper Small-Cap Growth Funds Index.
The ending values were $12,770, $12,011, and $12,067 respectively.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED 7/31/2007
1 Year 20.39%
Start of Performance (9/15/2005) 13.92%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE WHICH IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUND PERFORMANCE CHANGES OVER TIME AND CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN WHAT IS STATED. FOR CURRENT TO THE MOST RECENT MONTH-END
PERFORMANCE AND AFTER-TAX RETURNS, VISIT FEDERATEDINVESTORS.COM OR CALL 1-800-
341-7400. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. MUTUAL FUNDS
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
TOTAL RETURNS SHOWN INCLUDE THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC)
OF 1.00%, AS APPLICABLE.
1 Represents a hypothetical investment of $10,000 in the Fund. The maximum CDSC
is 1.00% on any redemption less than one year from the purchase date. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
Russell 2000{reg-trade-mark} Growth Index and the Lipper Small-Cap Growth Funds
Index have been adjusted to reflect reinvestment of dividends on securities in
the indexes.
2 The Russell 2000{reg-trade-mark} Growth Index is not adjusted to reflect 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. It is not possible to invest directly in an index.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the respective categories indicated. Lipper figures do not reflect sales
charges.
- 22 -
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 23, 2008
ACQUISITION OF THE ASSETS OF
FEDERATED TECHNOLOGY 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 SMALL 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 December 21, 2007, is not a
prospectus. A Prospectus/Proxy Statement dated December 21,2007, related to the
above-referenced matter may be obtained from Federated Technology Fund by
writing or calling Federated Technology Fund at the address and telephone number
shown above. This Statement of Additional Information should be read in
conjunction with such Prospectus/Proxy Statement.
1
TABLE OF CONTENTS
Page
1. Statement of Additional Information of Federated Technology Fund, a portfolio
of Federated Equity Funds, dated December 31, 2007 (incorporated by reference) 3
2. Statement of Additional Information of Federated MDT Small Cap Growth Fund, a
portfolio of Federated MDT Series, dated September 30, 2007 (incorporated
by reference)
3. Audited Financial Statements of Federated Technology Fund, a portfolio of
Federated Equity Funds, dated October 31, 2007 (incorporated by
reference)
4. Audited Financial Statements of Federated MDT Small Cap Growth Fund, a
portfolio of Federated MDTSeries dated July 31, 2007 (incorporated by
reference)
5. Federated Technology Fund and Federated MDT Small Cap Growth Fund, Pro Forma Financial
Statements for the Period Ended July 31, 2007 (unaudited):
Introduction
Pro Forma Combining Portfolio of Investments July 31, 2007, (unaudited)
Pro Forma Combining Statements of Assets and Liabilities, Period Ended July 31, 2007 (unaudited)
Pro Forma Combining Statements of Operations, Period Ended July 31, 2007 (unaudited)
Notes to Pro Forma Financial Statements, for the Period Ended July 31, 2007 (unaudited)
2
INFORMATION INCORPORATED BY REFERENCE
The Statement of Additional Information of Federated Technology 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 Technology Fund at 1-800-341-7400.
The Statement of Additional Information of Federated MDT Small Cap Growth
Fund, a portfolio of Federated MDT Series, dated September 30, 2007, is
incorporated by reference to Federated MDT Series Post-Effective Amendment No.
04 to its Registration Statement on Form N-1A (File No. 811-21904), which was
filed with the Securities and Exchange Commission on or about September 28,
2007. A copy may be obtained from the Federated MDT Small Cap Growth Fund at 1-
800-341-7400.
The audited financial statements of Federated Technology Fund, dated
October 31, 2006, are incorporated by reference to the Annual Report to
shareholders of Federated Technology 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 unaudited financial statements of Federated Technology Fund dated
April 30, 2007, are incorporated by reference to the Semi-Annual Report to
shareholders of Federated Technology 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 April 27, 2007.
The audited financial statements of Federated MDT Small Cap Growth Fund,
dated July 31, 2007, are incorporated by reference to the Annual Report to
shareholders of Federated MDT Small 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 28, 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 Technology Fund
(Technology Fund) and Federated MDT Small Cap Growth Fund (MDT Fund), for the
period ended July 31, 2007. MDT Small Cap Growth Fund (the "Predecessor Fund")
was reorganized into MDT Fund as of the close of business on December 8, 2006.
Prior to the reorganization, MDT Fund had no investment operations. MDT Fund is
the successor to the Predecessor Fund. For the purposes of these Pro Forma
Financial Statements, the financial information covers the period from August 1,
2006 to July 31, 2007. These statements have been derived from the books and
records utilized in calculating daily net asset values at July 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 Technology Fund
for Class A Shares, Class B Shares and Class C Shares of MDT Fund. Under
generally accepted accounting principles, MDT 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.
3
FEDERATED TECHNOLOGY
FUND
FEDERATED MDT SMALL CAP
GROWTH FUND
PRO FORMA COMBINING
PORTFOLIO OF INVESTMENTS
JULY 31, 2007
(UNAUDITED)
MDT FUND MDT FUND
TECHNOLOGY MDT PRO FORMA TECHNOLOGY MDT PRO FORMA
FUND COMBINED FUND FUND COMBINED
FUND
SHARES VALUE
COMMON STOCKS -
99.6%
ADVERTISING - 0.0%
0 2,243 2,243 1Greenfield Online, Inc. $0 $36,426 $36,426
AGRICULTURAL
CHEMICALS - 0.2%
0 5,222 5,222 UAP Holding Corp. 0 141,882 141,882
APPAREL - 0.1%
0 952 952 1Carter's, Inc. 0 20,154 20,154
0 3,658 3,658 1Maidenform Brands, Inc. 0 65,771 65,771
0 85,925 85,925
AUTO ORIGINAL
EQUIPMENT
MANUFACTURERS -
0.1%
0 3,906 3,906 Sun Hydraulics Corp. 0 116,086 116,086
BEER - 0.2%
0 2,925 2,925 1The Boston Beer Co., Inc., Class A 0 119,223 119,223
BIOTECHNOLOGY -
0.2%
0 2,054 2,054 1Air Methods Corp. 0 78,257 78,257
0 1,032 1,032 1LifeCell Corp. 0 31,672 31,672
0 1,343 1,343 1PharmaNet Development Group, Inc. 0 37,604 37,604
0 147,533 147,533
BUILDING MATERIALS
- 0.3%
0 703 703 Aaon, Inc. 0 21,027 21,027
0 5,425 5,425 Apogee Enterprises, Inc. 0 139,748 139,748
0 2,609 2,609 1Drew Industries, Inc. 0 90,741 90,741
0 251,516 251,516
CELLULAR
COMMUNICATIONS -
0.0%
0 1,248 1,248 1USA Mobility, Inc. 0 29,790 29,790
CEMENT - 0.2%
0 3,610 3,610 1Astec Industries, Inc. 0 188,334 188,334
CLOTHING STORES -
1.0%
0 3,469 3,469 1Aeropostale, Inc. 0 132,100 132,100
0 3,490 3,490 Buckle, Inc. 0 121,975 121,975
0 2,845 2,845 1Dress Barn, Inc. 0 51,751 51,751
0 6,422 6,422 1Fossil, Inc. 0 164,082 164,082
0 4,297 4,297 1Gymboree Corp. 0 184,986 184,986
0 800 800 1Heelys, Inc. 0 17,520 17,520
0 2,569 2,569 1Jos A. Bank Clothiers, Inc. 0 88,630 88,630
0 761,044 761,044
COMPUTER NETWORKING
- 0.1%
0 4,471 4,471 1FalconStor Software, Inc. 0 46,454 46,454
0 1,740 1,740 1NetScout Systems, Inc. 0 16,895 16,895
0 3,610 3,610 1Radiant Systems, Inc. 0 50,179 50,179
0 113,528 113,528
COMPUTER
PERIPHERALS - 0.4%
0 5,837 5,837 1Nuance Communications, Inc. 0 96,194 96,194
0 288 288 1Rimage Corp. 0 6,924 6,924
0 5,478 5,478 1Synaptics, Inc. 0 192,387 192,387
0 295,505 295,505
COMPUTER SERVICES -
0.1%
0 1,555 1,555 1Manhattan Associates, Inc. 0 43,338 43,338
CONSTRUCTION
MACHINERY - 0.1%
0 1,070 1,070 Manitowoc, Inc. 0 83,107 83,107
CONSUMER
DISCRETIONARY -
3.9%
36,100 0 36,100 1GSI Commerce, Inc. 803,586 0 803,586
23,000 0 23,000 1GameStop Corp. 928,050 0 928,050
15,600 0 15,600 2Garmin Ltd 1,308,840 0 1,308,840
3,040,476 0 3,040,476
CONTRACTING - 0.3%
0 3,564 3,564 1Perini Corp. 0 218,865 218,865
0 393 393 Team, Inc. 0 18,475 18,475
0 237,340 237,340
COSMETICS &
TOILETRIES - 0.2%
0 2,411 2,411 1Chattem, Inc. 0 135,402 135,402
0 418 418 Inter Parfums, Inc. 0 9,158 9,158
0 144,560 144,560
DEFENSE AEROSPACE -
1.0%
0 12,825 12,825 1GenCorp, Inc. 0 151,591 151,591
0 1,561 1,561 1Orbital Sciences Corp. 0 33,078 33,078
0 4,908 4,908 1Teledyne Technologies, Inc. 0 217,768 217,768
0 4,603 4,603 1TransDigm Group, Inc. 0 189,644 189,644
0 3,078 3,078 Triumph Group, Inc. 0 234,574 234,574
0 826,655 826,655
DEFENSE ELECTRONICS
- 0.5%
0 4,086 4,086 1FLIR Systems, Inc. 0 178,354 178,354
0 3,035 3,035 United Industrial Corp. 0 191,691 191,691
0 370,045 370,045
DRUG STORES - 0.2%
0 2,903 2,903 Longs Drug Stores Corp. 0 140,389 140,389
ELECTRIC &
ELECTRICAL ORIGINAL
EQUIPMENT
MANUFACTURERS -
0.4%
0 5,039 5,039 Cubic Corp. 0 138,724 138,724
0 2,464 2,464 1General Cable Corp. 0 195,888 195,888
0 334,612 334,612
ELECTRICAL
EQUIPMENT - 0.4%
0 11,140 11,140 1GrafTech International Ltd. 0 172,559 172,559
0 6,090 6,090 1Houston Wire & Cable Co. 0 156,939 156,939
0 329,498 329,498
ELECTRICAL - RADIO
& TV - 0.1%
0 1,167 1,167 1Universal Electronics, Inc. 0 41,125 41,125
ELECTRONIC
INSTRUMENTS - 0.2%
0 1,810 1,810 1Advanced Analogic Technologies, Inc. 0 16,073 16,073
0 3,020 3,020 1FEI Co. 0 86,614 86,614
0 1,710 1,710 1Hittite Microwave Corp. 0 68,776 68,776
0 171,463 171,463
ETHICAL DRUGS -
0.2%
0 6,290 6,290 1Sciele Pharma, Inc. 0 145,865 145,865
FINANCIAL SERVICES
- 0.7%
0 3,650 3,650 Deluxe Corp. 0 137,824 137,824
0 2,133 2,133 1GFI Group, Inc. 0 158,951 158,951
0 1,969 1,969 Greenhill & Co., Inc. 0 114,202 114,202
0 755 755 1Huron Consulting Group, Inc. 0 51,287 51,287
0 1,299 1,299 1Portfolio Recovery Associates, Inc. 0 67,873 67,873
0 530,137 530,137
FOOD WHOLESALING -
0.4%
0 3,763 3,763 Nash Finch Co. 0 151,536 151,536
0 7,039 7,039 Winn-Dixie Stores, Inc. 0 188,012 188,012
0 339,548 339,548
FURNITURE - 0.2%
0 6,189 6,189 Temper-Pedic International, Inc. 0 192,787 192,787
GENERIC DRUGS -
0.2%
0 9,022 9,022 Perrigo Co. 0 168,260 168,260
HEALTH CARE - 5.8%
15,000 0 15,000 1Cephalon, Inc. 1,127,100 0 1,127,100
28,400 0 28,400 1Elan Corp. PLC, ADR 531,932 0 531,932
70,200 0 70,200 1,2Isis Pharmaceuticals, Inc. 730,782 0 730,782
34,200 0 34,200 1,2Momenta Pharmaceuticals, Inc. 332,424 0 332,424
12,800 0 12,800 1Myriad Genetics, Inc. 478,464 0 478,464
17,600 0 17,600 2Shire PLC, ADR 1,298,704 0 1,298,704
4,499,406 0 4,499,406
HOME HEALTH CARE -
0.1%
0 434 434 1Apria Healthcare Group, Inc. 0 11,379 11,379
0 664 664 1Wellcare Health Plans, Inc. 0 67,237 67,237
0 78,616 78,616
HOME PRODUCTS -
0.3%
0 8,080 8,080 Tupperware Brands Corp. 0 210,161 210,161
HOUSEHOLD
APPLIANCES - 0.2%
0 7,834 7,834 1Goodman Global, Inc. 0 188,956 188,956
INDUSTRIAL
MACHINERY - 0.5%
0 3,411 3,411 Actuant Corp. 0 208,003 208,003
0 525 525 1Columbus McKinnon Corp. 0 13,466 13,466
0 2,734 2,734 Valmont Industries, Inc. 0 206,663 206,663
0 428,132 428,132
INFORMATION
TECHNOLOGY - 67.3%
11,300 0 11,300 Accenture Ltd 476,069 0 476,069
71,492 0 71,492 1,2Acme Packet, Inc. 789,987 0 789,987
60,000 0 60,000 1Activision, Inc. 1,026,600 0 1,026,600
45,900 0 45,900 1Adobe Systems, Inc. 1,849,311 0 1,849,311
15,400 0 15,400 1Akamai Technologies, Inc. 522,984 0 522,984
49,100 0 49,100 1Amdocs Ltd. 1,776,929 0 1,776,929
33,200 0 33,200 1Ansys, Inc. 864,528 0 864,528
7,200 0 7,200 1Apple, Inc. 948,672 0 948,672
46,100 0 46,100 1Broadcom Corp. 1,512,541 0 1,512,541
42,300 0 42,300 1Cadence design Systems, Inc. 905,220 0 905,220
52,300 0 52,300 1,2Cisco Systems, Inc. 1,511,993 0 1,511,993
22,800 0 22,800 1Cognizant Technology Solutions Corp. 1,846,344 0 1,846,344
13,600 0 13,600 1CommScope, Inc. 740,248 0 740,248
38,700 0 38,700 1Commvault Systems, Inc. 657,126 0 657,126
89,000 0 89,000 1Corning, Inc. 2,121,760 0 2,121,760
54,100 0 54,100 1Dell, Inc. 1,513,177 0 1,513,177
99,200 0 99,200 EMC Corp. Mass 1,836,192 0 1,836,192
16,500 0 16,500 1FormFactor, Inc. 633,435 0 633,435
27,600 0 27,600 1Gartner Group, Inc., Class A 577,668 0 577,668
3,900 0 3,900 1Google, Inc. 1,989,000 0 1,989,000
11,200 0 11,200 Harris Corp. 614,656 0 614,656
43,500 0 43,500 Hewlett-Packard Co. 2,002,305 0 2,002,305
6,200 0 6,200 IBM Corp. 686,030 0 686,030
42,400 0 42,400 1Integrated Device Technology, Inc. 689,848 0 689,848
93,700 0 93,700 Intel Corp. 2,213,194 0 2,213,194
33,900 0 33,900 1JDS Uniphase Corp. 485,787 0 485,787
46,100 0 46,100 Jabil Circuit, Inc. 1,038,633 0 1,038,633
19,770 0 19,770 2KLA-Tencor Corp. 1,122,738 0 1,122,738
33,200 0 33,200 2Linear Technology Corp. 1,183,580 0 1,183,580
87,900 0 87,900 1Marvell Technology Group Ltd. 1,582,200 0 1,582,200
64,700 0 64,700 2Maxim Integrated Products, Inc. 2,050,990 0 2,050,990
16,900 0 16,900 Microchip Technology, Inc. 613,639 0 613,639
17,400 0 17,400 1NAVTEQ Corp. 941,862 0 941,862
18,600 0 18,600 1NVIDIA Corp. 851,136 0 851,136
35,700 0 35,700 1Network Appliance, Inc. 1,011,738 0 1,011,738
32,000 0 32,000 Nokia Oyj, Class A, ADR 916,480 0 916,480
70,100 0 70,100 1Oracle Corp. 1,340,312 0 1,340,312
31,800 0 31,800 Paychex, Inc. 1,315,884 0 1,315,884
22,500 0 22,500 1Qlogic Corp. 299,025 0 299,025
22,200 0 22,200 Qualcomm, Inc. 924,630 0 924,630
4,900 0 4,900 1Research in Motion Ltd. 1,048,600 0 1,048,600
31,200 0 31,200 1Salesforce.com Inc. 1,212,432 0 1,212,432
1,953 0 1,953 Samsung Electronics Co. 1,285,688 0 1,285,688
35,200 0 35,200 1,2Take-Two Interactive Software, Inc. 620,576 0 620,576
35,900 0 35,900 2Telefonaktiebolaget LM Ericsson, Class B, ADR 1,343,019 0 1,343,019
18,700 0 18,700 1ValueClick, Inc. 399,806 0 399,806
17,200 0 17,200 1Zebra Technologies Corp., Class A 623,156 0 623,156
52,517,728 0 52,517,728
INSURANCE BROKERAGE
- 0.1%
0 2,191 2,191 Life Partners Holdings, Inc. 0 94,585 94,585
INTERNATIONAL BANK
- 0.1%
0 1,313 1,313 Preferred Bank Los Angeles, CA 0 50,419 50,419
INTERNET SERVICES -
0.3%
0 2,527 2,527 1Priceline.com, Inc. 0 161,223 161,223
0 1,318 1,318 1Shutterfly, Inc. 0 33,938 33,938
0 195,161 195,161
MACHINE TOOLS -
0.2%
0 3,245 3,245 1AZZ, Inc. 0 115,197 115,197
0 943 943 1Flotek Industries, Inc. 0 28,045 28,045
0 143,242 143,242
MACHINED PARTS
ORIGINAL EQUIPMENT
MANUFACTURERS -
0.1%
0 2,185 2,185 Applied Industrial Technologies, Inc. 0 62,032 62,032
MARITIME - 0.1%
0 3,658 3,658 Horizon Lines, Inc., Class A 0 105,570 105,570
MEDICAL SUPPLIES -
0.8%
0 3,682 3,682 1Align Technology, Inc. 0 96,100 96,100
0 3,100 3,100 1Emergency Medial Services Corp., Class A 0 120,931 120,931
0 3,072 3,072 1Kyphon, Inc. 0 201,585 201,585
0 894 894 1NuVasive, Inc. 0 25,640 25,640
0 2,809 2,809 1Obagi Medical Products, Inc. 0 47,556 47,556
0 2,560 2,560 West Pharmaceutical Services, Inc. 0 118,477 118,477
0 610,289 610,289
MEDICAL TECHNOLOGY
- 0.3%
0 5,768 5,768 1Greatbatch Technologies, Inc. 0 178,981 178,981
0 1,221 1,221 1MEDTOX Scientific, Inc. 0 23,932 23,932
0 202,913 202,913
METAL CONTAINERS -
0.4%
0 857 857 Greif, Inc., Class A 0 47,135 47,135
0 4,087 4,087 1Mobile Mini, Inc. 0 116,766 116,766
0 2,913 2,913 Silgan Holdings, Inc. 0 150,369 150,369
0 314,270 314,270
METAL FABRICATION -
0.2%
0 2,686 2,686 Barnes Group, Inc. 0 83,803 83,803
0 2,628 2,628 Dynamic Materials Corp. 0 110,560 110,560
0 194,363 194,363
MISCELLANEOUS
COMPONENTS - 0.0%
0 845 845 1Atheros Communications 0 23,559 23,559
MISCELLANEOUS
MACHINERY - 0.3%
0 4,746 4,746 Curtiss Wright Corp. 0 206,783 206,783
0 267 267 Regal Beloit Corp. 0 13,542 13,542
0 220,325 220,325
MOTION PICTURES -
0.3%
0 9,388 9,388 1Macrovision Corp. 0 223,247 223,247
MULTI-INDUSTRY
CAPITAL GOODS -
0.1%
0 784 784 1Ceradyne, Inc. 0 58,510 58,510
MULTI-INDUSTRY
TRANSPORTATION -
0.2%
0 4,859 4,859 1Hub Group, Inc. 0 165,303 165,303
OFFICE FURNITURE -
0.1%
0 2,378 2,378 Knoll, Inc. 0 47,108 47,108
OFFICE SUPPLIES -
0.2%
0 2,868 2,868 1United Stationers, Inc. 0 182,806 182,806
OFFSHORE DRILLER -
0.3%
0 3,382 3,382 1Bristow Group, Inc. 0 160,408 160,408
0 657 657 1Hornbeck Offshore Services, Inc. 0 28,284 28,284
0 520 520 1Oceaneering International, Inc. 0 29,203 29,203
0 217,895 217,895
OIL SERVICE,
EXPLORE & DRILL -
0.5%
0 1,819 1,819 1Dawson Geophysical Co. 0 99,336 99,336
0 642 642 1McDermott International, Inc. 0 53,247 53,247
0 1,181 1,181 1Parker Drilling Co. 0 11,125 11,125
0 3,459 3,459 1W-H Energy Services, Inc. 0 221,653 221,653
0 385,361 385,361
OIL WELL SUPPLY -
0.2%
0 4,319 4,319 1Oil States International, Inc. 0 188,913 188,913
OPTICAL READING
EQUIPMENT - 0.1%
0 2,349 2,349 1ScanSource, Inc. 0 63,024 63,024
OTHER
COMMUNICATIONS
EQUIPMENT - 0.2%
0 5,113 5,113 1Netgear, Inc. 0 141,426 141,426
OTHER COMPUTER
HARDWARE - 0.1%
0 3,890 3,890 1Smart Modular Technologies (WWH), Inc. 0 47,808 47,808
PERSONAL LOANS -
0.1%
0 334 334 Cash America International, Inc. 0 12,231 12,231
0 2,427 2,427 1Ezcorp, Inc., Class A 0 29,221 29,221
0 939 939 1World Acceptance Corp. 0 30,226 30,226
0 71,678 71,678
PERSONNEL AGENCY -
0.3%
0 474 474 Barrett Business Services, Inc. 0 11,964 11,964
0 8,186 8,186 1Labor Ready, Inc. 0 192,862 192,862
0 204,826 204,826
POLLUTION CONTROL -
0.1%
0 1,535 1,535 American Ecology, Inc. 0 31,283 31,283
0 1,506 1,506 Waste Holdings, Inc. 0 48,087 48,087
0 79,370 79,370
PRINTING - 0.3%
0 3,579 3,579 1Cenveo, Inc. 0 75,195 75,195
0 1,868 1,868 1Consoildated Graphics, Inc. 0 123,120 123,120
0 2,433 2,433 1Valassis Communications, Inc. 0 28,880 28,880
0 227,195 227,195
PROPERTY LIABILITY
INSURANCE - 0.0%
0 1,451 1,451 National Interstate Corp. 0 37,000 37,000
RAILROAD - 0.3%
0 5,113 5,113 Wabtec Corp. 0 208,815 208,815
RECREATIONAL GOODS
- 0.0%
0 1,267 1,267 1Smith & Wesson Holding Corp. 0 23,820 23,820
RECREATIONAL
VEHICLES - 0.0%
0 375 375 Polaris Industries, Inc., Class A 0 18,510 18,510
REGIONAL BANK -
0.1%
0 417 417 City Bank Lynwood, WA 0 10,166 10,166
0 914 914 1SVB Financial Group 0 48,150 48,150
0 58,316 58,316
RESTAURANT - 0.4%
0 4,427 4,427 1Buffalo Wild Wings, Inc. 0 191,335 191,335
0 562 562 1Chipotle Mexican Grill, Inc. 0 49,647 49,647
0 880 880 1Red Robin Gourmet Burgers 0 33,942 33,942
0 274,924 274,924
SECURITIES
BROKERAGE - 0.0%
0 425 425 1Investment Technology Group, Inc. 0 16,983 16,983
SEMICONDUCTOR
MANUFACTURING -
0.2%
0 4,521 4,521 1NetLogic Microsystems, Inc. 0 137,800 137,800
0 709 709 1Plexus Corp. 0 17,193 17,193
0 722 722 1Silicon Laboratories, Inc. 0 25,147 25,147
0 180,140 180,140
SERVICES TO MEDICAL
PROFESSIONALS -
0.3%
0 2,336 2,336 1American Dental Partners, Inc. 0 59,965 59,965
0 6,831 6,831 1Nighthawk Radiology Holdings, Inc. 0 140,924 140,924
0 200,889 200,889
SHOES - 0.6%
0 4,046 4,046 1Crocs, Inc. 0 240,009 240,009
0 2,171 2,171 1Deckers Outdoor Corp. 0 223,830 223,830
0 382 382 Wolverine World Wide, Inc. 0 10,337 10,337
0 474,176 474,176
SOFTWARE
PACKAGED/CUSTOM -
1.5%
0 3,825 3,825 1Blue Coat Systems, Inc. 0 186,392 186,392
0 2,176 2,176 1COMSYS IT Partners, Inc. 0 39,516 39,516
0 4,239 4,239 1Double-Take Software, Inc. 0 64,687 64,687
0 4,086 4,086 1Epicor Software Corp. 0 53,363 53,363
0 14,992 14,992 1Informatica Corp. 0 208,988 208,988
0 788 788 1Omniture, Inc. 0 18,006 18,006
0 956 956 1Progress Software Corp. 0 28,919 28,919
0 6,801 6,801 1S1 Corp. 0 49,443 49,443
0 4,744 4,744 1SPSS, Inc. 0 194,694 194,694
0 3,715 3,715 1Synchronoss Technologies, Inc. 0 135,077 135,077
0 8,411 8,411 1VASCO Data Security International, Inc. 0 222,639 222,639
0 1,201,724 1,201,724
SPECIALTY CHEMICALS
- 0.7%
0 3,313 3,313 Chemed Corp. 0 209,647 209,647
0 8,672 8,672 1Hercules, Inc. 0 180,031 180,031
0 5,135 5,135 Koppers Holdings, Inc. 0 151,842 151,842
0 541,520 541,520
SPECIALTY MACHINERY
- 0.3%
0 564 564 1Stratasys, Inc. 0 24,822 24,822
0 3,711 3,711 Woodward Governor Co. 0 214,310 214,310
0 239,132 239,132
SPECIALTY RETAILING
- 0.0%
0 920 920 1Conn's, Inc. 0 23,340 23,340
SURVEILLANCE -
DETECTION - 0.1%
0 2,635 2,635 1Lo-Jack Corp. 0 56,178 56,178
TELECOMMUNICATIONS
EQUIPMENT &
SERVICES - 1.0%
0 775 775 Adtran, Inc. 0 20,220 20,220
0 11,033 11,033 1Arris Group, Inc. 0 163,509 163,509
0 6,862 6,862 1C-COR Electronics, Inc. 0 92,294 92,294
0 2,918 2,918 1CommScope, Inc. 0 158,827 158,827
0 4,319 4,319 1Comtech Telecommunications Corp. 0 187,747 187,747
0 5,354 5,354 1Dycom Industries, Inc. 0 149,644 149,644
0 772,241 772,241
TELECOMMUNICATION
SERVICES - 0.8%
20,600 0 20,600 1,2Clearwire Corp., Class A 587,718 0 587,718
TOYS & GAMES - 0.0%
0 876 876 1Marvel Entertainment, Inc. 0 21,225 21,225
UNDESIGNATED
CONSUMER CYCLICALS
- 1.1%
0 4,790 4,790 1Blackboard, Inc. 0 211,862 211,862
0 2,097 2,097 1Capella Education Co. 0 93,757 93,757
0 4,007 4,007 DeVRY, Inc. 0 129,827 129,827
0 612 612 1PRA International 0 17,705 17,705
0 1,659 1,659 1Parexel International Corp. 0 67,073 67,073
0 421 421 Strayer Education, Inc. 0 63,794 63,794
0 1,771 1,771 1Sykes Enterprises, Inc. 0 29,647 29,647
0 4,609 4,609 1TeleTech Holdings, Inc., Class A 0 135,182 135,182
0 3,155 3,155 Watson Wyatt & Co. Holdings 0 140,555 140,555
0 889,402 889,402
UNDESIGNATED
CONSUMER STAPLES -
0.1%
0 973 973 1USANA, Inc. 0 39,270 39,270
TOTAL COMMON STOCKS (IDENTIFIED COST $64,672,991) 60,645,328 17,090,189 77,735,517
MONEY MARKET MUTUAL
FUND - 0.8%
323,519 317,904 641,423 3,4Prime Value Obligations Fund, Institutional 323,519 317,904 641,423
Shares, 5.25% (AT NET ASSET VALUE)
PRINCIPAL AMOUNT
REPURCHASE AGREEMENT - 11.7%
$9,086,000 0 9,086,000 Interest in $3,700,000,000 joint repurchase 9,086,000 0 9,086,000
agreement, 5.32%, dated 7/31/2007 under which CS
First Boston Corp., will repurchase U.S. Government
Agency securities with various maturities to
8/16/2043 for $3,700,546,778 on 8/1/2007. The
market value of the underlying securities at the end
of the period was $3,811,008,459 (purchased with
proceeds from securities lending collateral).(AT
COST)
TOTAL INVESTMENTS (IDENTIFIED COST $74,400,414) - 70,054,847 17,408,093 87,462,940
112.1%
OTHER ASSETS & LIABILITIES - (12.1)% (9,519,502) 70,682 (9,448,820)
TOTAL NET ASSETS - 100% $60,535,345 $17,478,775 $78,014,120
The categories of investments are shown as a percentage of total net assets at July 31, 2007.
1Non-income producing
security.
2All or a portion of these securities are temporarily on loan to unaffiliated broker/dealers.
As of July 31, 2007, securities subject to this type of arrangement and related collateral were
as follows:
MARKET VALUE OF SECURITIES MARKET VALUE OF COLLATERAL
LOANED
$8,542,590 $9,086,000
3Affiliated company.
47-Day net yield.
The following acronym is used throughout
this portfolio:
ADR - American Depositary
Receipt
Note: Immediately following
the Reorganization , it is
the intent of MDT Fund to
sell all Technology Fund's
securities acquired I the
Reorganization, and to
purchase different securities
with the proceeds of such
sales.
4
FEDERATED TECHNOLOGY FUND
FEDERATED MDT SMALL CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS & LIABILITIES
JULY 31, 2007 (UNAUDITED)
MDT FUND MDT FUND
TECHNOLOGY MDT PRO FORMA PRO FORMA
FUND FUND ADJUSTMENT COMBINED
ASSETS:
Investments in securities, at value including $317,904 of $70,052,599 $17,408,093 $0 $87,460,692
investments in an affiliated issuer (identified cost
$74,398,167)
Income receivable 14,701 1,743 0 16,444
Receivable for investments sold 544,129 460,160 0 1,004,289
Receivable for shares sold 21,847 478,519 0 500,366
Total assets 70,633,276 18,348,515 0 88,981,791
LIABILITIES:
Payable for investments purchased 622,884 817,200 0 1,440,084
Payable for shares redeemed 178,292 7,960 0 186,252
Payable to bank 1,238 330 0 1,568
Payable for Directors'/Trustees fees 0 241 0 241
Payable for collateral due to broker 9,086,000 0 0 9,086,000
Payable for distribution services fees 31,341 579 0 31,920
Payable for shareholder services fees 11,085 676 0 11,761
Accrued expenses 167,091 42,754 0 209,845
Total liabilities 10,097,931 869,740 0 10,967,671
NET ASSETS $60,535,345 $17,478,775 $0 $78,014,120
NET ASSETS CONSISTS OF:
Paid-in capital 798,886,839 16,728,244 0 815,615,083
Net unrealized appreciation of investments and translation of 12,472,528 590,049 0 13,062,577
assets and liabilities in foreign currency
Accumulated net realized gain (loss) on investments and foreign (749,856,843) 160,482 0 (749,696,361)
currency transactions
Distributions in excess of net investment income (967,179) 0 0 (967,179)
Total Net Assets $60,535,345 $17,478,775 $0 $78,014,120
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE
INSTITUTIONAL SHARES:
NET ASSETS $0 $16,244,826 $0 $16,244,826
SHARES OUTSTANDING 0 1,247,445 0 1,247,445
NET ASSET VALUE PER SHARE $0.00 $13.02 $0.00 $13.02
OFFERING PRICE PER SHARE $0.00 $13.02 $0.00 $13.02
REDEMPTION PROCEEDS PER SHARE $0.00 $13.02 $0.00 $13.02
CLASS A SHARES:
NET ASSETS $20,658,856 $532,355 $0 $21,191,211
SHARES OUTSTANDING 3,338,219 41,100 (1,742,940) (d) 1,636,379
NET ASSET VALUE PER SHARE $6.19 $12.95 $0.00 $12.95
OFFERING PRICE PER SHARE $6.55 (a) $13.70 (a) $0.00 $13.70 (a)
REDEMPTION PROCEEDS PER SHARE $6.19 $12.95 $0.00 $12.95
CLASS B SHARES:
NET ASSETS $33,414,049 $0 $0 $33,414,049
SHARES OUTSTANDING 5,727,796 0 (3,161,433) (d) 2,566,363
NET ASSET VALUE PER SHARE $5.83 $0.00 $0.00 $13.02
OFFERING PRICE PER SHARE $5.83 $0.00 $0.00 $13.02
REDEMPTION PROCEEDS PER SHARE $5.51 (b) $0.00 $0.00 $12.30 (b)
CLASS C SHARES:
NET ASSETS $6,462,440 $701,594 $0 $7,164,034
SHARES OUTSTANDING 1,106,944 54,929 (600,880) (d) 560,993
NET ASSET VALUE PER SHARE $5.84 $12.77 $0.00 $12.77
OFFERING PRICE PER SHARE $5.84 $12.77 $0.00 $12.77
REDEMPTION PROCEEDS PER SHARE $5.78 (c) $12.64 (c) $0.00 $12.64 (c)
Investments, at identified cost $57,582,370 $16,818,044 $0 $74,400,414
(a) Computation of offering price per share 100/94.50 of net
asset value.
(b) Computation of redemption proceeds per share 94.50/100 of
net asset value.
(c )Computation of redemption proceeds per share 99.00/100 of
net asset value.
(d) Adjustment to reflect share balance as a result of the
combination.
5
FEDERATED TECHNOLOGY FUND
FEDERATED MDT SMALL CAP GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
JULY 31, 2007 (UNAUDITED)
MDT MDT
FUND FUND
TECHNOLOGY MDT PRO FORMA PRO FORMA
FUND FUND ADJUSTMENT COMBINED
INVESTMENT INCOME:
Dividends (including $2,293 received from an affiliated issuer) $296,563 $22,391 $0 $318,954
Interest 67,478 3,132 0 70,610
TOTAL INVESTMENT INCOME 364,041 25,523 0 389,564
EXPENSES:
Investment advisory fee 486,543 59,891 263,447 (a) 809,881
Administrative personnel and services fee 230,057 230,037 (190,057) (b) 270,037
Custodian fees 13,542 23,652 5,137 (c) 42,331
Transfer and dividend disbursing agent fees and expenses 499,210 47,616 (26,000) (d) 520,826
Directors'/Trustees' fees 2,174 225 (200) (e) 2,199
Auditing Fees 22,303 14,363 (22,166) (f) 14,500
Legal fees 11,278 7,624 (9,037) (g) 9,865
Portfolio accounting fees 70,793 74,199 (55,570) (h) 89,422
Distribution services fee - Class A Shares 53,424 236 (34,103) (i) 19,557
Distribution services fee - Class B Shares 274,256 0 0 274,256
Distribution services fee - Class C Shares 52,014 4,051 4,815 (i) 60,880
Shareholder services fees - Class A Shares 0 654 34,103 (j) 34,757
Shareholder services fees - Class B Shares 91,527 0 0 91,527
Shareholder services fees - Class C Shares 14,456 892 (1,943) (j) 13,405
Share registration costs 38,881 61,004 (29,881) (k) 70,004
Printing and postage 60,619 18,732 (13,651) (l) 65,700
Insurance premiums 6,721 6,086 (6,086) (m) 6,721
Miscellaneous 3,455 3,102 (3,102) (n) 3,455
TOTAL EXPENSES 1,931,253 552,364 (84,294) 2,399,323
WAIVERS AND REIMBURSEMENT:
Waiver/reimbursement of investment adviser fee (229,600) (59,891) (405,934) (o) (695,425)
Waiver of administrative personnel and services fee (44,353) (106,394) 25,853 (p) (124,894)
Wiaver of transfer and dividend disbursing agent fees and expenses 0 (13,076) 0 (13,076)
Waiver of portfolio accounting fees 0 (21,438) 0 (21,438)
Reimbursement of other operating expenses 0 (268,027) 268,027 (q) 0
Fees paid indirectly from directed brokerage arrangements (4,405) 0 4,405 (r ) 0
TOTAL WAIVERS AND REIMBURSEMENT (278,358) (468,826) (106,969) (854,153)
NET EXPENSES 1,652,895 83,538 (191,943) 1,544,490
NET INVESTMENT LOSS ($1,288,854) ($58,015) $191,943 ($1,154,926)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain on investments and foreign currency transactions 7,528,637 239,622 0 7,768,259
Net change in unrealized appreciation/depreciation of investments 9,250,113 617,453 0 9,867,566
Net realized and unrealized gain on investments and foreign currency 16,778,750 857,075 0 17,635,825
transactions
Change in net assets resulting from operations $15,489,896 $799,060 $191,943 $16,480,899
(See Notes to Pro Forma Financial Statements)
6
FEDERATED TECHNOLOGY FUND
FEDERATED MDT SMALL CAP GROWTH FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
YEAR ENDED JULY 31, 2007 (UNAUDITED)
NOTE 1. DESCRIPTION OF THE FUND
Technology Fund, a portfolio of Federated Equity Funds, is registered under the
Investment Company Act of 1940, as amended (the "Act), as an open-end,
management investment company. The Fund consists of three classes of shares:
Class A Shares, Class B Shares and Class C Shares.
MDT Fund, a portfolio of Federated MDT Series, is registered under the Act as an
open-end, management investment company. MDT Small Cap Growth Fund (the
"Predecessor Fund") was reorganized into MDT Fund as of the close of business on
December 8, 2006. Prior to the reorganization, MDT Fund had no investment
operations. MDT Fund is the successor to the Predecessor Fund. For the
purposes of these Pro Forma Financial Statements, the financial information
covers the period from August 1, 2006 to July 31, 2007. MDT Fund consists of
three classes of shares: Class A Shares, Class C Shares and Institutional
Shares. Upon commencement of the combination with Technology Fund, MDT Fund
will begin offering Class B 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 Technology Fund and MDT Fund for
the year ended July 31, 2007. These statements have been derived from the books
and records utilized in calculating daily net asset values at July 31, 2007.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of Technology Fund and MDT 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 Shares, Class B Shares and Class C Shares of Technology Fund
for Class A Shares, Class B Shares and Class C Shares of MDT Fund. Under
generally accepted accounting principles, MDT 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 year ended July 31, 2007, Technology Fund and MDT Fund paid investment
advisory fees computed at the annual rate of 0.75% and 1.15%, respectively, 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 based upon a valuation model
determined by management 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; prices for interest rate
swaps are furnished by an independent pricing service and are based upon a
valuation model incorporating interest rates, yield curves 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 registered 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 is done by others under the direction of Fund management. An event
is considered material if there is both an affirmative expectation that the
security's value will change in response to the event and a reasonable basis for
quantifying the resulting change in value.
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 1,595,279 Class A Shares, 2,566,363 Class B
Shares and 506,064 Class C Shares, respectively, of MDT Fund in exchange for
3,338,219 Class A Shares, 5,727,796 Class B Shares and 1,106,944 Class C Shares
of Technology Fund which would have been issued at July 31, 2007 in connection
with the proposed reorganization.
NOTE 5. FEDERAL INCOME TAXES
Each fund has elected to be taxed as a "registered investment company" under the
Internal Revenue Code. After the acquisition, MDT Fund intends to continue to
qualify as a registered 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 provisions for federal income
tax are 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 Equity Management Company of Pennsylvania, Technology Fund's
investment adviser, receives for its services an annual investment advisory fee
equal to 0.75% of the Funds average daily net assets. Federated MDTA LLC, MDT
Fund's investment adviser (the "Adviser"), receives for its services an annual
investment adviser fee equal to 1.15% of the Fund's average daily net assets.
Prior to December 8, 2006, the Adviser received an annual investment adviser fee
equal to 1.25% of the Fund's average daily net assets. Each investment adviser
may voluntarily choose to waive any portion of its fee. The advisers can modify
or terminate these voluntary waivers at any time. An adjustment to the combined
investment adviser fee reflects the fee structure of MDT Fund on the average
daily net assets of MDT Fund Pro Forma Combined.
(b) Federated Administrative Services (FAS), under the Administrative Services
Agreement (the "Agreement"), provides MDT Fund and Technology Fund with certain
administrative personnel and services necessary to operate the funds. 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 MDT Fund on the average daily net assets of MDT
Fund Pro Forma Combined.
(c) Adjustment to reflect custodian fees resulting from higher trading activity
and the combining of two portfolios into one.
(d) Adjustment to reflect transfer and dividend disbursing agent fees and
expenses resulting from the combining of two portfolios into one.
(e) Adjustment to reflect directors'/trustees' fees resulting from higher
average daily net assets and the combining of two portfolios into one.
(f) Adjustment to reflect auditing fees resulting from the combining of two
portfolios into one.
(g) Adjustment to reflect legal fees resulting from the combining of two
portfolios into one.
(h) Adjustment to reflect portfolio accounting fees resulting from the
combining of two portfolios into one.
(i) Under a Distribution Plan (the "Plan") pursuant to Rule 12B-1 under the
Act, MDT Fund may incur distribution expenses at 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. Under a similar plan,
Technology Fund may incur distribution expenses at 0.25% of Class A Shares and
0.75% of Class B Shares and Class C Shares average daily net assets. FSC may
voluntarily choose to waive any portion of its fee. For the period from the
Reorganization through July 31, 2007, MDT Fund did not charge or accrue the
distribution 12b-1 fee for the Class A Shares. Adjustment to reflect the
expense structure of MDT Fund on the average daily net assets of MDT Fund Pro
Forma Combined.
(j) Effective December 11, 2006, under the terms of a Shareholder Services
Agreement, MDT Fund may pay fees up to 0.25% of the average daily net assets of
the Fund's Class A Shares 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, Technology Fund may pay fees up to 0.25% of the average daily net assets
of Class A Shares, Class B Shares and Class C Shares to financial intermediaries
or to FSSC. FSSC or these financial intermediaries may voluntarily choose to
reimburse any portion of their fee. Adjustment to reflect the expense
structure of MDT Fund on the average daily net assets of MDT Fund Pro Forma
Combined.
(k) Adjustment to reflect share registration costs resulting from the combining
of two portfolios into one.
(l) Adjustment to reflect printing and postage expense resulting from the
combining of two portfolios into one.
(m) Adjustment to reflect insurance premiums resulting from the combining of
two portfolios into one.
(n) Adjustment to reflect miscellaneous expenses resulting from the combining
of two portfolios into one.
(o) 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 MDT 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. The
Adviser may also voluntarily choose to waive a portion of its fee and/or
reimburse certain operating expenses of MDT Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion. An adjustment to the combined waiver/reimbursement of investment
adviser fee reflects the fee structure of MDT Fund on the average daily net
assets of MDT Fund Pro Forma Combined.
(p) Effective July 15, 2006, FAS contractually agreed to waive a portion of its
fee which it would otherwise be entitled to receive from MDT Fund under the
Agreement. The level of fees payable by MDT Fund to FAS for the period will not
exceed the level of fees which MDT 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 this voluntary waiver at any time at its sole discretion.
An adjustment to the combined waiver of administrative personnel and services
fee reflects the fee structure of MDT Fund on the average daily net assets of
MDT Fund Pro Forma Combined.
(q) An adjustment to the combined reimbursement of other operating expenses
reflects the fee structure of MDT Fund on the average daily net assets of MDT
Fund Pro Forma Combined.
(r) Technology Fund directs portfolio trades to a broker that in turn pays a
portion of Technology Fund's operating expenses. MDT Fund does not utilize this
type of brokerage arrangement. Adjustment to reflect reduction of fees paid
indirectly from directed brokerage arrangements.
7
FEDERATED TECHNOLOGY 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:
1.1 Conformed copy of Declaration of Trust of the Registrant; (1)
1.2 Conformed copy of Amendment No. 1 of the Declaration of Trust; (5)
1.3 Conformed copy of Amendment No. 2 of the Declaration of Trust; (6)
2. Copy of By-Laws of the Registrant; (1)
3. Not applicable;
4. Plan of Reorganization; (+)
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)
6.3 Conformed copy of Investment Advisory Contract on behalf of the
Registrant which includes Exhibits A through H; (5)
6.4 Conformed copy of Subadvisory Agreement for Federated MDT Balanced
Fund which includes
Exhibit A; (5)
7.1 Conformed copy of Distributor's Contract of the Registrant; (3)
7.2) Conformed copy of Distributor's Contract of the Registrant with
Exhibits A through D; (5)
7.3 Conformed copy of Distributor's Contract for Class B
Shares of the Registrant; (5)
8. Not Applicable
9.1 Conformed copy of Custodian Agreement of the Registrant; (3)
9.2 Conformed copy of Custodian Schedule; (3)
9.3 Conformed copy of Custodian Schedule; (5)
9.4 Conformed copy of Custodian Agreement Exhibit 1
(revised as of 6/22/07); (6)
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)
10.2 Conformed copy of Distribution Plan with Exhibits A
through D attached; (5)
10.3 Conformed Copy of Distribution Plan of the Registrant
for Class B Shares; (5)
10.4 Copy of the Multiple Class Plan and attached Exhibits
of the Registrant; (5)
10.5 Copy of Class A Shares, Class B Shares and Class C
Shares Exhibits to the Multiple Class Plan (6)
11. 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 incorporatesby 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 incorporatesby 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 incorporatesthe 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; (5)
14.2 Conformed copy of Consent of Independent Registered Public
Accounting Firm of Federated Large Cap Growth Fund; (5)
14.3 Conformed copy of Consent of Independent Registered Public
Accounting Firm of Federated Technology Fund ; +
14.4 Conformed copy of Consent of Independent Registered Public
Accounting Firm of Federated MDT Small Cap Growth Fund; +
15. Not applicable
16.1 Conformed copy of Power of Attorney of Registrant; (5)
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; (5)
16.4 Conformed copy of Power of Attorney of Registrant; +
16.5 Conformed copy of Unanimous Consent of Trustees; +
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)
5. Response is incorporated by reference to Registrant's Preliminary Form N-14
to its Initial Registration Statement on Form N-1A filed April 6, 2007.
(File Nos. 333-134468 and 811-21904)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed September 28, 2007. (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
29th day of November, 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 November 29, 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. O'Neil* Trustee
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
James F. Will* Trustee
* By Power of Attorney