MANAGED SERIES TRUST, 485APOS, 1994-11-30

MANAGED SERIES TRUST
485APOS, 1994-11-30

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1933 Act File No. 33-51247
1940 Act File No. 811-7129

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X

Pre-Effective Amendment No.

Post-Effective Amendment No. 2 X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X

Amendment No. 4 X

MANAGED SERIES TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule
485.

If appropriate, check the following box:

This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:

_ filed the Notice required by that Rule on
_________________; or
X intends to file the Notice required by that Rule on or
about March 15, 1995; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.

Copies to:

Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin,
L.L.P.
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of MANAGED
SERIES TRUST (formerly, Allocation Series Trust), which
consists of four portfolios: (1) Federated Managed Income Fund
(formerly, Managed Income Fund), (2) Federated Managed Growth
and Income Fund (formerly, Managed Growth and Income Fund),
(3) Federated Managed Growth Fund (formerly, Managed Growth
Fund), and (4) Federated Managed Aggressive Growth Fund
(formerly, Managed Aggressive Growth Fund), each having two
classes of shares, (a) Institutional Service Shares and (b)
Select Shares, is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page (1-4) Cover Page.

Item 2. Synopsis (1-4) Summary of Fund Expenses.

Item 3. Condensed Financial
Information (1-4) Financial Highlights; (1-
4) Performance Information.

Item 4. General Description of
Registrant (1-4) General Information; (1-
4) Investment Information; (1-
4) Investment Objective; (1-4)
Investment Policies; (1-4)
Acceptable Investments; (1-4)
Investment Limitations.

Item 5. Management of the Fund (1-4) Trust Information; (1-4)
Management of the Trust; (1-4)
Administration of the Fund; (1-
4) Administrative Services; (1-
4) Brokerage Transactions; (1a-
4a) Expenses of the Fund and
Institutional Service Shares;
(1b-4b) Expenses of the Fund
and Select Shares.

Item 6. Capital Stock and Other
Securities (1-4) Dividends; (1-4) Capital
Gains; (1-4) Shareholder
Information; (1-4) Voting
Rights; (1-4) Massachusetts
Partnership Law; (1-4) Tax
Information; (1-4) Federal
Income Tax; (1-4) Pennsylvania
Corporate and Personal Property
Taxes; (1-4) Other Classes of
Shares.

Item 7. Purchase of Securities Being
Offered (1-4) Net Asset Value; (1a-4a)
Investing in Institutional
Service Shares; (1b-4b)
Investing in Select Shares; (1-
4) Share Purchases; (1-4)
Minimum Investment Required; (1-
4) What Shares Cost; (1-4)
Subaccounting Services; (1a-4a)
Distribution of Institutional
Service Shares; (1b-4b)
Distribution of Select Shares;
(1a-4a) Shareholder Services
Plan; (1b-4b) Distribution and
Shareholder Services Plans; (1-
4) Other Payments to Financial
Institutions; (1-4) Systematic
Investment Plan; (1-4)
Certificates and Confirmations.

Item 8. Redemption or Repurchase (1a-4a) Redeeming Institutional
Service Shares; (1b-4b)
Redeeming Select Shares; (1-4)
Through a Financial
Institution; (1-4) Telephone
Redemption; (1-4) Written
Requests; (1-4) Systematic
Withdrawal Program; (1-4)
Accounts with Low Balances.

Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.

Item 10. Cover Page (1-4) Cover Page.

Item 11. Table of Contents (1-4) Table of Contents.

Item 12. General Information and
History (1-4) General Information About
the Trust.

Item 13. Investment Objectives and
Policies (1-4) Investment Objectives and
Policies; (1-4) Investment
Limitations.

Item 14. Management of the Fund (1-4) Managed Series Trust
Management.

Item 15. Control Persons and Principal
Holders of Securities (1-4) Trust Ownership.

Item 16. Investment Advisory and Other
Services (1-4) Investment Advisory
Services; (1-4) Administrative
Services.

Item 17. Brokerage Allocation (1-4) Brokerage Transactions.

Item 18. Capital Stock and Other
Securities Not applicable.

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered (1-4) Purchasing Shares; (1-4)
Determining Net Asset Value; (1-
4) Redeeming Shares.

Item 20. Tax Status (1-4) Tax Status.

Item 21. Underwriters (1-4) Distribution and
Shareholder Services Plans.

Item 22. Calculation of Performance
Data (1-4) Total Return; (1-4)
Yield;
(1-4) Performance Comparisons.

Item 23. Financial Statements (1-4) To be filed by amendment.

FEDERATED MANAGED INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

The Institutional Service Shares of Federated Managed Income Fund (the "Fund")
offered by this prospectus represent interests in the Fund, which is a
diversified investment portfolio of Managed Series Trust (the "Trust"). The
Trust is an open-end management investment company (a mutual fund).

The investment objective of the Fund is to seek current income. The Fund invests
in both bonds and stocks. Institutional Service Shares are sold at net asset
value.

THE INSTITUTIONAL SERVICE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE INSTITUTIONAL SERVICE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.

The Fund has also filed a Combined Statement of Additional Information for
Institutional Service Shares and Select Shares of all portfolios of the Trust
dated , with the Securities and Exchange Commission. The
information contained in the Combined Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Combined Statement of Additional Information free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Asset Allocation 2
Bond Asset Categories 3
U.S. Treasury Securities 3
Mortgage-Backed Securities 4
Investment-Grade Corporate Bonds 4
High Yield Corporate Bonds 4

Investment Risks 4

Foreign Bonds 5
Equity Asset Categories 5
Large Company Stocks 5
Utility Stocks 5
Small Company Stocks 5
Foreign Stocks 5

Equity Reserves 6

Acceptable Investments 6
U.S. Treasury and Other U.S.
Government Securities 6
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICS") 7
Characteristics of Mortgage-Backed
Securities 7
Corporate Bonds 8

Equity Securities 8

Foreign Securities 8
Investment Risks 9

Equity Reserves 9

Repurchase Agreements 9

Convertible Securities 9

Investing in Securities of Other
Investment Companies 10
Restricted and Illiquid Securities 10
When-Issued and Delayed Delivery
Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 11
Forward Foreign Currency Exchange
Contracts 11
Options 11
Futures and Options on Futures 12
Risks 13
Portfolio Turnover 13
Investment Limitations 13

TRUST INFORMATION 13
- ------------------------------------------------------

Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 14
Adviser's Background 14
Distribution of Institutional Service Shares 16
Administration of the Fund 16
Administrative Services 16
Shareholder Services Plan 17

Other Payments to
Financial Institutions 17

Custodian 17
Transfer Agent and Dividend
Disbursing Agent 17
Legal Counsel 17
Independent Public Accountants 17
Brokerage Transactions 17
Expenses of the Fund and Institutional
Service Shares 17

NET ASSET VALUE 18
- ------------------------------------------------------

INVESTING IN INSTITUTIONAL SERVICE SHARES 18
- ------------------------------------------------------

Share Purchases 18
Through a Financial Institution 18
By Wire 19
By Mail 19
Minimum Investment Required 19
What Shares Cost 19
Subaccounting Services 20
Systematic Investment Program 20
Certificates and Confirmations 20
Dividends 20
Capital Gains 20

REDEEMING INSTITUTIONAL SERVICE SHARES 20
- ------------------------------------------------------

Through a Financial Institution 21
Telephone Redemption 21
Written Requests 21
Signatures 21
Receiving Payment 22
Systematic Withdrawal Program 22
Accounts with Low Balances 22

SHAREHOLDER INFORMATION 22
- ------------------------------------------------------

Voting Rights 22
Massachusetts Partnership Law 23

TAX INFORMATION 23
- ------------------------------------------------------

Federal Income Tax 23
Pennsylvania Corporate and
Personal Property Taxes 23

PERFORMANCE INFORMATION 24
- ------------------------------------------------------

OTHER CLASSES OF SHARES 24
- ------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES 25
- ------------------------------------------------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 26
- ------------------------------------------------------

APPENDIX 27
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Institutional Service Shares and Select Shares. This prospectus relates only
to Institutional Service Shares.

Institutional Service Shares ("Shares") of the Fund are designed to give
institutions, individuals, and financial institutions acting in a fiduciary or
agency capacity a convenient means of accumulating an interest in a
professionally managed, diversified investment portfolio. A minimum initial
investment of $25,000 over a 90-day period is required.

Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek current income. There can be, of
course, no assurance that the Fund will achieve its investment objective. The
Fund's investment objective cannot be changed without the approval of
shareholders. Unless otherwise noted, the Fund's investment policies may be
changed by the Trustees without shareholder approval.

INVESTMENT POLICIES

ASSET ALLOCATION. The Fund will primarily invest in two types of assets: bonds
and stocks. The Fund's investment approach is based on the conviction that, over
time, the choice of investment asset categories and their relative long-term
weightings within the portfolio will have the primary impact on its investment
performance. Of secondary importance to the Fund's performance are the shifting
of money among asset categories and the selection of securities within asset
categories. Therefore, the Fund will pursue its investment objective in the
following manner: (1) by setting long-term ranges for each asset category; (2)
by moving money among asset categories within those defined ranges; and (3) by
actively selecting securities within each of the asset categories. The Fund
attempts to minimize risk by allocating its assets in such a fashion.

Within each of these types of investments, the Fund has designated asset
categories. As a matter of investment policy, ranges have been set for each
asset category's portfolio commitment.

The Fund will invest between 70 and 90 percent of its assets in bonds. The bond
asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.

The Fund will invest between 10 and 30 percent of its assets in stocks. The
Fund's ability to invest a portion of its assets in stocks offers the
opportunity for higher return than other income-oriented

funds. The stock asset categories are large company stocks, utility stocks,
small company stocks, and foreign stocks.

The following is a summary of the asset categories and the amount of the Fund's
total assets which may be invested in each asset category:

<TABLE>
<S> <C>
ASSET CATEGORY RANGE
BONDS 70-90%
U.S. Treasury Securities 0-90%
Mortgage-Backed Securities 0-45%
Investment-Grade Corporate Bonds 0-45%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%
STOCKS 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Equity Reserves 0-12.5%
</TABLE>

The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, U.S.
Treasury securities are judged to be unusually attractive relative to other
asset categories, the allocation for U.S. Treasury securities may be moved to
its upper limit. At other times when U.S. Treasury securities appear to be
overvalued, the commitment may be moved down to a lesser allocation. There is no
assurance, however, that the adviser's attempts to pursue this strategy will
result in a benefit to the Fund.

Each asset category within the Fund will be a managed portfolio. The Fund will
seek superior investment performance through security selection in addition to
determining the percentage of its assets to allocate to each of the asset
categories.

U.S. TREASURY SECURITIES. U.S. Treasury securities are direct obligations
of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds. The
Fund may invest up to 90 percent of its total

assets in U.S. Treasury securities. The Fund may invest in other U.S.
government securities if, in the judgment of the adviser, other U.S.
government securities are more attractive than U.S. Treasury securities.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent an
undivided interest in a pool of residential mortgages or may be
collateralized by a pool of residential mortgages. Mortgage-backed
securities are generally either issued or guaranteed by the Government
National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") or
other U.S. government agencies or instrumentalities. Mortgage-backed
securities may also be issued by single-purpose, stand-alone finance
subsidiaries or trusts of financial institutions, government agencies,
investment bankers, or companies related to the construction industry. The
Fund may invest up to 45 percent of its total assets in mortgage-backed
securities.

INVESTMENT-GRADE CORPORATE BONDS. Investment-grade corporate bonds are
corporate debt obligations having fixed or floating rates of interest and
which are rated BBB or higher by a nationally recognized statistical rating
organization ("NRSRO"). The Fund may invest up to 45 percent of its total
assets in investment-grade corporate bonds. In certain cases the Fund's
adviser may choose bonds which are unrated if it determines that such bonds
are of comparable quality or have similar characteristics to the
investment-grade bonds described above. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.

HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to ten percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.

INVESTMENT RISKS. _Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than

higher-rated securities.

Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.

FOREIGN BONDS. Foreign bonds are high-quality debt securities of nations
other than the United States. The Fund's portfolio of foreign bonds will be
comprised mainly of foreign government, foreign governmental agency or
supranational institution bonds. The Fund will also invest in high-quality
debt securities issued by corporations in nations other than the United
States and subject to the Fund's credit limitations for foreign bonds. The
Fund may invest up to ten percent of its total assets in foreign bonds.

EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
stocks will be allocated among the following asset categories within the ranges
specified:

LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 30 percent of its total assets in large
company stocks.

UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 15 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.

SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to three percent of its total assets in
small company stocks.

FOREIGN STOCKS. Foreign stocks are equity securities of established
companies in economically developed countries other than the United States.
These securities may be either dollar-denominated or denominated in foreign
currencies. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of

the asset category ranges. The Fund may invest up to three percent of its
total assets in foreign stocks.

EQUITY RESERVES. When the adviser believes that a temporary defensive
position is available, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments. The Fund may invest up to
12.5 percent of its total assets in equity reserves.

ACCEPTABLE INVESTMENTS

U.S. TREASURY AND OTHER U.S. GOVERNMENT SECURITIES. The U.S. Treasury and
other U.S. government securities in which the Fund invests are either
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The U.S. government securities in which the Fund may
invest are limited to:

direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of the agency or instrumentality (such as FNMA
and FHLMC bonds).

MORTGAGE-BACKED SECURITIES. Mortgaged-backed securities are securities
collateralized by residential mortgages. The mortgage-backed securities in
which the Fund may invest may be:

issued by an agency of the U.S. government, typically GNMA, FNMA or
FHLMC;

privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government;

privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed by
the issuer and such guarantee is collateralized by U.S. government
securities; and

other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities and payment of the principal
and interest are supported by the credit of an agency or instrumentality
of the U.S. government.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies
related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:

Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of
securities. The first three (A, B, and C bonds) pay interest at
their stated rates beginning with the issue date; the final class
(or Z bond) typically receives the residual income from the
underlying investments after payments are made to the other
classes.

The cash flows from the underlying mortgages are applied first to
pay interest and then to retire securities.

The classes of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity class (or A
bonds). When those securities are completely retired, all principal
payments are then directed to the next-shortest maturity security
(or B bond). This process continues until all of the classes have
been paid off.

Because the cash flow is distributed sequentially instead of pro rata
as with pass-through securities, the cash flows and average lives of
CMOs are more predictable, and there is a period of time during which
the investors in the longer-maturity classes receive no principal
paydowns. The interest portion of these payments is distributed by the
Fund as income and the capital portion is reinvested.

The Fund will invest only in CMOs which are rated AAA by an NRSRO.

REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.

CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the
entire principal amount is returned. This is caused by the need to
reinvest at lower interest rates both distributions of principal
generally and significant prepayments which become more likely as
mortgage interest rates decline. Since comparatively high interest
rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of
declining interest rates than other non-callable, fixed-income
government securities of comparable stated maturities. However,
mortgage-backed securities may experience less pronounced declines in
value during periods of rising interest rates.

In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest rates
fall, counter to changes in value experienced by most fixed-income
securities. The Fund's adviser intends to use this characteristic of
interest-only SMBSs to reduce the effects of interest rate changes on
the value of the Fund's portfolio, while continuing to pursue the
Fund's investment objective.

CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:

rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");

unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or

unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.

Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.

The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.

EQUITY SECURITIES. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks have
neither fixed maturity dates nor fixed schedules of promised payments.
Utility stocks are common stocks of utility companies, including water
companies, companies that produce, transmit, or distribute gas and electric
energy and those companies that provide communications facilities, such as
telephone and telegraph companies. Foreign stocks are equity securities of
foreign issuers.

FOREIGN SECURITIES. The foreign bonds in which the Fund invests are rated
within the four highest ratings for bonds by Moody's (Aaa, Aa, A or Baa) or
by Standard & Poor's (AAA, AA, A or BBB) or are unrated if determined to be
of equivalent quality by the Fund's adviser.

INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.

EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.

REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.

CONVERTIBLE SECURITIES. _Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. The Adviser may treat
convertible securities as large company stocks, small company stocks, or
high yield bonds for purposes of the asset category ranges, depending upon
current market conditions, including the relationship of the then-current

price to the conversion price.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. _The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100 percent of the value of the securities loaned.

FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one

or more currencies, such efforts may also limit any potential gain that might
result from a relative increase in the value of such currencies and might, in
certain cases, result in losses to the Fund.

CURRENCY RISKS. To the extent that debt securities purchased by the Fund
are denominated in currencies other than the U.S. dollar, changes in
foreign currency exchange rates will affect the Fund's net asset value; the
value of interest earned; gains and losses realized on the sale of
securities; and net investment income and capital gain, if any, to be
distributed to shareholders by the Fund. If the value of a foreign currency
rises against the U.S. dollar, the value of the Fund's assets denominated
in that currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. dollar, the value of the Fund's assets
denominated in that currency will decrease.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell an
amount of a particular currency at a specific price and on a future date agreed
upon by the parties.

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated and are maintained until
the contract has been settled. The Fund will not enter into a forward contract
with a term of more than one year.

The Fund will generally enter into a forward contract to provide the proper
currency to settle a securities transaction at the time the transaction occurs
("trade date"). The period between trade date and settlement date will vary
between 24 hours and 30 days, depending upon local custom.

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the adviser
will consider the likelihood of changes in currency values when making
investment decisions, the adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency.

OPTIONS. The Fund may deal in options on foreign currencies, foreign currency
futures, securities, and securities indices, which options may be listed for
trading on a national securities exchange or traded over-the-counter. The Fund
will use options only to manage interest rate and currency risks. The Fund may
write covered call options to generate income. The Fund may write covered call
options and secured put options on up to 25 percent of its net assets and may
purchase put and call options provided that no more than 5 percent of the fair
market value of its net assets may be invested in premiums on such options.

currency, security or other asset at the exercise price during the option
period. The writer of a covered call owns assets that are acceptable for escrow,
and the writer of a secured put invests an amount not less than the exercise
price in eligible assets to the extent that it is obligated as a writer. If a
call written by the Fund is exercised, the Fund foregoes any possible profit
from an increase in the market price of the underlying asset over the exercise
price plus the premium received. In writing puts, there is a risk that the Fund
may be required to take delivery of the underlying asset at a disadvantageous
price.

Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of non-performance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets and with a wider range of expiration
dates and exercise prices, than are exchange traded options.

FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell futures
contracts to accommodate cash flows into and out of the Fund's portfolio and to
hedge against the effects of changes in the value of portfolio securities due to
anticipated changes in interest rates and market conditions. Futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.

Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The Fund may utilize stock index futures to
handle cash flows into and out of the Fund and to potentially reduce
transactional costs.

The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.

RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.

It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.

PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exeeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;

lend any securities except for portfolio securities; or

underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.

The above investment limitations cannot be changed without shareholder approval.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts

investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.

ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $76 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.

Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since the Fund's inception. In
allocating the Fund's assets, Mr. Ritter evaluates the market environment
and economic outlook, utilizing the services of the investment adviser's
economist and strategist. Mr. Ritter joined Federated Investors in 1983 and
has been a Vice President of the Fund's investment adviser since 1992. From
1988 until 1991, Mr. Ritter acted as an Assistant Vice President. Mr.
Ritter is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Chicago and his M.S. in Economics from Carnegie
Mellon University.

The portfolio managers for each of the individual asset categories are as
follows:

Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University. Mr. Madich joined Federated Investors in 1984
and has been a Senior Vice President of the Fund's investment adviser since
1993. Mr. Madich served as Vice President of the Fund's investment adviser
from 1988 until 1993. Mr. Madich is a Chartered Financial Analyst and
received his M.B.A. in Public Finance from the University of Pittsburgh.

Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the investment adviser from 1989 until 1991, and from 1986 until
1989 he acted as Project Manager in the Product Development Department. Mr.
Balestrino is a Chartered Financial Analyst and received his M.A. in Urban
and Regional Planning from the University of Pittsburgh.

Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.

Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 as an
Assistant Vice President of the Fund's investment adviser. Mr. Bauer was an
Assistant Vice President of the International Banking Division at
Pittsburgh National Bank from 1982 until 1989. Mr. Bauer is a Chartered
Financial Analyst and received his M.B.A. in Finance from Pennsylvania
State University.

Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category and the senior portfolio manager for the
domestic small company stocks asset category. He has been one of the Fund's
portfolio managers since its inception. Mr. Anderson joined Federated
Investors in 1972 and is presently a Senior Vice President of the Fund's
investment adviser. Mr. Anderson is a Chartered Financial Analyst and
received his M.B.A. in Finance from the University of Wisconsin.

Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the domestic small company stocks asset category.
He has served in this capacity since August 1994. Mr. Plautz joined
Federated Investors in 1990 and has been a Vice President of the Fund's
investment adviser since October 1994. Prior to this, Mr. Plautz served as
an Assistant Vice President of the investment adviser. Mr. Plautz was a
portfolio manager at Banc

One Asset Management Corp. from 1986 until 1990. Mr. Plautz received his
M.S. in Finance from the University of Wisconsin.

James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie-Mellon University.

Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.

Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Federated Securities Corp. is the principal distributor for Shares. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. _Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.

SHAREHOLDER SERVICES PLAN. _The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments up to 0.25 of 1% of
the average daily net asset value of the Institutional Service Shares to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts ("shareholder services"). The Trust has entered into a Shareholder
Services Agreement with Federated Shareholder Services, a subsidiary of
Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Trust and Federated Shareholder Services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _In addition to receiving the payments
under the Services Plan, financial institutions could be compensated by the
distributor, who could be reimbursed by the adviser, or affiliates thereof, for
providing administrative support services to holders of Shares. These payments
would be made directly by the distributor and will not be made from the assets
of the Fund.

CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.

LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro and Morin, L.L.P., Washington,
D.C.

INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.

EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES

Holders of Shares pay their allocable portion of Fund and Trust expenses.

The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.

The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.

At present, no expenses are allocated to the Shares as a class. However, the
Trustees reserves the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified by the
transfer agent as attributable to holders of Shares; fees under the Fund's
Shareholder Services Plan, if any; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Shares; legal fees relating solely to Shares; and
Trustees' fees incurred as a result of issues relating solely to Shares.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Institutional Service Shares may exceed that of Select Shares due to the
variance in daily net income realized by each class. Such variance will reflect
only accrued net income to which the shareholders of a particular class are
entitled.

INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased through a financial institution which has a
sales agreement with the distributor or by wire or mail.

To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish an account will be taken over the telephone. The
Fund reserves the right to reject any purchase request.

THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank
or an investment dealer) to place an order to purchase Shares. Texas residents
must purchase

Shares through a broker registered with the State of Texas or through Federated
Securities Corp. at
1-800-358-2801. Orders through a financial institution are considered received
when the Fund is notified of the purchase order. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly.

BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Income Fund-- Institutional Service Shares; Fund Number (this number can
be found on the account statement or by contacting the Fund); Group Number or
Wire Order Number; Nominee or Institution Name; and ABA Number 011000028.

BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Income Fund--Institutional Service Shares to Federated Services Company,
c/o State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.

The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

SUBACCOUNTING SERVICES

Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.

DIVIDENDS

Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Unless shareholders request cash payments by writing the
Fund, dividends are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.

CAPITAL GAINS

Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.

REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution, by telephone
request or by written request.

THROUGH A FINANCIAL INSTITUTION

A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.

TELEPHONE REDEMPTION

Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern Time). All proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered.

WRITTEN REQUESTS

Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name and class of shares
name, his account number, and the Share or dollar amount requested. If Share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.

SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:

a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agents have received
payment for Shares from the shareholder.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Shares,
and the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually use up, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $25,000. A shareholder may apply for participation in this
program through Federated Securities Corp.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

September 6, 1994, IU & Co. of Columbus, Indiana, acting in various capacities
for numerous accounts, was the owner of record of 103,361 Select Shares (30.25%)
and J. Jones & Company of Atmore, Alabama, acting in various capacities for
numerous accounts, was the owner of record of 102,973 Select Shares (30.14%) of
Federated Managed Income Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Trust:

the Fund is not subject to Pennsylvania corporate or personal property
taxes; and

Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises its total return and yield for Shares.

Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

Shares are sold without any sales load or other similar non-recurring charges.

Total return and yield will be calculated separately for Institutional Service
Shares and Select Shares. Because Select Shares are subject to 12b-1 fees, the
total return and yield for Institutional Service Shares, for the same period,
will exceed that of Select Shares.

From time to time the Fund may advertise the performance of Institutional
Service Shares using certain financial publications and/or compare the
performance of Institutional Service Shares to certain indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

Select Shares are sold primarily to retail and private banking customers of
financial institutions. Select Shares are sold at net asset value. Investments
in Select Shares are subject to a minimum initial investment of $1,500.

Select Shares are distributed pursuant to a 12b-1 Plan adopted by the Trust
whereby the distributor is paid a fee of .75 of 1% of the Select Shares' average
daily net assets. Select Shares are also subject to a Shareholder Services Plan
fee of .25 of 1%.

Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.

The amount of dividends payable to Institutional Service Shares will exceed that
of Select Shares by the difference between Class Expenses and distribution and
shareholder service expenses borne by shares of each respective class.

The stated advisory fee is the same for both classes of shares.

FEDERATED MANAGED INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 18, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Cash $ 100,000
- ------------------------------------------------------------------------------------------------------ ----------
LIABILITIES: --
- ------------------------------------------------------------------------------------------------------ ----------
Net Assets for 10,000 shares of capital stock outstanding $ 100,000
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($100,000/10,000 shares of capital stock outstanding) $ 10.00
- ------------------------------------------------------------------------------------------------------ ----------
</TABLE>

Notes:

(1) Managed Series Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated November 15, 1993, and
has had no operations since that date other than those relating to
organizational matters, including the issuance on January 18, 1994 of
10,000 shares of the Federated Managed Income Fund at $10.00 per share to
Federated Management, the investment adviser to the Fund. Expenses of
organization incurred by the Trust, estimated at $33,100, were borne
initially by Federated Administrative Services, Inc., the Administrator to
the Fund. The Trust has agreed to reimburse the Administrator for
organizational expenses initially borne by the Administrator during the
five-year period following the date the Trust's registration first became
effective.

(2) Reference is made to "Management of the Trust," "Administration of the
Fund," and "Tax Information" in this prospectus for a description of the
investment advisory fee, administrative and other services and federal tax
aspects of the Fund.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees and Shareholder of
FEDERATED MANAGED INCOME FUND (A Portfolio of Managed Series Trust):

We have audited the accompanying statement of assets and liabilities of the
Federated Managed Income Fund (a portfolio of Managed Series Trust, a
Massachusetts business trust) as of January 18, 1994. This financial statement
is the responsibility of the Trust's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the aforementioned financial statement presents fairly, in all
material respects, the financial position of the Federated Managed Income Fund
(a portfolio of Managed Series Trust) as of January 18, 1994, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN & CO.

Pittsburgh, Pennsylvania
January 21, 1994

APPENDIX
- --------------------------------------------------------------------------------

STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.

CCC--Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D

rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.

Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.

DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

NR--NR indicates that Fitch does not rate the specific issue.

PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Federated Managed Income Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------

Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------

Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222

- ---------------------------------------------------------------------------------------------------------------------
FEDERATED MANAGED
INCOME FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

A Diversified Portfolio of
Managed Series Trust, an Open-End
Management Investment Company

Prospectus dated

56166K107
3122013A-ISS (11/94)

FEDERATED MANAGED INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
SELECT SHARES
PROSPECTUS

The Select Shares of Federated Managed Income Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a diversified investment
portfolio of Managed Series Trust (the "Trust"). The Trust is an open-end
management investment company (a mutual fund).

The investment objective of the Fund is to seek current income. The Fund invests
in both bonds and stocks. Select Shares are sold at net asset value.

THE SELECT SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SELECT SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in Select Shares of the Fund. Keep this prospectus for future reference.

The Fund has also filed a Combined Statement of Additional Information for
Select Shares and Institutional Service Shares of all portfolios of the Trust
dated _______________, with the Securities and Exchange Commission. The
information contained in the Combined Statement of Additional Information is
incorporated by reference into this prospectus. You may request
a copy of the Combined Statement of Additional Information free of charge by
calling
1-800-235-4669. To obtain other information or to make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus.

Prospectus dated _______________

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Risks 4

Foreign Bonds 5
Equity Asset Categories 5
Large Company Stocks 5
Utility Stocks 5
Small Company Stocks 5
Foreign Stocks 5

Equity Reserves 6

Acceptable Investments 6
U.S. Treasury and Other
U.S. Government Securities 6
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICS") 7
Characteristics of Mortgage-
Backed Securities 7
Corporate Bonds 8
Equity Securities 8
Foreign Securities 8
Investment Risks 9

Equity Reserves 9

Repurchase Agreements 9

Convertible Securities 9

Investing in Securities of
Other Investment Companies 10
Restricted and Illiquid Securities 10
When-Issued and Delayed
Delivery Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 11
Forward Foreign Currency
Exchange Contracts 11
Options 11
Futures and Options on Futures 12
Risks 13
Portfolio Turnover 13
Investment Limitations 13

TRUST INFORMATION 13
- ------------------------------------------------------

Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 14
Adviser's Background 14
Distribution of Select Shares 16

Distribution and Shareholder Services Plans 16

Other Payments to Financial Institutions 17

Administration of the Fund 17
Administrative Services 17
Custodian 17
Transfer Agent and Dividend
Disbursing Agent 18
Legal Counsel 18
Independent Public Accountants 18
Brokerage Transactions 18
Expenses of the Fund and Select Shares 18
NET ASSET VALUE 19
- ------------------------------------------------------
INVESTING IN SELECT SHARES 19
- ------------------------------------------------------
Share Purchases 19
Through a Financial Institution 19
By Wire 19
By Mail 19
Minimum Investment Required 20
What Shares Cost 20
Subaccounting Services 20
Systematic Investment Program 20
Certificates and Confirmations 20
Dividends 21
Capital Gains 21
REDEEMING SELECT SHARES 21
- ------------------------------------------------------
Through a Financial Institution 21
Telephone Redemption 21
Written Requests 22
Signatures 22
Receiving Payment 22
Systematic Withdrawal Program 22
Accounts with Low Balances 22
SHAREHOLDER INFORMATION 23
- ------------------------------------------------------
Voting Rights 23
Massachusetts Partnership Law 23
TAX INFORMATION 24
- ------------------------------------------------------
Federal Income Tax 24
Pennsylvania Corporate and
Personal Property Taxes 24
PERFORMANCE INFORMATION 24
- ------------------------------------------------------
OTHER CLASSES OF SHARES 25
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 26
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 27
- ------------------------------------------------------
APPENDIX 28
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 15, 1993. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Select Shares and Institutional Service Shares. This prospectus relates only
to Select Shares.

Select Shares ("Shares") of the Fund are designed primarily for retail and
private banking customers of financial institutions as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
bonds and stocks. A minimum initial investment of $1,500 is required.

Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Within each of these types of investments, the Fund has designated asset
categories. As a matter of investment policy, ranges have been set for each
asset category's portfolio commitment.

funds. The stock asset categories are large company stocks, utility stocks,
small company stocks, and foreign stocks.

The following is a summary of the asset categories and the amount of the Fund's
total assets which may be invested in each asset category:

</TABLE>
<TABLE>
<CAPTION>
ASSET CATEGORY RANGE
<S> <C>
BONDS 70-90%
U.S. Treasury Securities 0-90%
Mortgage-Backed Securities 0-45%
Investment-Grade Corporate Bonds 0-45%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%
STOCKS 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Equity Reserves 0-12.5%
</TABLE>

U.S. TREASURY SECURITIES. U.S. Treasury securities are direct obligations
of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds. The
Fund may invest up to 90 percent of its total

EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
stocks will be allocated among the following asset categories within the ranges
specified:

SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price x number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to three percent of its total assets in
small company stocks.

the asset category ranges. The Fund may invest up to three percent of its
total assets in foreign stocks.

ACCEPTABLE INVESTMENTS

direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities
collateralized by residential mortgages. The mortgage-backed securities in
which the Fund may invest may be:

issued by an agency of the U.S. government, typically GNMA, FNMA or
FHLMC;

The cash flows from the underlying mortgages are applied first to
pay interest and then to retire securities.

The Fund will invest only in CMOs which are rated AAA by an NRSRO.

CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:

unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or

unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.

EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.

price to the conversion price.

FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell futures
contracts to accommodate cash flows into and out of the Fund's portfolio and to
hedge against the effects of changes in the value of portfolio securities due to
anticipated changes in interest rates and market conditions. Futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract, and the buyer agrees to take delivery of
the instrument at the specified future time.

PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts

investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to.75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.

The portfolio managers for each of the individual asset categories are as
follows:

Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University. Mr. Madich joined Federated Investors in 1984
and has been a Senior Vice President of the Fund's investment adviser since
1993. Mr. Madich served as a Vice President of the Fund's investment
adviser from 1988 until 1993. Mr. Madich is a Chartered Financial Analyst
and received his M.B.A. in Public Finance from the University of
Pittsburgh.

One Asset Management Corp. from 1986 until 1990. Mr. Plautz received his
M.S. in Finance from the University of Wisconsin.

DISTRIBUTION OF SELECT SHARES

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. _Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of
0.75 of 1% of the average daily net asset value of the Select Shares to finance
any activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund

under the Distribution Plan.

In addition, the Trust has adopted a Shareholder Services Plan (the "Services
Plan") under which the Fund may make payments up to 0.25 of 1% of the average
daily net asset value of the Select Shares to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _In addition to receiving the payments
under the Distribution and Services Plans, financial institutions may be
compensated by the distributor, who may be reimbursed by the adviser, or
affiliates thereof, for providing administrative support services to holders of
Shares. These payments will be made directly by the distributor and will not be
made from the assets of the Fund.

ADMINISTRATION OF THE FUND

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.

LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro and Morin, L.L.P., Washington,
D.C.

INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.

BROKERAGE TRANSACTIONS

EXPENSES OF THE FUND AND SELECT SHARES

Holders of Shares pay their allocable portion of Fund and Trust expenses.

At present, the only expenses allocated to the Shares as a class are expenses
under the Fund's 12b-1 Plan. However, the Trustees reserves the right to
allocate certain other expenses to holders of Shares as it deems appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; fees under the Fund's Shareholder Services
Plan, if any; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; registration fees paid to the Securities and Exchange
Commission and registration fees paid to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Shares; legal fees relating solely to Shares; and Trustees' fees incurred as
a result of issues relating solely to Shares.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN SELECT SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Texas residents may purchase Shares through a broker registered with the State
of Texas or through Federated Securities Corp. at 1-800-358-2801. Orders through
a financial institution are considered received when the Fund is notified of the
purchase order. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 p.m. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. It is the financial institution's responsibility to transmit
orders promptly.

BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Income Fund-- Select Shares; Fund Number (this number can be found on
the account statement or by contacting the Fund); Group Number or Wire Order
Number; Nominee or Institution Name; and ABA Number 011000028.

BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Income Fund--Select Shares to Federated Services Company, c/o State
Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602.
Orders by mail are considered received after

payment by check is converted by State Street Bank into federal funds. This is
normally the next business day after State Street Bank receives the check.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $1,500. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.

WHAT SHARES COST

SUBACCOUNTING SERVICES

SYSTEMATIC INVESTMENT PROGRAM

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
the quarter.

DIVIDENDS

CAPITAL GAINS

Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.

REDEEMING SELECT SHARES
- --------------------------------------------------------------------------------

THROUGH A FINANCIAL INSTITUTION

TELEPHONE REDEMPTION

Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). All proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

WRITTEN REQUESTS

a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Shares,
and the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually use up, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through Federated Securities Corp.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required

minimum value of $1,500. This requirement does not apply, however, if the
balance falls below $1,500 because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. As of September 6, 1994, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 103,361 Select Shares (30.25%) and J. Jones & Company of
Atmore, Alabama, acting in various capacities for numerous accounts, was the
owner of record of 102,973 Select Shares (30.14%) of Federated Managed Income
Fund, and therefore, may, for certain purposes, be deemed to control the Fund
and be able to affect the outcome of certain matters presented for a vote of
shareholders.

MASSACHUSETTS PARTNERSHIP LAW

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Trust:

the Fund is not subject to Pennsylvania corporate or personal property
taxes; and

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises its total return and yield for Shares.

Shares are sold without any sales load or other similar non-recurring charges.

Total return and yield will be calculated separately for Select Shares and
Institutional Service Shares. Because Select Shares are subject to 12b-1 fees,
the total return and yield for Institutional Service Shares, for the same
period, will exceed that of Select Shares.

From time to time the Fund may advertise the performance of Select Shares using
certain financial publications and/or compare the performance of Select Shares
to certain indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

Institutional Service Shares are sold to institutions and individuals and to
accounts for which financial institutions act in a fiduciary or agency capacity.
Institutional Service Shares are sold at net asset value. Investments in
Institutional Service Shares are subject to a minimum initial investment of
$25,000. Institutional Service Shares are distributed without a 12b-1 Plan.

Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.

The amount of dividends payable to Institutional Service Shares will generally
exceed that of Select Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.

The stated advisory fee is the same for both classes of shares.

Notes:

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees and Shareholder of
FEDERATED MANAGED INCOME FUND (A Portfolio of Managed Series Trust):

ARTHUR ANDERSEN & CO.

Pittsburgh, Pennsylvania
January 21, 1994

APPENDIX
- --------------------------------------------------------------------------------

STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

B--Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

BAA--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

BA--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

CAA--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.

NR--NR indicates that Fitch does not rate the specific issue.

ADDRESSES
- --------------------------------------------------------------------------------

Federated Managed Income Fund
Select Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------

Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- -----------------------------------------------------------------------------

Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------

Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------

Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222

- ------------------------------------------------------------------------------

FEDERATED MANAGED
INCOME FUND
SELECT SHARES

PROSPECTUS

A Diversified Portfolio of
Managed Series Trust, an Open-End
Management Investment Company

Prospectus dated _______________

56166K206
3122012A-SEL (11/94)

FEDERATED MANAGED GROWTH AND INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

The Institutional Service Shares of Federated Managed Growth and Income Fund
(the "Fund") offered by this prospectus represent interests in the Fund, which
is a diversified investment portfolio of Managed Series Trust (the "Trust"). The
Trust is an open-end management investment company (a mutual fund).

The investment objective of the Fund is to seek current income and capital
appreciation. The Fund invests in both bonds and stocks. Institutional Service
Shares are sold at net asset value.

This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.

The Fund has also filed a Combined Statement of Additional Information for
Institutional Service Shares and Select Shares of all portfolios of the Trust
dated _______________, with the Securities and Exchange Commission. The
information contained in the Combined Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Combined Statement of Additional Information free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus.

Prospectus dated _______________

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Risks 4

Foreign Bonds 5
Equity Asset Categories 5
Large Company Stocks 5
Utility Stocks 5
Small Company Stocks 5

Investment Risks 5

Foreign Stocks 6

Equity Reserves 6

Acceptable Investments 6
U.S. Treasury and Other U.S. Government
Securities 6
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICs") 7
Characteristics of Mortgage-
Backed Securities 8
Corporate Bonds 8

Equity Securities 8

Foreign Securities 9
Investment Risks 9

Equity Reserves 9

Repurchase Agreements 9

Convertible Sercurities 9

Investing in Securities of
Other Investment Companies 10
Restricted and Illiquid Securities 10
When-Issued and Delayed
Delivery Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 11
Forward Foreign Currency
Exchange Contracts 11
Options 11
Futures and Options on Futures 12
Risks 13
Portfolio Turnover 13
Investment Limitations 13

TRUST INFORMATION 14
- ------------------------------------------------------

Other Payments to Financial Institutions 17

Custodian 17
Transfer Agent and Dividend
Disbursing Agent 17
Legal Counsel 17
Independent Public Accountants 17
Brokerage Transactions 18
Expenses of the Fund and Institutional
Service Shares 18

NET ASSET VALUE 18
- ------------------------------------------------------

INVESTING IN INSTITUTIONAL SERVICE SHARES 19
- ------------------------------------------------------

Share Purchases 19
Through a Financial Institution 19
By Wire 19
By Mail 19
Minimum Investment Required 19
What Shares Cost 20
Subaccounting Services 20
Systematic Investment Program 20
Certificates and Confirmations 20
Dividends 20
Capital Gains 21

REDEEMING INSTITUTIONAL SERVICE SHARES 21
- ------------------------------------------------------

Through a Financial Institution 21
Telephone Redemption 21
Written Requests 21
Signatures 22
Receiving Payment 22
Systematic Withdrawal Program 22
Accounts with Low Balances 22

SHAREHOLDER INFORMATION 23
- ------------------------------------------------------

Voting Rights 23
Massachusetts Partnership Law 23

TAX INFORMATION 23
- ------------------------------------------------------

Federal Income Tax 23
Pennsylvania Corporate and
Personal Property Taxes 24

PERFORMANCE INFORMATION 24
- ------------------------------------------------------

OTHER CLASSES OF SHARES 24
- ------------------------------------------------------

APPENDIX 26
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

ADDRESSES
- --------------------------------------------------------------------------------

GENERAL INFORMATION
- --------------------------------------------------------------------------------

Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek current income and capital
appreciation. The Fund will attempt to minimize investment risk by allocating
its assets across various stock and bond categories. There can be, of course, no
assurance that the Fund will achieve its investment objective. The Fund's
investment objective cannot be changed without the approval of shareholders.
Unless otherwise noted, the Fund's investment policies may be changed by the
Trustees without shareholder approval.

INVESTMENT POLICIES

Within each of these types of investments, the Fund has designated asset
categories. As a matter of investment policy, ranges have been set for each
asset category's portfolio commitment.

The Fund will invest between 50 and 70 percent of its assets in bonds. The bond
asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.

The Fund will invest between 30 and 50 percent of its assets in stocks. The
stock asset categories are large company stocks, utility stocks, small company
stocks, and foreign stocks.

The following is a summary of the asset categories and the amount of the Fund's
total assets which may be invested in each asset category:

<TABLE>
<CAPTION>
ASSET CATEGORY RANGE
<S> <C>
BONDS 50-70%
U.S. Treasury Securities 0-70%
Mortgage-Backed Securities 0-35%
Investment Grade Corporate Bonds 0-35%
High Yield Corporate Bonds 0-7.5%
Foreign Bonds 0-7.5%

STOCKS 30-50%
Large Company Stocks 0-50%
Utility Stocks 0-20%
Small Company Stocks 0-7.5%
Foreign Stocks 0-7.5%
Equity Reserves 0-15%
</TABLE>

The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, large
company stocks are judged to be unusually attractive relative to other asset
categories, the allocation for large company stocks may be moved to its upper
limit. At other times when large company stocks appear to be overvalued, the
commitment may be moved down to a lesser allocation. There is no assurance,
however, that the adviser's attempts to pursue this strategy will result in a
benefit to the Fund.

U.S. TREASURY SECURITIES. U.S. Treasury securities are direct obligations
of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds. The
Fund may invest up to 70 percent of its total assets in U.S. Treasury
securities. The Fund may invest in other U.S. government securities if,
in the judgment of the adviser, other U.S. government securities are more
attractive than U.S. Treasury securities.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent an
undivided interest in a pool of residential mortgages or may be
collateralized by a pool of residential mortgages. Mortgage-backed
securities are generally either issued or guaranteed by the Government
National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") or
other U.S. government agencies or instrumentalities. Mortgage-backed
securities may also be issued by single-purpose, stand-alone finance
subsidiaries or trusts of financial institutions, government agencies,
investment bankers, or companies related to the construction industry. The
Fund may invest up to 35 percent of its total assets in mortgage-backed
securities.

INVESTMENT-GRADE CORPORATE BONDS. Investment-grade corporate bonds are
corporate debt obligations having fixed or floating rates of interest and
which are rated BBB or higher by a nationally recognized statistical rating
organization ("NRSRO"). The Fund may invest up to 35 percent of its total
assets in investment-grade corporate bonds. In certain cases, the Fund's
adviser may choose bonds which are unrated if it determines that such bonds
are of comparable quality or have similar characteristics to the
investment-grade bonds described above. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.

HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to 7.5 percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.

Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity
dates. Issuers are more likely to call bonds during periods of
declining interest rates. In these cases, if the Fund owns a bond which
is called, the Fund will receive its return of principal earlier than
expected and would likely be required to reinvest the proceeds at lower
interest rates, thus reducing income to the Fund.

EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
stocks will be allocated among the following asset categories within the ranges
specified:

LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 50 percent of its total assets in large
company stocks.

UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 20 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.

SMALL COMPANY STOCKS. _Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to 7.5 percent of its total assets in small
company stocks.

INVESTMENT RISKS. _Stocks in the small capitalization sector of the
United States equity market have historically been more volatile in
price than larger capitalization stocks, such as those included in the
Standard & Poor's 500 Index. This is because, among other things, small
companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to have
a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks of
large companies; that is, the stocks of small companies may decline in
price as the price of large company stocks rises or vice versa.

EQUITY RESERVES. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments. The Fund may invest up to
15 percent of its total assets in equity reserves.

ACCEPTABLE INVESTMENTS

. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

. obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of the agency or instrumentality (such as FNMA
and FHLMC bonds).

MORTGAGE-BACKED SECURITIES. Mortgaged-backed securities are securities
collateralized by residential mortgages. The mortgage-backed securities in
which the Fund may invest may be:

. issued by an agency of the U.S. government, typically GNMA, FNMA or
FHLMC;

. privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government;

. privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed by
the issuer and such guarantee is collateralized by U.S. government
securities; and

. other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities and payment of the principal
and interest are supported by the credit of an agency or instrumentality
of the U.S. government.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government
agencies, investment bankers, or companies related to the construction
industry. Most of the CMOs in which the Fund would invest use the same
basic structure:

. Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of
securities. The first three (A, B, and C bonds) pay interest at
their stated rates beginning with the issue date; the final class
(or Z bond) typically receives the residual income from the
underlying investments after payments are made to the other
classes.

. The cash flows from the underlying mortgages are applied first to
pay interest and then to retire securities.

. The classes of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity class (or A
bonds). When those securities are completely retired, all principal
payments are then directed to the next-shortest maturity security
(or B bond). This process continues until all of the classes have
been paid off.

The Fund will invest only in CMOs which are rated AAA by an NRSRO.

CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the
entire principal amount is returned. This is caused by the need to
reinvest at lower interest rates both distributions of principal
generally and significant prepayments
which become more likely as mortgage interest rates decline. Since
comparatively high interest rates cannot be effectively "locked in,"
mortgage-backed securities may have less potential for capital
appreciation during periods of declining interest rates than other
non-callable, fixed-income government securities of comparable stated
maturities. However, mortgage-backed securities may experience less
pronounced declines in value during periods of rising interest rates.

CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:

. rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");

. unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or

. unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.

EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.

CONVERTIBLE SECURITIES. _Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting
of "usable" bonds and warrants or a combination of the features of several
of these securities. The investment characteristics of each convertible
security vary widely, which allows convertible securities to be employed
for different investment objectives. The Adviser may treat convertible
securities as large company stocks, small company stocks, or high yield
bonds for purposes of the asset category ranges, depending upon current
market conditions, including the relationship of the then-current price to
the conversion price.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.

FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted
either on a spot or cash basis at prevailing rates or through forward foreign
currency exchange contracts.

The Fund may write covered call options to generate income. The Fund may write
covered call options and secured put options on up to 25 percent of its net
assets and may purchase put and call options provided that no more than 5
percent of the fair market value of its net assets may be invested in premiums
on such options.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow, and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that the Fund may be
required to take delivery of the underlying asset at a disadvantageous price.

FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell futures
contracts to accommodate cash flows into and out of the Fund's portfolio and to
hedge against the effects of changes in the value of portfolio securities due to
anticipated changes in interest rates and market conditions. Futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract, and the buyer agrees to take delivery of
the instrument at the specified future time.

It is not certain that a secondary market for positions in futures
contracts for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.

INVESTMENT LIMITATIONS

The Fund will not:

. borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;

. lend any securities except for portfolio securities; or

. underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.

The above investment limitations cannot be changed without shareholder approval.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.

Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since the Fund's inception. In
allocating the Fund's assets, Mr. Ritter evaluates the market environment
and economic outlook, utilizing the services of the investment adviser's
economist and
strategist. Mr.Ritter joined Federated Investors in 1983 and has been a
Vice President of the Fund's investment adviser since 1992. From 1988 until
1991, Mr. Ritter acted as an Assistant Vice President. Mr. Ritter is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Chicago and his M.S. in Economics from Carnegie Mellon
University.

The portfolio managers for each of the individual asset categories are as
follows:

Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. _Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting
services) necessary to operate the Fund. Federated Administrative Services
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by subsidiaries of Federated Investors
(Federated Funds) as specified below:

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _In addition to receiving the payments
under the Services Plan, financial institutions could be compensated by the
distributor, who could be reimbursed by the adviser, or affiliates thereof, for
providing administrative support services to holders of Shares. These payments
will be made directly by the distributor and will not be made from the assets of
the Fund.

CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.

LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro and Morin, L.L.P., Washington,
D.C.

INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.

BROKERAGE TRANSACTIONS

EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES

Holders of Shares pay their allocable portion of Fund and Trust expenses.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Texas residents must purchase Shares through a broker registered with the State
of Texas or through Federated Securities Corp. at 1-800-358-2801. Orders through
a financial institution are considered received when the Fund is notified of the
purchase order. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 p.m. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. It is the financial institution's responsibility to transmit
orders promptly.

BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Growth and Income Fund--Institutional Service Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Wire Order Number; Nominee or Institution Name; and ABA Number
011000028.

BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Growth and Income Fund--Institutional Service Shares to Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8602,
Boston, Massachusetts 02266-8602. Orders by mail are considered received after
payment by check is converted by State Street Bank into federal funds. This is
normally the next business day after State Street Bank receives the check.

MINIMUM INVESTMENT REQUIRED

WHAT SHARES COST

SUBACCOUNTING SERVICES

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account had been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.

DIVIDENDS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.

CAPITAL GAINS

Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.

REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

THROUGH A FINANCIAL INSTITUTION

TELEPHONE REDEMPTION

WRITTEN REQUESTS

amount requested. If Share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request.

. a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

. a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

SYSTEMATIC WITHDRAWAL PROGRAM

ACCOUNTS WITH LOW BALANCES

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. As of September 6, 1994, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 119,609 Select Shares (38.89%) of Federated Managed Growth
and Income Fund, and therefore, may, for certain purposes, be deemed to control
the Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders.

MASSACHUSETTS PARTNERSHIP LAW

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Trust:

. the Fund is not subject to Pennsylvania corporate or personal property
taxes; and

. Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.