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. 1 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 3 X
MANAGED SERIES TRUST
(formerly, Allocation 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)
X on September 29, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
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) Filed in Part A.
FEDERATED
MANAGED INCOME
FUND
[LOGO] MANAGED SERIES TRUST
------------
INSTITUTIONAL SERVICE
------------
SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed Income Fund
is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K107
G00523-02 (9/94)
FEDERATED MANAGED INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Income Fund--Institutional Service Shares after page 1, following
the section entitled "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights--Institutional Service Shares" to the Table of
Contents page, after the heading "Summary of Fund Expenses."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.11
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.04
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.15
- ------------------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.10)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.05
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.45%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.48%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 6.50%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.20%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $26,743
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 97%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 4:
"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."
C. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 4. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
D. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 7. In addition,
please delete the heading "Investment Risks" which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
E. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
F. Please delete the first sentence of the tenth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
G. Please add the following as the last paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
H. Please delete the section entitled "Administrative Services" on page 15
and replace it with the following:
"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."
I. Please delete the section entitled "Shareholder Services Plan" on page 15
and replace it with the following:
"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."
J. Please insert the following section entitled "Other Payments to Financial
Institutions" after the section entitled "Shareholder Services Plan" on
page 15. In addition, please add the heading "Other Payments to Financial
Institutions" to the Table of Contents page after the heading
"Shareholder Services Plan."
"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."
K. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"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."
L. Please insert the following "Financial Highlights" table for Federated
Managed Income Fund--Select Shares after page 23, following the section
entitled "Other Classes of Shares." In addition, please add the heading
"Financial Highlights--Select Shares" to the Table of Contents page after
the heading "Other Classes of Shares."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.10
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.03
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.13
- ------------------------------------------------------------------------------------------------ --------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.08)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.05
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 1.31%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.23%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 5.75%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.45%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,275
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 97%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
M. Please delete the section entitled "Statement of Assets and Liabilities" on
page 24 and replace it with the following Financial Statements after the
section entitled "Financial Highlights--Select Shares" and before the
section entitled "Report to Independent Public Accountants." In addition,
please add the heading "Financial Statements" to the Table of Contents
page, after the heading "Financial Highlights--Select Shares" and delete
the heading "Statement of Assets and Liabilities" from the Table of
Contents page.
FEDERATED MANAGED INCOME FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--16.1%++
- -------------------------------------------------------------------------------------------------
LARGE COMPANY--9.0%*
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.8%
--------------------------------------------------------------------------------
1,100 (a)FMC Corp. $ 64,625
--------------------------------------------------------------------------------
1,100 Lubrizol Corp. 37,262
--------------------------------------------------------------------------------
1,500 Phelps Dodge Corp. 92,625
--------------------------------------------------------------------------------
2,400 Praxair, Inc. 54,000
-------------------------------------------------------------------------------- --------------
Total 248,512
-------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.4%
--------------------------------------------------------------------------------
1,800 Ford Motor Co. 57,150
--------------------------------------------------------------------------------
900 General Motors Corp. 46,237
-------------------------------------------------------------------------------- --------------
Total 103,387
-------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--1.1%
--------------------------------------------------------------------------------
700 Avon Products, Inc. 39,638
--------------------------------------------------------------------------------
1,200 Eastman Kodak Co. 58,050
--------------------------------------------------------------------------------
3,000 Mattel, Inc. 82,875
--------------------------------------------------------------------------------
1,200 Philip Morris Cos., Inc. 66,000
--------------------------------------------------------------------------------
1,500 Reebok International, Ltd. 53,250
--------------------------------------------------------------------------------
5,400 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 36,450
-------------------------------------------------------------------------------- --------------
Total 336,263
-------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--0.6%
--------------------------------------------------------------------------------
2,100 American Stores Co. $ 54,337
--------------------------------------------------------------------------------
1,600 Sears, Roebuck & Co. 75,600
--------------------------------------------------------------------------------
2,500 (a)Tele-Communications, Inc., Class A 58,281
-------------------------------------------------------------------------------- --------------
Total 188,218
-------------------------------------------------------------------------------- --------------
ENERGY--1.2%
--------------------------------------------------------------------------------
2,000 Baker Hughes, Inc. 42,250
--------------------------------------------------------------------------------
1,600 Chevron Corp. 71,000
--------------------------------------------------------------------------------
800 Mapco, Inc. 48,500
--------------------------------------------------------------------------------
400 Noram Energy Corp. 2,400
--------------------------------------------------------------------------------
1,500 Peoples Energy Corp. 38,438
--------------------------------------------------------------------------------
1,100 Texaco, Inc. 69,850
--------------------------------------------------------------------------------
2,600 USX Marathon Group 45,175
--------------------------------------------------------------------------------
700 (a)Western Atlas, Inc. 34,038
-------------------------------------------------------------------------------- --------------
Total 351,651
-------------------------------------------------------------------------------- --------------
FINANCE--1.5%
--------------------------------------------------------------------------------
900 AMLI Residential Properties 19,350
--------------------------------------------------------------------------------
800 Bankers Trust of New York Corp. 53,600
--------------------------------------------------------------------------------
1,400 Citicorp 57,750
--------------------------------------------------------------------------------
1,000 Dean Witter, Discover & Co. 40,125
--------------------------------------------------------------------------------
600 Dreyfus Corp. 29,700
--------------------------------------------------------------------------------
600 Federal National Mortgage Association 52,050
--------------------------------------------------------------------------------
500 Mellon Bank Corp. 28,625
--------------------------------------------------------------------------------
1,800 PNC Financial Corp. 51,750
--------------------------------------------------------------------------------
1,000 Transamerica Corp. 50,750
--------------------------------------------------------------------------------
2,000 Travelers, Inc. 66,250
-------------------------------------------------------------------------------- --------------
Total $ 449,950
-------------------------------------------------------------------------------- --------------
HEALTHCARE--0.7%
--------------------------------------------------------------------------------
1,100 American Home Products Corp. 63,113
--------------------------------------------------------------------------------
1,000 Becton, Dickinson & Co. 42,125
--------------------------------------------------------------------------------
1,000 Bristol-Myers Squibb Co. 52,625
--------------------------------------------------------------------------------
1,300 U.S. Healthcare, Inc. 49,237
-------------------------------------------------------------------------------- --------------
Total 207,100
-------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--0.8%
--------------------------------------------------------------------------------
400 Deere & Co. 28,050
--------------------------------------------------------------------------------
900 General Electric Co. 45,337
--------------------------------------------------------------------------------
900 (a)Litton Industries, Inc. 33,412
--------------------------------------------------------------------------------
500 Loews Corp. 44,125
--------------------------------------------------------------------------------
1,400 Textron, Inc. 74,550
-------------------------------------------------------------------------------- --------------
Total 225,474
-------------------------------------------------------------------------------- --------------
TECHNOLOGY--1.1%
--------------------------------------------------------------------------------
2,100 General Motors Corp., Class E 74,025
--------------------------------------------------------------------------------
800 Hewlett-Packard Co. 62,100
--------------------------------------------------------------------------------
1,500 Martin-Marietta Corp. 68,062
--------------------------------------------------------------------------------
1,100 Raytheon Co. 72,188
--------------------------------------------------------------------------------
1,700 Rockwell International Corp. 60,987
-------------------------------------------------------------------------------- --------------
Total 337,362
-------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.1%
--------------------------------------------------------------------------------
1,800 Ryder Systems, Inc. 47,025
-------------------------------------------------------------------------------- --------------
UTILITIES--0.7%
--------------------------------------------------------------------------------
1,200 AT&T Corp. 65,550
--------------------------------------------------------------------------------
400 British Telecommunications, ADR $ 23,650
--------------------------------------------------------------------------------
800 Enron Corp. 25,900
--------------------------------------------------------------------------------
1,900 MCI Communications Corp. 43,225
--------------------------------------------------------------------------------
500 Telefonos De Mexico, SA, ADR 30,375
--------------------------------------------------------------------------------
2,600 Westinghouse Electric Corp., Conv. Pfd., Series C 34,447
-------------------------------------------------------------------------------- --------------
Total 223,147
-------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $2,933,645) 2,718,089
-------------------------------------------------------------------------------- --------------
UTILITY--7.1%
--------------------------------------------------------------------------------
UTILITIES--7.1%
--------------------------------------------------------------------------------
3,500 Ameritech Corp. 143,500
--------------------------------------------------------------------------------
1,700 Baltimore Gas & Electric Co. 38,888
--------------------------------------------------------------------------------
2,500 Bell Atlantic Corp. 141,562
--------------------------------------------------------------------------------
2,300 BellSouth Corp. 143,750
--------------------------------------------------------------------------------
1,700 CMS Energy Corp. 38,463
--------------------------------------------------------------------------------
1,700 Cincinnati Gas & Electric Co. 38,037
--------------------------------------------------------------------------------
1,300 Consolidated Edison Co. of New York 37,375
--------------------------------------------------------------------------------
1,800 DPL, Inc. 36,675
--------------------------------------------------------------------------------
1,200 DQE 36,150
--------------------------------------------------------------------------------
1,800 Duke Power Co. 68,850
--------------------------------------------------------------------------------
1,500 Entergy Corp. 38,250
--------------------------------------------------------------------------------
1,400 Florida Progress Corp. 39,200
--------------------------------------------------------------------------------
1,200 FPL Group, Inc. 37,950
--------------------------------------------------------------------------------
1,400 General Public Utilities Corp. 36,050
--------------------------------------------------------------------------------
4,600 GTE Corp. 146,050
--------------------------------------------------------------------------------
1,000 MCN Corp. 39,875
--------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
--------------------------------------------------------------------------------
UTILITIES--CONTINUED
--------------------------------------------------------------------------------
1,300 Nipsco Industries, Inc. $ 38,025
--------------------------------------------------------------------------------
1,600 Northeast Utilities Co. 37,400
--------------------------------------------------------------------------------
3,800 Nynex Corp. 146,300
--------------------------------------------------------------------------------
1,900 Pacific Enterprises 38,950
--------------------------------------------------------------------------------
2,200 Pacificorp 39,050
--------------------------------------------------------------------------------
1,400 Peco Energy Co. 36,575
--------------------------------------------------------------------------------
2,200 Pinnacle West Capital Corp. 38,775
--------------------------------------------------------------------------------
1,700 PSI Resources, Inc. 37,613
--------------------------------------------------------------------------------
1,500 Public Service Enterprise Group, Inc. 41,625
--------------------------------------------------------------------------------
1,200 Sonat, Inc. 39,750
--------------------------------------------------------------------------------
2,800 Southern Co. 54,600
--------------------------------------------------------------------------------
4,200 Southern New England Telecommunications 144,375
--------------------------------------------------------------------------------
3,200 Southwestern Bell Corp. 134,400
--------------------------------------------------------------------------------
1,800 UGI Corp. 38,025
--------------------------------------------------------------------------------
3,300 U.S. West, Inc. 132,825
--------------------------------------------------------------------------------
1,200 Utilicorp United, Inc. 35,700
--------------------------------------------------------------------------------
1,300 Western Resource, Inc. 36,563
-------------------------------------------------------------------------------- --------------
TOTAL UTILITY (IDENTIFIED COST, $2,075,561) 2,131,176
-------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $5,009,206) 4,849,265
-------------------------------------------------------------------------------- --------------
BONDS--79.9%
- -------------------------------------------------------------------------------------------------
INVESTMENT-GRADE--9.8%
--------------------------------------------------------------------------------
AUTOMOTIVE--0.8%
--------------------------------------------------------------------------------
$ 250,000 General Motors Acceptance Corp., 7.25%, 4/30/99 246,692
-------------------------------------------------------------------------------- --------------
FINANCE--0.7%
--------------------------------------------------------------------------------
250,000 Household Finance Corp., 6.45%, 2/1/2009 215,968
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
INVESTMENT-GRADE--CONTINUED
--------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES--0.7%
--------------------------------------------------------------------------------
$ 200,000 Merrill Lynch & Co., Inc., 7.25%, 6/14/2004 $ 201,412
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.7%
--------------------------------------------------------------------------------
200,000 Georgia Pacific Corp., 10.125%, 5/15/2000 206,096
-------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCY--1.0%
--------------------------------------------------------------------------------
300,000 Tennessee Valley Authority, 7.318%, 5/31/99 303,144
-------------------------------------------------------------------------------- --------------
INSURANCE--0.7%
--------------------------------------------------------------------------------
200,000 SunAmerica Inc., 6.58%, 1/15/2002 185,634
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--1.4%
--------------------------------------------------------------------------------
150,000 News American Holdings, Inc., 7.50%, 3/1/2000 146,701
--------------------------------------------------------------------------------
250,000 Valassis Inserts, Inc., Sr. Notes, 8.875%, 3/15/99 259,545
-------------------------------------------------------------------------------- --------------
Total 406,246
-------------------------------------------------------------------------------- --------------
SOVEREIGN GOVERNMENT--1.9%
--------------------------------------------------------------------------------
150,000 Hydro Quebec, 7.375%, 2/1/2003 144,747
--------------------------------------------------------------------------------
300,000 Malta (Republic of), 7.50%, 3/29/2009 281,424
--------------------------------------------------------------------------------
150,000 Ontario Hydro, 9.25%, 5/1/95 153,617
-------------------------------------------------------------------------------- --------------
Total 579,788
-------------------------------------------------------------------------------- --------------
UTILITIES--1.9%
--------------------------------------------------------------------------------
300,000 Duke Power Co., 7.00%, 9/1/2005 283,023
--------------------------------------------------------------------------------
300,000 Gulf States Utilities Co., 6.75%, 10/1/98 293,349
-------------------------------------------------------------------------------- --------------
Total 576,372
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENT-GRADE (IDENTIFIED COST, $2,990,869) 2,921,352
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
FOREIGN--7.9%
--------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.1%
--------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 $ 41,312
-------------------------------------------------------------------------------- --------------
BELGIUM FRANC--0.3%
--------------------------------------------------------------------------------
3,100,000 Belgian (Government, Foreign Government Guarantee), 10.00%,
4/5/96 99,977
-------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.4%
--------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
-------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.8%
--------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 169,717
--------------------------------------------------------------------------------
400,000 France O.A.T., 9.80%, 1/30/96 77,636
-------------------------------------------------------------------------------- --------------
Total 247,353
-------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.8%
--------------------------------------------------------------------------------
250,000 Bundesobligationen, 7.25%, 10/20/97 162,565
--------------------------------------------------------------------------------
300,000 Bundesobligation, 8.875%, 1/22/96 198,164
--------------------------------------------------------------------------------
300,000 KFW International Finance, Inc., 7.00%, 5/12/2000 55,079
--------------------------------------------------------------------------------
175,000 Treuhandanstalt, 7.75%, 10/1/2002 115,394
-------------------------------------------------------------------------------- --------------
Total 531,202
-------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
--------------------------------------------------------------------------------
185,000,000 Buoni Poliem Del Tes, 12.00%, 9/1/97 119,294
-------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.4%
--------------------------------------------------------------------------------
20,000,000 Japan--111, 4.60%, 6/22/98 208,226
--------------------------------------------------------------------------------
15,000,000 Japan--119, Foreign Government Guarantee, 4.80%, 6/21/99 157,054
--------------------------------------------------------------------------------
18,000,000 Japan--133, 7.30%, 9/20/2000 209,354
--------------------------------------------------------------------------------
15,000,000 Japan--89, 5.10%, 6/20/96 156,605
-------------------------------------------------------------------------------- --------------
Total 731,239
-------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.6%
--------------------------------------------------------------------------------
325,000 Netherlands Government, 6.00%, 4/15/95 $ 183,618
-------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--1.1%
--------------------------------------------------------------------------------
200,000 UK Conversion, 9.00%, 3/3/2000 315,153
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $2,249,578) 2,372,924
-------------------------------------------------------------------------------- --------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
HIGH YIELD--5.0%
--------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.4%
--------------------------------------------------------------------------------
$ 125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 127,812
-------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.5%
--------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 150,000
-------------------------------------------------------------------------------- --------------
CABLE TV--0.4%
--------------------------------------------------------------------------------
125,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 112,344
-------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.4%
--------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 125,625
-------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.4%
--------------------------------------------------------------------------------
125,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 113,906
-------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 127,188
-------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
--------------------------------------------------------------------------------
125,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 109,063
-------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.4%
--------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 116,875
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 116,250
-------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.3%
--------------------------------------------------------------------------------
$ 125,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 $ 79,375
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
--------------------------------------------------------------------------------
125,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 115,000
-------------------------------------------------------------------------------- --------------
STEEL--0.4%
--------------------------------------------------------------------------------
125,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 118,125
-------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.3%
--------------------------------------------------------------------------------
150,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 92,626
-------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,343,248) 1,504,189
-------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.1%
--------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.1%
--------------------------------------------------------------------------------
30,000 General Instrument Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $40,725) 41,512
-------------------------------------------------------------------------------- --------------
TREASURY--37.9%
--------------------------------------------------------------------------------
11,600,000 U.S. Treasury Note, 3.875%, 10/31/95 (IDENTIFIED COST, $11,343,281) 11,367,887
-------------------------------------------------------------------------------- --------------
MORTGAGE-BACKED SECURITIES--19.2%
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--19.2%
--------------------------------------------------------------------------------
982,287 Federal Home Loan Bank, 7.00%, 4/1/2009 961,718
--------------------------------------------------------------------------------
509,303 Federal Home Loan Bank, 7.50%, 5/1/2024 497,843
--------------------------------------------------------------------------------
258,288 Federal National Mortgage Association, 7.50%, 6/1/2009 257,883
--------------------------------------------------------------------------------
2,419,878 Federal National Mortgage Association, 8.00%, 4/1/2024 2,419,878
--------------------------------------------------------------------------------
247,392 Government National Mortgage Association, 7.50%, 5/15/2024 240,200
--------------------------------------------------------------------------------
1,338,841 Government National Mortgage Association, 9.00%, 1/15/2023 1,396,156
-------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $5,751,947) 5,773,678
-------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $23,719,648) 23,981,542
-------------------------------------------------------------------------------- --------------
CASH EQUIVALENT--5.0%
- -------------------------------------------------------------------------------------------------
$ 250,000 U.S. Treasury Bill, 1/26/95 $ 244,048
--------------------------------------------------------------------------------
1,265,000 **J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,265,000
-------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) 1,509,048
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $30,237,902) $ 30,339,855+
-------------------------------------------------------------------------------- --------------
</TABLE>
+ The cost of investments for federal tax purposes amount to $30,237,902. The
net unrealized appreciation on a federal tax cost basis amounts to $101,953,
and is comprised of $232,905 appreciation and $130,952 depreciation at July
31, 1994.
++ The overall exposure of the Fund to stocks is 14.6%, after adjustment for
the use of futures contracts to hedge exposure to large cap stocks.
(a) Non-income producing.
* In order to hedge exposure to large cap stocks, the Fund sold two S&P 500
futures contracts with a market value of $461,100. This reduces the Fund's
exposure to large cap stocks to 7.5% of the Fund.
** The repurchase agreement is fully collaterialized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated Funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
Note: The categories of investments are shown as a percentage of net assets
($30,017,825) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost, $30,237,902)
(Notes 2A and 2B) $ 30,339,855
- --------------------------------------------------------------------------------------------------
Cash 6,595
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 349,298
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 293,757
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 45,934
- -------------------------------------------------------------------------------------------------- --------------
Total assets 31,035,439
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 647,038
- -------------------------------------------------------------------------------------
Payable for foreign currency purchased 293,757
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 13,293
- -------------------------------------------------------------------------------------
Payable for Futures Variation Margin (Note 2F) 3,900
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 728
- -------------------------------------------------------------------------------------
Accrued expenses 58,898
- ------------------------------------------------------------------------------------- -----------
Total liabilities 1,017,614
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 2,986,457 shares of beneficial interest outstanding $ 30,017,825
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 29,874,395
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currencies, and futures contracts 93,969
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency transactions, and futures
contracts (11,591)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 61,052
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 30,017,825
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Institutional Service Shares ($26,743,166 / 2,660,694 shares of beneficial interest
outstanding) $10.05
- -------------------------------------------------------------------------------------------------- --------------
Select Shares ($3,274,659 / 325,763 shares of beneficial interest outstanding) $10.05
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $721) $ 323,930
- ---------------------------------------------------------------------------------------------------
Dividends 24,172
- --------------------------------------------------------------------------------------------------- -----------
Total investment income (Note 2C) 348,102
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee** $ 37,514
- ----------------------------------------------------------------------------------------
Administrative personnel and services** 2,717
- ----------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 32,800
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 1,695
- ----------------------------------------------------------------------------------------
Legal fees 1,750
- ----------------------------------------------------------------------------------------
Fund share registration costs 2,578
- ----------------------------------------------------------------------------------------
Printing and postage 3,000
- ----------------------------------------------------------------------------------------
Insurance premiums 1,286
- ----------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 1,312
- ----------------------------------------------------------------------------------------
Distribution services fee** 3,936
- ----------------------------------------------------------------------------------------
Miscellaneous 575
- ---------------------------------------------------------------------------------------- ---------
Total expenses 89,193
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 37,514
- -----------------------------------------------------------------------------
Waiver of distribution services fee** 1,312
- -----------------------------------------------------------------------------
Reimbursement of other operating expenses** 22,500 61,326
- ----------------------------------------------------------------------------- --------- ---------
Net expenses 27,867
- --------------------------------------------------------------------------------------------------- -----------
Net investment income 320,235
- --------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures
contracts (identified cost basis) (11,591)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures contracts 93,969
- --------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 82,378
- --------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 402,613
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from January 18, 1994 (start of business) to July 31, 1994.
** (See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 320,235
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($11,591 net loss, as computed for federal tax purposes) (Note 2E) (11,591)
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts 93,969
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 402,613
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Service Shares (235,828)
- ------------------------------------------------------------------------------------------------
Select Shares (23,355)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (259,183)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 30,294,607
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 56,002
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (576,214)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets from Fund share transactions 29,774,395
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 29,917,825
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period 100,000
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $61,052) $ 30,017,825
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
* For the period from January 18, 1994 (start of business) to July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$51,747 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<S> <C> <C> <C>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
September 1994 2 S&P 500 Index Futures Short ($10,867)
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability to
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ------------- --------------
Shares sold 2,709,675 $ 27,107,097
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,448 54,615
- -----------------------------------------------------------------------------------
Shares redeemed (54,429) (545,067)
- ----------------------------------------------------------------------------------- ------------- --------------
Net change resulting from Institutional Service Shares transactions 2,660,694 $ 26,616,645
- ----------------------------------------------------------------------------------- ------------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ------------- --------------
Shares sold 328,736 $ 3,287,510
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 138 1,387
- -----------------------------------------------------------------------------------
Shares redeemed (3,111) (31,147)
- ----------------------------------------------------------------------------------- ------------- --------------
Net change resulting from Select Shares transactions 325,763 3,257,750
- ----------------------------------------------------------------------------------- ------------- --------------
Total net change resulting from Fund share transactions 2,986,457 $ 29,874,395
- ----------------------------------------------------------------------------------- ------------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary waiver and reimbursement at
any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of the Fund for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $34,447 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,288 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations, for the
period ended
July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 38,645,418
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 9,742,479
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
N. Please delete the section entitled "Report of Independent Public
Accountants" on page 25. In addition, please delete the heading "Report of
Independent Public Accountants" from the Table of Contents page.
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
Absent the anticipated voluntary waiver, the Total Institutional Service
Shares Operating Expenses are estimated to be 1.27%.
For more information on Institutional Service Shares expenses, see
"Summary of Fund Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on pages 6 and 7 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 8 of the Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
pages 8 and 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00253-01-SS (5/94)
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 March 11, 1994, 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 March 11, 1994
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
Foreign Bonds 4
Equity Asset Categories 4
Large Company Stocks 4
Utility Stocks 5
Small Company Stocks 5
Foreign Stocks 5
Cash Reserves Category 5
Acceptable Investments 5
U.S. Treasury and Other U.S.
Government Securities 5
Mortgage-Backed Securities 5
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICS") 6
Characteristics of Mortgage-Backed
Securities 6
Corporate Bonds 7
Investment Risks 8
Equity Securities 8
Foreign Securities 8
Investment Risks 8
Cash Reserves 9
Repurchase Agreements 9
Investing in Securities of Other
Investment Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed Delivery
Transactions 9
Lending of Portfolio Securities 9
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange
Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Institutional Service Shares 15
Administration of the Fund 15
Administrative Services 15
Shareholder Services Plan 15
Custodian 15
Transfer Agent and Dividend
Disbursing Agent 16
Legal Counsel 16
Independent Public Accountants 16
Brokerage Transactions 16
Expenses of the Fund and Institutional
Service Shares 16
Net Asset Value 17
- ------------------------------------------------------
Investing in Institutional Service Shares 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 17
By Wire 17
By Mail 17
Minimum Investment Required 18
What Shares Cost 18
Subaccounting Services 18
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 19
Capital Gains 19
Redeeming Institutional Service Shares 19
- ------------------------------------------------------
Through a Financial Institution 19
Telephone Redemption 19
Written Requests 20
Signatures 20
Receiving Payment 20
Systematic Withdrawal Program 20
Accounts with Low Balances 21
Shareholder Information 21
- ------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 21
Tax Information 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 22
Performance Information 22
- ------------------------------------------------------
Other Classes of Shares 22
- ------------------------------------------------------
Statement of Assets and Liabilities 24
- ------------------------------------------------------
Report of Independent Public Accountants 25
- ------------------------------------------------------
Appendix 26
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Institutional Service Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable).................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
Annual Institutional Service Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)............................................................. 0.23%
12b-1 Fee..................................................................................... None
Total Other Expenses.......................................................................... 0.52%
Shareholder Servicing Fee (2)............................................................. 0.00%
Total Institutional Service Shares Operating Expenses (3)............................ 0.75%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The Institutional Service Shares have no present intention of paying or
accruing the shareholder servicing fee. If Institutional Service Shares were
paying or accruing the shareholder servicing fee, the Institutional Service
Shares would be able to pay up to 0.25% of their average daily net assets
for the shareholder servicing fee.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 1.27% absent the anticipated voluntary waiver of a portion of the
management fee.
* Total Institutional Service Shares Operating Expenses are based on average
expenses expected to be incurred during the period ending January 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $8 $24
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Select Shares. Institutional Service Shares and Select Shares are
subject to certain of the same expenses; however, Select Shares are subject to a
12b-1 fee of up to 0.75%. See "Other Classes of Shares."
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. Additionally, the Fund may invest in cash reserves. 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>
<CAPTION>
<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 0-9%
Foreign Bonds 0-9%
Stocks 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Cash Reserves 0-12%
</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.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. The average duration of the Fund's Bond Assets will
be not less than two nor more than four years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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.
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 nine 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.
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 nine 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 a 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. The Fund may invest up to three percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is available, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 12 percent of
its total assets in cash 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 Corporation (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.
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.
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.
Cash Reserves. The Fund's cash 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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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
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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 cash reserves asset
category 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 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 portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this category since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions would
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution would receive payments from the Fund
at a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services would include, but not be limited to, the provision of
personal service and maintenance of shareholder accounts.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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
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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
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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: 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
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.
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
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 Corporation 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
edge." 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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 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 March 11, 1994
3122013A-ISS (3/94)
FEDERATED
MANAGED INCOME
FUND
[LOGO] MANAGED SERIES TRUST
------------
SELECT SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed Income Fund
is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K206
G00523-01 (9/94)
FEDERATED MANAGED INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
SELECT SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Income Fund--Select Shares after page 1, following the section
entitled "Summary of Fund Expenses" and before the section entitled
"General Information." In addition, please add the heading "Financial
Highlights--Select Shares" to the Table of Contents page, after the
heading "Summary of Fund Expenses."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.10
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency,
and futures contracts 0.03
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.13
- ------------------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.08)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.05
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.31%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.23%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 5.75%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.45%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 3,275
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 97%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 4:
"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."
C. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 4. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
D. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 7. In addition,
please delete the heading "Investment Risks" which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
E. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
F. Please delete the first sentence of the tenth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
G. Please add the following as the last paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
H. Please delete the first five paragraphs of the section entitled
"Distribution Plan," which begins on page 15 and replace them with the
following. In addition, please delete the heading "Distribution Plan" from
the Table of Contents page and replace it with the heading "Distribution
and Shareholder Services Plans."
"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."
I. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Distribution and
Shareholder Services Plans," which begins on page 15. In addition, please
add the heading "Other Payments to Financial Institutions" to the Table
of Contents page after the heading "Distribution and Shareholder Services
Plans."
"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."
J. Please delete the section entitled "Administrative Services" on page 16
and replace it with the following:
"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."
K. Please delete the section entitled "Shareholder Services Plan" on page 16.
In addition, please delete the heading "Shareholder Services Plan" from
the Table of Contents page.
L. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 22:
"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."
M. Please insert the following "Financial Highlights" table for Federated
Managed Income Fund--Institutional Service Shares after page 23, following
the section entitled "Other Classes of Shares." In addition, please add
the heading "Financial Highlights--Institutional Service Shares" to the
Table of Contents page after the heading "Other Classes of Shares."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.11
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.04
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.15
- ------------------------------------------------------------------------------------------------ --------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.10)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.05
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 1.45%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 0.48%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 6.50%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.20%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $26,743
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 97%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial
public investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
N. Please delete the section entitled "Statement of Assets and Liabilities" on
page 24 and replace it with the following Financial Statements after the
section entitled "Financial Highlights-- Institutional Service Shares" and
before the section entitled "Report of Independent Public Accountants." In
addition, please add the heading "Financial Statements" to the Table of
Contents page, after the heading "Financial Highlights--Institutional
Service Shares" and delete the heading "Statement of Assets and
Liabilities" from the Table of Contents.
FEDERATED MANAGED INCOME FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--16.1%++
- -------------------------------------------------------------------------------------------------
LARGE COMPANY--9.0%*
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.8%
--------------------------------------------------------------------------------
1,100 (a)FMC Corp. $ 64,625
--------------------------------------------------------------------------------
1,100 Lubrizol Corp. 37,262
--------------------------------------------------------------------------------
1,500 Phelps Dodge Corp. 92,625
--------------------------------------------------------------------------------
2,400 Praxair, Inc. 54,000
-------------------------------------------------------------------------------- --------------
Total 248,512
-------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.4%
--------------------------------------------------------------------------------
1,800 Ford Motor Co. 57,150
--------------------------------------------------------------------------------
900 General Motors Corp. 46,237
-------------------------------------------------------------------------------- --------------
Total 103,387
-------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--1.1%
--------------------------------------------------------------------------------
700 Avon Products, Inc. 39,638
--------------------------------------------------------------------------------
1,200 Eastman Kodak Co. 58,050
--------------------------------------------------------------------------------
3,000 Mattel, Inc. 82,875
--------------------------------------------------------------------------------
1,200 Philip Morris Cos., Inc. 66,000
--------------------------------------------------------------------------------
1,500 Reebok International, Ltd. 53,250
--------------------------------------------------------------------------------
5,400 (a)RJR Nabisco Holdings, Conv. Pfd., Series C $ 36,450
-------------------------------------------------------------------------------- --------------
Total 336,263
-------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--0.6%
--------------------------------------------------------------------------------
2,100 American Stores Co. 54,337
--------------------------------------------------------------------------------
1,600 Sears, Roebuck & Co. 75,600
--------------------------------------------------------------------------------
2,500 (a)Tele-Communications, Inc., Class A 58,281
-------------------------------------------------------------------------------- --------------
Total 188,218
-------------------------------------------------------------------------------- --------------
ENERGY--1.2%
--------------------------------------------------------------------------------
2,000 Baker Hughes, Inc. 42,250
--------------------------------------------------------------------------------
1,600 Chevron Corp. 71,000
--------------------------------------------------------------------------------
800 Mapco, Inc. 48,500
--------------------------------------------------------------------------------
400 Noram Energy Corp. 2,400
--------------------------------------------------------------------------------
1,500 Peoples Energy Corp. 38,438
--------------------------------------------------------------------------------
1,100 Texaco, Inc. 69,850
--------------------------------------------------------------------------------
2,600 USX Marathon Group 45,175
--------------------------------------------------------------------------------
700 (a)Western Atlas, Inc. 34,038
-------------------------------------------------------------------------------- --------------
Total 351,651
-------------------------------------------------------------------------------- --------------
FINANCE--1.5%
--------------------------------------------------------------------------------
900 AMLI Residential Properties 19,350
--------------------------------------------------------------------------------
800 Bankers Trust of New York Corp. 53,600
--------------------------------------------------------------------------------
1,400 Citicorp 57,750
--------------------------------------------------------------------------------
1,000 Dean Witter, Discover & Co. 40,125
--------------------------------------------------------------------------------
600 Dreyfus Corp. 29,700
--------------------------------------------------------------------------------
600 Federal National Mortgage Association 52,050
--------------------------------------------------------------------------------
500 Mellon Bank Corp. 28,625
--------------------------------------------------------------------------------
1,800 PNC Financial Corp. $ 51,750
--------------------------------------------------------------------------------
1,000 Transamerica Corp. 50,750
--------------------------------------------------------------------------------
2,000 Travelers, Inc. 66,250
-------------------------------------------------------------------------------- --------------
Total 449,950
-------------------------------------------------------------------------------- --------------
HEALTHCARE--0.7%
--------------------------------------------------------------------------------
1,100 American Home Products Corp. 63,113
--------------------------------------------------------------------------------
1,000 Becton, Dickinson & Co. 42,125
--------------------------------------------------------------------------------
1,000 Bristol-Myers Squibb Co. 52,625
--------------------------------------------------------------------------------
1,300 U.S. Healthcare, Inc. 49,237
-------------------------------------------------------------------------------- --------------
Total 207,100
-------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--0.8%
--------------------------------------------------------------------------------
400 Deere & Co. 28,050
--------------------------------------------------------------------------------
900 General Electric Co. 45,337
--------------------------------------------------------------------------------
900 (a)Litton Industries, Inc. 33,412
--------------------------------------------------------------------------------
500 Loews Corp. 44,125
--------------------------------------------------------------------------------
1,400 Textron, Inc. 74,550
-------------------------------------------------------------------------------- --------------
Total 225,474
-------------------------------------------------------------------------------- --------------
TECHNOLOGY--1.1%
--------------------------------------------------------------------------------
2,100 General Motors Corp., Class E 74,025
--------------------------------------------------------------------------------
800 Hewlett-Packard Co. 62,100
--------------------------------------------------------------------------------
1,500 Martin-Marietta Corp. 68,062
--------------------------------------------------------------------------------
1,100 Raytheon Co. 72,188
--------------------------------------------------------------------------------
1,700 Rockwell International Corp. 60,987
-------------------------------------------------------------------------------- --------------
Total 337,362
-------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.1%
--------------------------------------------------------------------------------
1,800 Ryder Systems, Inc. $ 47,025
-------------------------------------------------------------------------------- --------------
UTILITIES--0.7%
--------------------------------------------------------------------------------
1,200 AT&T Corp. 65,550
--------------------------------------------------------------------------------
400 British Telecommunications, ADR 23,650
--------------------------------------------------------------------------------
800 Enron Corp. 25,900
--------------------------------------------------------------------------------
1,900 MCI Communications Corp. 43,225
--------------------------------------------------------------------------------
500 Telefonos De Mexico, SA, ADR 30,375
--------------------------------------------------------------------------------
2,600 Westinghouse Electric Corp., Conv. Pfd., Series C 34,447
-------------------------------------------------------------------------------- --------------
Total 223,147
-------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $2,933,645) 2,718,089
-------------------------------------------------------------------------------- --------------
UTILITY--7.1%
--------------------------------------------------------------------------------
UTILITIES--7.1%
--------------------------------------------------------------------------------
3,500 Ameritech Corp. 143,500
--------------------------------------------------------------------------------
1,700 Baltimore Gas & Electric Co. 38,888
--------------------------------------------------------------------------------
2,500 Bell Atlantic Corp. 141,562
--------------------------------------------------------------------------------
2,300 BellSouth Corp. 143,750
--------------------------------------------------------------------------------
1,700 CMS Energy Corp. 38,463
--------------------------------------------------------------------------------
1,700 Cincinnati Gas & Electric Co. 38,037
--------------------------------------------------------------------------------
1,300 Consolidated Edison Co. of New York 37,375
--------------------------------------------------------------------------------
1,800 DPL, Inc. 36,675
--------------------------------------------------------------------------------
1,200 DQE 36,150
--------------------------------------------------------------------------------
1,800 Duke Power Co. 68,850
--------------------------------------------------------------------------------
1,500 Entergy Corp. 38,250
--------------------------------------------------------------------------------
1,400 Florida Progress Corp. 39,200
--------------------------------------------------------------------------------
1,200 FPL Group, Inc. 37,950
--------------------------------------------------------------------------------
1,400 General Public Utilities Corp. $ 36,050
--------------------------------------------------------------------------------
4,600 GTE Corp. 146,050
--------------------------------------------------------------------------------
1,000 MCN Corp. 39,875
--------------------------------------------------------------------------------
1,300 Nipsco Industries, Inc. 38,025
--------------------------------------------------------------------------------
1,600 Northeast Utilities Co. 37,400
--------------------------------------------------------------------------------
3,800 Nynex Corp. 146,300
--------------------------------------------------------------------------------
1,900 Pacific Enterprises 38,950
--------------------------------------------------------------------------------
2,200 Pacificorp 39,050
--------------------------------------------------------------------------------
1,400 Peco Energy Co. 36,575
--------------------------------------------------------------------------------
2,200 Pinnacle West Capital Corp. 38,775
--------------------------------------------------------------------------------
1,700 PSI Resources, Inc. 37,613
--------------------------------------------------------------------------------
1,500 Public Service Enterprise Group, Inc. 41,625
--------------------------------------------------------------------------------
1,200 Sonat, Inc. 39,750
--------------------------------------------------------------------------------
2,800 Southern Co. 54,600
--------------------------------------------------------------------------------
4,200 Southern New England Telecommunications 144,375
--------------------------------------------------------------------------------
3,200 Southwestern Bell Corp. 134,400
--------------------------------------------------------------------------------
1,800 UGI Corp. 38,025
--------------------------------------------------------------------------------
3,300 U.S. West, Inc. 132,825
--------------------------------------------------------------------------------
1,200 Utilicorp United, Inc. 35,700
--------------------------------------------------------------------------------
1,300 Western Resource, Inc. 36,563
-------------------------------------------------------------------------------- --------------
TOTAL UTILITY (IDENTIFIED COST, $2,075,561) 2,131,176
-------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $5,009,206) 4,849,265
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--79.9%
- -------------------------------------------------------------------------------------------------
INVESTMENT-GRADE--9.8%
--------------------------------------------------------------------------------
AUTOMOTIVE--0.8%
--------------------------------------------------------------------------------
$ 250,000 General Motors Acceptance Corp., 7.25%, 4/30/99 $ 246,692
-------------------------------------------------------------------------------- --------------
FINANCE--0.7%
--------------------------------------------------------------------------------
250,000 Household Finance Corp., 6.45%, 2/1/2009 215,968
-------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--0.7%
--------------------------------------------------------------------------------
200,000 Merrill Lynch & Co., Inc., 7.25%, 6/14/2004 201,412
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.7%
--------------------------------------------------------------------------------
200,000 Georgia Pacific Corp., 10.125%, 5/15/2000 206,096
-------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCY--1.0%
--------------------------------------------------------------------------------
300,000 Tennessee Valley Authority, 7.318%, 5/31/99 303,144
-------------------------------------------------------------------------------- --------------
INSURANCE--0.7%
--------------------------------------------------------------------------------
200,000 SunAmerica Inc., 6.58%, 1/15/2002 185,634
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--1.4%
--------------------------------------------------------------------------------
150,000 News American Holdings, Inc., 7.50%, 3/1/2000 146,701
--------------------------------------------------------------------------------
250,000 Valassis Inserts, Inc., Sr. Notes, 8.875%, 3/15/99 259,545
-------------------------------------------------------------------------------- --------------
Total 406,246
-------------------------------------------------------------------------------- --------------
SOVEREIGN GOVERNMENT--1.9%
--------------------------------------------------------------------------------
150,000 Hydro Quebec, 7.375%, 2/1/2003 144,747
--------------------------------------------------------------------------------
300,000 Malta (Republic of), 7.50%, 3/29/2009 281,424
--------------------------------------------------------------------------------
150,000 Ontario Hydro, 9.25%, 5/1/95 153,617
-------------------------------------------------------------------------------- --------------
Total 579,788
-------------------------------------------------------------------------------- --------------
UTILITIES--1.9%
--------------------------------------------------------------------------------
300,000 Duke Power Co., 7.00%, 9/1/2005 283,023
--------------------------------------------------------------------------------
300,000 Gulf States Utilities Co., 6.75%, 10/1/98 293,349
-------------------------------------------------------------------------------- --------------
Total 576,372
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENT-GRADE (IDENTIFIED COST, $2,990,869) 2,921,352
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
FOREIGN--7.9%
--------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.1%
--------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 $ 41,312
-------------------------------------------------------------------------------- --------------
BELGIUM FRANC--0.3%
--------------------------------------------------------------------------------
3,100,000 Belgian (Government, Foreign Government Guarantee), 10.00%,
4/5/96 99,977
-------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.4%
--------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
-------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.8%
--------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 169,717
--------------------------------------------------------------------------------
400,000 France O.A.T., 9.80%, 1/30/96 77,636
-------------------------------------------------------------------------------- --------------
Total 247,353
-------------------------------------------------------------------------------- --------------
DUCTSCHE MARK--1.8%
--------------------------------------------------------------------------------
250,000 Bundesobligationen, 7.25%, 10/20/97 162,565
--------------------------------------------------------------------------------
300,000 Bundesobligation, 8.875%, 1/22/96 198,164
--------------------------------------------------------------------------------
300,000 KFW International Finance, Inc., 7.00%, 5/12/2000 55,079
--------------------------------------------------------------------------------
175,000 Treuhandanstalt, 7.75%, 10/1/2002 115,394
-------------------------------------------------------------------------------- --------------
Total 531,202
-------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
--------------------------------------------------------------------------------
185,000,000 Buoni Poliem Del Tes, 12.00%, 9/1/97 119,294
-------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.4%
--------------------------------------------------------------------------------
20,000,000 Japan--111, 4.60%, 6/22/98 208,226
--------------------------------------------------------------------------------
15,000,000 Japan--119, Foreign Government Guarantee, 4.80%, 6/21/99 157,054
--------------------------------------------------------------------------------
18,000,000 Japan--133, 7.30%, 9/20/2000 209,354
--------------------------------------------------------------------------------
15,000,000 Japan--89, 5.10%, 6/20/96 156,605
-------------------------------------------------------------------------------- --------------
Total 731,239
-------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.6%
--------------------------------------------------------------------------------
325,000 Netherlands Government, 6.00%, 4/15/95 $ 183,618
-------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--1.1%
--------------------------------------------------------------------------------
200,000 UK Conversion, 9.00%, 3/3/2000 315,153
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $2,249,578) 2,372,924
--------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
HIGH YIELD--5.0%
--------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.4%
--------------------------------------------------------------------------------
$ 125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 127,812
-------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.5%
--------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 150,000
-------------------------------------------------------------------------------- --------------
CABLE TV--0.4%
--------------------------------------------------------------------------------
125,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 112,344
-------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.4%
--------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 125,625
-------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.4%
--------------------------------------------------------------------------------
125,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 113,906
-------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 127,188
-------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
--------------------------------------------------------------------------------
125,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 109,063
-------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.4%
--------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 116,875
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 116,250
-------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.3%
--------------------------------------------------------------------------------
$ 125,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 $ 79,375
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
--------------------------------------------------------------------------------
125,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 115,000
-------------------------------------------------------------------------------- --------------
STEEL--0.4%
--------------------------------------------------------------------------------
125,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 118,125
-------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.3%
--------------------------------------------------------------------------------
150,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 92,626
-------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,343,248) 1,504,189
-------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.1%
--------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.1%
--------------------------------------------------------------------------------
30,000 General Instrument Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $40,725) 41,512
-------------------------------------------------------------------------------- --------------
TREASURY--37.9%
--------------------------------------------------------------------------------
11,600,000 U.S. Treasury Note, 3.875%, 10/31/95 (IDENTIFIED COST, $11,343,281) 11,367,887
-------------------------------------------------------------------------------- --------------
MORTGAGE-BACKED SECURITIES--19.2%
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--19.2%
--------------------------------------------------------------------------------
982,287 Federal Home Loan Bank, 7.00%, 4/1/2009 961,718
--------------------------------------------------------------------------------
509,303 Federal Home Loan Bank, 7.50%, 5/1/2024 497,843
--------------------------------------------------------------------------------
258,288 Federal National Mortgage Association, 7.50%, 6/1/2009 257,883
--------------------------------------------------------------------------------
2,419,878 Federal National Mortgage Association, 8.00%, 4/1/2024 2,419,878
--------------------------------------------------------------------------------
247,392 Government National Mortgage Association, 7.50%, 5/15/2024 240,200
--------------------------------------------------------------------------------
1,338,841 Government National Mortgage Association, 9.00%, 1/15/2023 1,396,156
-------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $5,751,947) 5,773,678
-------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $23,719,648) 23,981,542
-------------------------------------------------------------------------------- --------------
CASH EQUIVALENT--5.0%
- -------------------------------------------------------------------------------------------------
$ 250,000 U.S. Treasury Bill, 1/26/95 $ 244,048
--------------------------------------------------------------------------------
1,265,000 **J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,265,000
-------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) 1,509,048
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, (IDENTIFIED COST, $30,237,902) $ 30,339,855+
-------------------------------------------------------------------------------- --------------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $30,237,902. The
net unrealized appreciation on a federal tax cost basis amounts to $101,953,
and is comprised of $232,905 appreciation and $130,952 depreciation at July
31, 1994.
++ The overall exposure of the Fund to stocks is 14.6%, after adjustment for
the use of futures contracts to hedge exposure to large cap stocks.
(a) Non-income producing.
* In order to hedge exposure to large cap stocks, the Fund sold two S&P 500
futures contracts with a market value of $461,100. This reduces the Fund's
exposure to large cap stocks to 7.5% of the Fund.
** The repurchase agreement is fully collaterialized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated Funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
Note: The categories of investments are shown as a percentage of net assets
($30,017,825) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost, $30,237,902)
(Notes 2A and 2B) $ 30,339,855
- --------------------------------------------------------------------------------------------------
Cash 6,595
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 349,298
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 293,757
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 45,934
- -------------------------------------------------------------------------------------------------- --------------
Total assets 31,035,439
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 647,038
- -------------------------------------------------------------------------------------
Payable for foreign currency purchased 293,757
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 13,293
- -------------------------------------------------------------------------------------
Payable for Futures Variation Margin (Note 2F) 3,900
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 728
- -------------------------------------------------------------------------------------
Accrued expenses 58,898
- ------------------------------------------------------------------------------------- -----------
Total liabilities 1,017,614
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 2,986,457 shares of beneficial interest outstanding $ 30,017,825
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 29,874,395
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currencies, and futures contracts 93,969
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency transactions, and futures
contracts (11,591)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 61,052
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 30,017,825
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Institutional Service Shares ($26,743,166 / 2,660,694 shares of beneficial interest
outstanding) $10.05
- -------------------------------------------------------------------------------------------------- --------------
Select Shares ($3,274,659 / 325,763 shares of beneficial interest outstanding) $10.05
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $721) $ 323,930
- ---------------------------------------------------------------------------------------------------
Dividends 24,172
- --------------------------------------------------------------------------------------------------- -----------
Total investment income (Note 2C) 348,102
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee** $ 37,514
- ----------------------------------------------------------------------------------------
Administrative personnel and services** 2,717
- ----------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 32,800
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 1,695
- ----------------------------------------------------------------------------------------
Legal fees 1,750
- ----------------------------------------------------------------------------------------
Fund share registration costs 2,578
- ----------------------------------------------------------------------------------------
Printing and postage 3,000
- ----------------------------------------------------------------------------------------
Insurance premiums 1,286
- ----------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 1,312
- ----------------------------------------------------------------------------------------
Distribution services fee** 3,936
- ----------------------------------------------------------------------------------------
Miscellaneous 575
- ---------------------------------------------------------------------------------------- ---------
Total expenses 89,193
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 37,514
- -----------------------------------------------------------------------------
Waiver of distribution services fee** 1,312
- -----------------------------------------------------------------------------
Reimbursement of other operating expenses** 22,500 61,326
- ----------------------------------------------------------------------------- --------- ---------
Net expenses 27,867
- --------------------------------------------------------------------------------------------------- -----------
Net investment income 320,235
- --------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures
contracts (identified cost basis) (11,591)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures contracts 93,969
- --------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 82,378
- --------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 402,613
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from January 18, 1994 (start of business) to July 31, 1994.
** (See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 320,235
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($11,591 net loss, as computed for federal tax purposes) (Note 2E) (11,591)
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and future contracts 93,969
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 402,613
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Service Shares (235,828)
- ------------------------------------------------------------------------------------------------
Select Shares (23,355)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (259,183)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 30,294,607
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 56,002
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (576,214)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets from Fund share transactions 29,774,395
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 29,917,825
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period 100,000
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $61,052) $ 30,017,825
- ------------------------------------------------------------------------------------------------ ----------------
* For the period from January 18, 1994 (start of business) to July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FEDERATED MANAGED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$51,747 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<S> <C> <C> <C>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
September 1994 2 S&P 500 Index Futures Short ($10,867)
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ------------- --------------
Shares sold 2,709,675 $ 27,107,097
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,448 54,615
- -----------------------------------------------------------------------------------
Shares redeemed (54,429) (545,067)
- ----------------------------------------------------------------------------------- ------------- --------------
Net change resulting from Institutional Service Shares transactions 2,660,694 $ 26,616,645
- ----------------------------------------------------------------------------------- ------------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ------------- --------------
Shares sold 328,736 $ 3,287,510
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 138 1,387
- -----------------------------------------------------------------------------------
Shares redeemed (3,111) (31,147)
- ----------------------------------------------------------------------------------- ------------- --------------
Net change resulting from Select Shares transactions 325,763 3,257,750
- ----------------------------------------------------------------------------------- ------------- --------------
Total net change resulting from Fund share transactions 2,986,457 $ 29,874,395
- ----------------------------------------------------------------------------------- ------------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to July
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary waiver and reimbursement at
any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of the Fund for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $34,447 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,288 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 38,645,418
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 9,742,479
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
O. Please delete the section entitled "Report of Independent Public
Accountants" on page 25. In addition, please delete the heading "Report of
Independent Public Accountants" from the Table of Contents page.
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
(A Portfolio of Managed Series Trust)
Select Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
12b-1 fee 0.75%
Absent the anticipated voluntary waivers, the Total Select Shares
Operating Expenses are estimated to be 2.27%.
For more information on Select Shares expenses, see "Summary of Fund
Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 6 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 8 of the Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
pages 8 and 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00253-02-SE(5/94)
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 March 11, 1994, 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 March 11, 1994
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
Foreign Bonds 4
Equity Asset Categories 4
Large Company Stocks 4
Utility Stocks 4
Small Company Stocks 5
Foreign Stocks 5
Cash Reserves Category 5
Acceptable Investments 5
U.S. Treasury and Other
U.S. Government Securities 5
Mortgage-Backed Securities 5
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICS") 6
Characteristics of Mortgage-
Backed Securities 6
Corporate Bonds 7
Investment Risks 8
Equity Securities 8
Foreign Securities 8
Investment Risks 8
Cash Reserves 9
Repurchase Agreements 9
Investing in Securities of
Other Investment Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed
Delivery Transactions 9
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency
Exchange Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 15
Distribution Plan 15
Administration of the Fund 16
Administrative Services 16
Shareholder Services Plan 16
Custodian 16
Transfer Agent and Dividend
Disbursing Agent 16
Legal Counsel 16
Independent Public Accountants 17
Brokerage Transactions 17
Expenses of the Fund and Select Shares 17
Net Asset Value 17
- ------------------------------------------------------
Investing in Select Shares 18
- ------------------------------------------------------
Share Purchases 18
Through a Financial Institution 18
By Wire 18
By Mail 18
Minimum Investment Required 18
What Shares Cost 18
Subaccounting Services 19
Systematic Investment Program 19
Certificates and Confirmations 19
Dividends 19
Capital Gains 19
Redeeming Select Shares 20
- ------------------------------------------------------
Through a Financial Institution 20
Telephone Redemption 20
Written Requests 20
Signatures 20
Receiving Payment 21
Systematic Withdrawal Program 21
Accounts with Low Balances 21
Shareholder Information 22
- ------------------------------------------------------
Voting Rights 22
Massachusetts Partnership Law 22
Tax Information 22
- ------------------------------------------------------
Federal Income Tax 22
Pennsylvania Corporate and
Personal Property Taxes 22
Performance Information 23
- ------------------------------------------------------
Other Classes of Shares 23
- ------------------------------------------------------
Statement of Assets and Liabilities 24
- ------------------------------------------------------
Report of Independent Public
Accountants 25
- ------------------------------------------------------
Appendix 26
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Select Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
Annual Select Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1).............................................................. 0.23%
12b-1 Fee (after waiver) (2)................................................................... 0.50%
Total Other Expenses........................................................................... 0.77%
Shareholder Servicing Fee.................................................................. 0.25%
Total Select Shares Operating Expenses (3)............................................ 1.50%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time as its sole discretion. The
maximum management fee is 0.75%.
(2) The maximum 12b-1 fee is 0.75%.
(3) The Total Select Shares Operating Expenses are estimated to be 2.27% absent
the anticipated voluntary waivers of a portion of the management fee and a
portion of the 12b-1 fee.
* Total Select Shares Operating Expenses are based on average expenses expected
to be incurred during the period ending January 31, 1995. During the course
of this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Select Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Trust Information" and "Investing In Select
Shares." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $15 $47
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Select Shares of the Fund. The Fund also offers another class of shares called
Institutional Service Shares. Select Shares and Institutional Service Shares are
subject to certain of the same expenses; however, Institutional Service Shares
are not subject to a 12b-1 fee. See "Other Classes of Shares."
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
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. Additionally, the Fund may invest in cash reserves. 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>
<CAPTION>
<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 0-9%
Foreign Bonds 0-9%
Stocks 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Cash Reserves 0-12%
</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.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. The average duration of the Fund's Bond Assets will
be not less than two nor more than four years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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.
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 nine 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.
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 nine 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 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.
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. The Fund may invest up to three percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is available, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 12 percent of
its total assets in cash 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. 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;
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 Corporation (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.
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.
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.
Cash Reserves. The Fund's cash 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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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.
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 portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this capacity since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
Distribution of Select 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.
Distribution Plan. Pursuant to the provisions of a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Plan"), the Fund will
pay to the distributor an amount computed at an annual rate of .75 of 1% of the
average daily net asset value of the Shares to finance any activity which is
principally intended to result in the sale of Shares subject to the Plan.
The distributor may from time to time and for such periods as its deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for Shares.
Financial institutions will receive fees from the distributor 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
distributor.
The Fund's 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 amounts or may earn a profit from future payments made by the Fund
under the Plan.
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.
Administration of the Fund
Administrative Services. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions will
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution may receive payments from the Fund at
a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal service and maintenance of shareholder accounts.
In addition to receiving the payments under the Services Plan, 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.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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 Select 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, 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
- --------------------------------------------------------------------------------
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 Select 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 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: 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
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
the 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 Select 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 $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.
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 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 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 Corporation 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 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
edge." 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
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
- ---------------------------------------------------------------------------------------------------------------------
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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Income Fund
Select Shares
Prospectus
A Diversified Portfolio of
Managed Series Trust, an Open-End
Management Investment Company
Prospectus dated March 11, 1994
3122012A-SEL (3/94)
FEDERATED
MANAGED GROWTH AND
INCOME FUND
[LOGO] MANAGED SERIES TRUST
------------
INSTITUTIONAL SERVICE
------------
SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed
Growth and Income Fund is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K305
G00524-02 (9/94)
FEDERATED MANAGED GROWTH AND INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Growth and Income Fund--Institutional Service Shares after page 1,
following the section entitled "Summary of Fund Expenses" and before the
section entitled "General Information." In addition, please add the
heading "Financial Highlights--Institutional Service Shares" to the Table
of Contents page, after the heading "Summary of Fund Expenses."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
Net asset value, beginning of period $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.09
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency transactions,
and futures contracts 0.07
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.16
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.04)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.12
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.64%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.59%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 5.05%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.75%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,096
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 36%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 4:
"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."
C. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 4. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
D. Please delete the section entitled "Small Company Stocks" on page 5 and
replace it with the following. In addition, please add the heading
"Investment Risks" to the Table of Contents page after "Small Company
Stocks."
"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 a 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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 7. In addition,
please delete the heading "Investment Risks" which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the tenth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the last paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the section entitled "Administrative Services" on page 15
and replace it with the following:
"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."
J. Please delete the section entitled "Shareholder Services Plan" on page 15
and replace it with the following:
"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."
K. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Shareholder Services Plan"
on page 15. In addition, please add the heading "Other Payments to
Financial Institutions" to the Table of Contents page after the heading
"Shareholder Services Plan."
"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."
L. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"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."
M. Please insert the following "Financial Highlights" table for Federated
Managed Growth and Income Fund--Select Shares after page 23, following the
section entitled "Other Classes of Shares." In addition, please add the
heading "Financial Highlights--Select Shares" to the Table of Contents page
after the heading "Other Classes of Shares."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.08
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency transactions,
and futures contracts 0.07
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.15
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.04)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.11
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.49%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.36%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 4.29%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.00%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,543
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 36%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
N. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Select Shares" and before the section
entitled "Appendix." In addition, please add the heading "Financial
Statements" to the Table of Contents page, after the heading "Financial
Highlights--Select Shares."
FEDERATED MANAGED GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--30.0%++
- -------------------------------------------------------------------------------------------------
LARGE COMPANY--17.5%
--------------------------------------------------------------------------------
BASIC INDUSTRY--1.6%
--------------------------------------------------------------------------------
2,600 (a)FMC Corp. $ 152,750
--------------------------------------------------------------------------------
2,600 Lubrizol Corp. 88,075
--------------------------------------------------------------------------------
3,500 Phelps Dodge Corp. 216,125
--------------------------------------------------------------------------------
5,500 Praxair, Inc. 123,750
-------------------------------------------------------------------------------- --------------
Total 580,700
-------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.7%
--------------------------------------------------------------------------------
4,000 Ford Motor Co., 127,000
--------------------------------------------------------------------------------
2,200 General Motors Corp. 113,025
-------------------------------------------------------------------------------- --------------
Total 240,025
-------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--2.2%
--------------------------------------------------------------------------------
1,700 Avon Products, Inc. 96,262
--------------------------------------------------------------------------------
2,800 Eastman Kodak Co. 135,450
--------------------------------------------------------------------------------
7,100 Mattel, Inc. 196,138
--------------------------------------------------------------------------------
2,800 Philip Morris Cos., Inc. 154,000
--------------------------------------------------------------------------------
3,500 Reebok International, Ltd. 124,250
--------------------------------------------------------------------------------
12,500 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 84,375
-------------------------------------------------------------------------------- --------------
Total 790,475
-------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--1.2%
--------------------------------------------------------------------------------
5,000 American Stores Co. $ 129,375
--------------------------------------------------------------------------------
3,700 Sears, Roebuck & Co. 174,825
--------------------------------------------------------------------------------
5,800 (a)Tele-Communications, Inc. 135,213
-------------------------------------------------------------------------------- --------------
Total 439,413
-------------------------------------------------------------------------------- --------------
ENERGY--2.2%
--------------------------------------------------------------------------------
4,600 Baker Hughes, Inc. 97,175
--------------------------------------------------------------------------------
3,700 Chevron Corp. 164,187
--------------------------------------------------------------------------------
2,000 Mapco, Inc. 121,250
--------------------------------------------------------------------------------
800 Noram Energy Corp. 4,800
--------------------------------------------------------------------------------
2,600 Peoples Energy Corp. 66,625
--------------------------------------------------------------------------------
2,500 Texaco, Inc. 158,750
--------------------------------------------------------------------------------
6,000 USX Marathon Group 104,250
--------------------------------------------------------------------------------
1,600 (a)Western Atlas, Inc. 77,800
-------------------------------------------------------------------------------- --------------
Total 794,837
-------------------------------------------------------------------------------- --------------
FINANCE--2.8%
--------------------------------------------------------------------------------
2,000 AMLI Residential Properties 43,000
--------------------------------------------------------------------------------
1,800 Bankers Trust of New York 120,600
--------------------------------------------------------------------------------
3,400 Citicorp 140,250
--------------------------------------------------------------------------------
2,300 Dean Witter, Discover & Co. 92,287
--------------------------------------------------------------------------------
1,400 Dreyfus Corp. 69,300
--------------------------------------------------------------------------------
1,300 Federal National Mortgage Association 112,775
--------------------------------------------------------------------------------
1,200 Mellon Bank Corp. 68,700
--------------------------------------------------------------------------------
4,200 PNC Bank Corp. 120,750
--------------------------------------------------------------------------------
2,300 Transamerica Corp. 116,725
--------------------------------------------------------------------------------
4,700 Travelers, Inc. $ 155,688
-------------------------------------------------------------------------------- --------------
Total 1,040,075
-------------------------------------------------------------------------------- --------------
HEALTHCARE--1.3%
--------------------------------------------------------------------------------
2,600 American Home Products Corp. 149,175
--------------------------------------------------------------------------------
2,300 Becton, Dickinson & Co. 96,887
--------------------------------------------------------------------------------
2,300 Bristol-Myers Squibb Co. 121,037
--------------------------------------------------------------------------------
3,000 U.S. Healthcare, Inc. 113,625
-------------------------------------------------------------------------------- --------------
Total 480,724
-------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--1.4%
--------------------------------------------------------------------------------
900 Deere & Co. 63,113
--------------------------------------------------------------------------------
2,100 General Electric Co. 105,787
--------------------------------------------------------------------------------
2,100 (a)Litton Industries, Inc. 77,963
--------------------------------------------------------------------------------
1,100 Loews Corp. 97,075
--------------------------------------------------------------------------------
3,200 Textron, Inc. 170,400
-------------------------------------------------------------------------------- --------------
Total 514,338
-------------------------------------------------------------------------------- --------------
TECHNOLOGY--2.1%
--------------------------------------------------------------------------------
4,800 General Motors Corp., Class "E" 169,200
--------------------------------------------------------------------------------
1,900 Hewlett-Packard Co. 147,487
--------------------------------------------------------------------------------
3,400 Martin-Marietta Corp. 154,275
--------------------------------------------------------------------------------
2,600 Raytheon Co. 170,625
--------------------------------------------------------------------------------
3,900 Rockwell International Corp. 139,913
-------------------------------------------------------------------------------- --------------
Total 781,500
-------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.3%
--------------------------------------------------------------------------------
4,200 Ryder Systems, Inc. 109,725
-------------------------------------------------------------------------------- --------------
UTILITIES--1.7%
--------------------------------------------------------------------------------
2,900 AT&T Corp. $ 158,412
--------------------------------------------------------------------------------
800 British Telecommunications, ADR 47,300
--------------------------------------------------------------------------------
3,600 Duke Power Co. 137,700
--------------------------------------------------------------------------------
1,900 Enron Corp. 61,513
--------------------------------------------------------------------------------
4,400 MCI Communications Corp. 100,100
--------------------------------------------------------------------------------
2,100 Telefonos De Mexico, SA, ADR 127,575
-------------------------------------------------------------------------------- --------------
Total 632,600
-------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $6,397,281) 6,404,412
-------------------------------------------------------------------------------- --------------
UTILITY--9.7%
--------------------------------------------------------------------------------
UTILITIES--9.7%
--------------------------------------------------------------------------------
6,000 Ameritech Corp. 246,000
--------------------------------------------------------------------------------
2,900 Baltimore Gas & Electric Co. 66,337
--------------------------------------------------------------------------------
4,300 Bell Atlantic Corp. 243,487
--------------------------------------------------------------------------------
3,900 BellSouth Corp. 243,750
--------------------------------------------------------------------------------
2,800 Cincinnati Gas & Electric Co. 62,650
--------------------------------------------------------------------------------
2,900 CMS Energy Corp. 65,612
--------------------------------------------------------------------------------
2,300 Consolidated Edison Co. of New York 66,125
--------------------------------------------------------------------------------
3,100 DPL, Inc. 63,163
--------------------------------------------------------------------------------
2,000 DQE 60,250
--------------------------------------------------------------------------------
2,500 Entergy Corp. 63,750
--------------------------------------------------------------------------------
2,000 FPL Group, Inc. 63,250
--------------------------------------------------------------------------------
2,300 Florida Progress Corp. 64,400
--------------------------------------------------------------------------------
7,700 GTE Corp. 244,475
--------------------------------------------------------------------------------
2,300 General Public Utilities Corp. 59,225
--------------------------------------------------------------------------------
1,600 MCN Corp. 63,800
--------------------------------------------------------------------------------
2,100 Nipso Industries, Inc. $ 61,425
--------------------------------------------------------------------------------
2,800 Northeast Utilities Co. 65,450
--------------------------------------------------------------------------------
6,300 Nynex Corp. 242,550
--------------------------------------------------------------------------------
3,100 Pacific Enterprises 63,550
--------------------------------------------------------------------------------
3,600 Pacificorp. 63,900
--------------------------------------------------------------------------------
2,300 Peco Energy Co. 60,087
--------------------------------------------------------------------------------
3,600 Pinnacle West Capital Corp. 63,450
--------------------------------------------------------------------------------
2,800 PSI Resources, Inc. 61,950
--------------------------------------------------------------------------------
2,400 Public Service Enterprises Group 66,600
--------------------------------------------------------------------------------
3,000 Sonat, Inc. 99,375
--------------------------------------------------------------------------------
4,900 Southern Co. 95,550
--------------------------------------------------------------------------------
7,100 Southern New England Telecommunications Corp. 244,063
--------------------------------------------------------------------------------
5,400 Southwestern Bell Corp. 226,800
--------------------------------------------------------------------------------
3,000 UGI Corp. 63,375
--------------------------------------------------------------------------------
5,400 U.S. West, Inc. 217,350
--------------------------------------------------------------------------------
2,000 Utilicorp United, Inc. 59,500
--------------------------------------------------------------------------------
2,200 Western Resources, Inc. 61,875
--------------------------------------------------------------------------------
6,100 Westinghouse Electric Corp., Conv. Pfd., Series C 80,819
-------------------------------------------------------------------------------- --------------
TOTAL UTILITIES (IDENTIFIED COST, $3,488,601) 3,573,943
-------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--2.8%
--------------------------------------------------------------------------------
AUSTRALIA--0.1%
--------------------------------------------------------------------------------
6,400 Australian Consolidated Press, Ltd. 20,830
-------------------------------------------------------------------------------- --------------
BELGIUM--0.0%
--------------------------------------------------------------------------------
300 Delhaize-Le Lion 11,669
-------------------------------------------------------------------------------- --------------
FINLAND--0.1%
--------------------------------------------------------------------------------
200 Kone Corp. 'B' $ 20,835
-------------------------------------------------------------------------------- --------------
HONG KONG--0.1%
--------------------------------------------------------------------------------
5,400 Cheung Kong Holdings 26,494
-------------------------------------------------------------------------------- --------------
JAPAN--1.4%
--------------------------------------------------------------------------------
1,000 Bank of Tokyo 15,493
--------------------------------------------------------------------------------
1,000 Dai-Ichi Kangyo Bank 18,991
--------------------------------------------------------------------------------
3,000 Fuji Bank 67,770
--------------------------------------------------------------------------------
2,000 Hitachi, Ltd. 19,291
--------------------------------------------------------------------------------
2,000 Industrial Bank of Japan 60,373
--------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
--------------------------------------------------------------------------------
4,000 Kawasaki Heavy Industries 17,672
--------------------------------------------------------------------------------
3,000 Kirin Brewery Co., LTD 37,183
--------------------------------------------------------------------------------
1,000 Matsushita Electric Industries 16,393
--------------------------------------------------------------------------------
1,000 Mitsubishi Trucking & Banking 15,993
--------------------------------------------------------------------------------
4,000 Mitsubishi Heavy Industries 31,066
--------------------------------------------------------------------------------
3,000 Mitsukoshi, Ltd. 31,186
--------------------------------------------------------------------------------
1,000 Nomura Securities, Co. Ltd. 22,090
--------------------------------------------------------------------------------
1,000 Sakura Bank, Ltd. 14,094
--------------------------------------------------------------------------------
1,000 Sumitomo Bank 20,191
--------------------------------------------------------------------------------
6,000 Sumitomo Heavy Industries 24,349
--------------------------------------------------------------------------------
2,000 Takeda Chemical Industries 24,789
--------------------------------------------------------------------------------
3,000 Tokio Marine & Fire 38,383
-------------------------------------------------------------------------------- --------------
Total 527,983
-------------------------------------------------------------------------------- --------------
NETHERLANDS--0.1%
--------------------------------------------------------------------------------
200 Royal Dutch Petroleum Co. 22,600
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
--------------------------------------------------------------------------------
UNITED KINGDOM--0.5%
--------------------------------------------------------------------------------
7,000 British Petroleum PLC $ 44,621
--------------------------------------------------------------------------------
7,000 Coats Viyella PLC 22,797
--------------------------------------------------------------------------------
3,000 Eastern Electricity PLC 30,005
--------------------------------------------------------------------------------
3,000 Midlands Electricity PLC 30,375
--------------------------------------------------------------------------------
2,000 RMC Group PLC 29,372
--------------------------------------------------------------------------------
4,000 Williams Holdings PLC 22,318
--------------------------------------------------------------------------------
2,000 Wolseley PLC 25,467
-------------------------------------------------------------------------------- --------------
Total 204,955
-------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--0.5%
--------------------------------------------------------------------------------
5,400 France Growth Fund, Inc. 59,400
--------------------------------------------------------------------------------
5,700 Germany Fund, Inc. 68,400
--------------------------------------------------------------------------------
1,500 (a)Italy Fund, Inc. 15,750
--------------------------------------------------------------------------------
2,000 Swiss Helvetia Fund, Inc. 40,500
-------------------------------------------------------------------------------- --------------
Total 184,050
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $1,007,344) 1,019,416
-------------------------------------------------------------------------------- --------------
TOTAL STOCK (IDENTIFIED COST, $10,893,226) 10,997,771
-------------------------------------------------------------------------------- --------------
BONDS--59.2%
- -------------------------------------------------------------------------------------------------
TREASURY--24.6%
--------------------------------------------------------------------------------
$ 9,450,000 U.S. Treasury Notes, 5.125%, 4/30/98 (IDENTIFIED COST, $8,962,734) 9,020,592
-------------------------------------------------------------------------------- --------------
MORTGAGE-BACKED SECURITIES--15.2%
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--15.2%
--------------------------------------------------------------------------------
409,604 Federal Home Loan Bank, 7.00%, 4/1/2009 401,027
--------------------------------------------------------------------------------
781,861 Federal Home Loan Bank, 7.00%, 4/1/2009 765,489
--------------------------------------------------------------------------------
494,000 Federal Home Loan Bank, 7.50%, 7/1/2001 497,705
--------------------------------------------------------------------------------
404,446 Federal Home Loan Bank, 7.50%, 5/1/2024 395,346
--------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
--------------------------------------------------------------------------------
$ 240,061 Federal National Mortgage Association, 7.50%, 6/1/2009 $ 239,685
--------------------------------------------------------------------------------
1,923,670 Federal National Mortgage Association, 8.00%, 4/1/2009 1,923,670
--------------------------------------------------------------------------------
1,067,803 Government National Mortgage Association, 9.00%, 1/15/2023 1,113,516
--------------------------------------------------------------------------------
247,931 Government National Mortgage Association, 7.50%, 5/15/2024 240,724
-------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $5,563,673) 5,577,162
-------------------------------------------------------------------------------- --------------
INVESTMENT GRADE--7.4%
--------------------------------------------------------------------------------
AUTOMOTIVE--0.4%
--------------------------------------------------------------------------------
150,000 GMAC, 7.25%, 4/30/99 148,015
-------------------------------------------------------------------------------- --------------
BANKING--0.9%
--------------------------------------------------------------------------------
300,000 Chase Manhattan Corp., 9.00%, 2/24/99 318,060
-------------------------------------------------------------------------------- --------------
FINANCE--0.4%
--------------------------------------------------------------------------------
150,000 Household Finance Corp., 6.45%, 2/1/2009 129,581
-------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--0.8%
--------------------------------------------------------------------------------
300,000 Merrill Lynch & Co., Inc., 7.25%, 6/14/2004 302,118
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.6%
--------------------------------------------------------------------------------
200,000 Georgia PAC Corp., 10.125%, 5/15/2000 206,096
-------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCY--0.5%
--------------------------------------------------------------------------------
200,000 Tennessee Valley Authority, 7.318%, 5/31/99 202,096
-------------------------------------------------------------------------------- --------------
INSURANCE--0.6%
--------------------------------------------------------------------------------
250,000 SunAmerica, Inc., 6.58%, 1/15/2002 232,042
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.7%
--------------------------------------------------------------------------------
100,000 News American Holdings, Inc., 7.50%, 3/1/2000 97,801
--------------------------------------------------------------------------------
150,000 Valassis Inserts, Inc., 8.875%, 3/15/99 155,727
-------------------------------------------------------------------------------- --------------
Total 253,528
-------------------------------------------------------------------------------- --------------
SOVEREIGN GOVERNMENT--1.4%
--------------------------------------------------------------------------------
$ 300,000 Republic of Malta, 7.50%, 3/29/2009 $ 281,424
--------------------------------------------------------------------------------
100,000 Hydro Quebec, 7.375%, 2/1/2003 96,498
--------------------------------------------------------------------------------
141,000 Ontario Hydro, 9.25%, 5/1/95 144,399
-------------------------------------------------------------------------------- --------------
Total 522,321
-------------------------------------------------------------------------------- --------------
UTILITIES--1.1%
--------------------------------------------------------------------------------
200,000 Duke Power Co., 7.00%, 9/1/2005 188,682
--------------------------------------------------------------------------------
200,000 Gulf States Utilities Co., 6.75%, 10/1/98 195,566
-------------------------------------------------------------------------------- --------------
Total 384,248
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENT GRADE (IDENTIFIED COST, $2,658,101) 2,698,105
--------------------------------------------------------------------------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT FOREIGN BONDS--6.9%
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.1%
--------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 41,312
-------------------------------------------------------------------------------- --------------
BELGUIM FRANC--0.3%
--------------------------------------------------------------------------------
3,200,000 Belgian Foreign Government Guarantee, 10.00%, 4/5/96 103,202
-------------------------------------------------------------------------------- --------------
BRITISH POUND--0.8%
--------------------------------------------------------------------------------
175,000 U.K. Conversion, 9.00%, 3/3/2000 275,759
-------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.3%
--------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
-------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.4%
--------------------------------------------------------------------------------
325,000 Germany Bundesobligation, 8.875%, 1/22/96 214,677
--------------------------------------------------------------------------------
250,000 Germany Bundesobligation, Deb., 7.25%, 10/20/97 162,565
--------------------------------------------------------------------------------
200,000 Treuhandanstalt, 7.75%, 10/1/2002 131,879
-------------------------------------------------------------------------------- --------------
Total 509,121
-------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.7%
--------------------------------------------------------------------------------
350,000 France O.A.T., 8.50%, 11/25/2002 $ 169,717
--------------------------------------------------------------------------------
400,000 France O.A.T., 9.80%, 1/30/96 77,636
-------------------------------------------------------------------------------- --------------
Total 247,353
-------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.3%
--------------------------------------------------------------------------------
190,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 122,518
-------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.6%
--------------------------------------------------------------------------------
20,000,000 Japan-111, 4.60%, 6/22/98 208,226
--------------------------------------------------------------------------------
25,000,000 Japan-89, 5.10%, 6/20/96 261,008
--------------------------------------------------------------------------------
20,000,000 Japan-119, Foreign Government Guarantee, 4.80%, 6/21/99 209,406
--------------------------------------------------------------------------------
25,000,000 Japan-133, 7.30%, 9/20/2000 290,769
-------------------------------------------------------------------------------- --------------
Total 969,409
-------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.4%
--------------------------------------------------------------------------------
250,000 Netherlands Government, 6.00%, 4/15/95 141,244
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN BONDS (IDENTIFIED COST, $2,509,915) 2,513,694
--------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT HIGH YIELD--4.8%
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.3%
--------------------------------------------------------------------------------
$ 125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 127,813
-------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.4%
--------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 150,000
-------------------------------------------------------------------------------- --------------
CABLE T.V.--0.3%
--------------------------------------------------------------------------------
125,000 Continental Cablevision, Inc., 9.50%. 8/1/2013 112,344
-------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.7%
--------------------------------------------------------------------------------
125,000 Arcadian Partners LP, Sr. Note, Series B, 10.75%, 5/1/2005 125,625
--------------------------------------------------------------------------------
$ 125,000 Polymer Group, Inc., 12.25%, 7/15/2002 $ 125,938
-------------------------------------------------------------------------------- --------------
Total 251,563
-------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.3%
--------------------------------------------------------------------------------
125,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 113,906
-------------------------------------------------------------------------------- --------------
CONTAINERS & GLASS PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Owens Illinois, Inc., 10.50%, 6/15/2002 127,188
-------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
--------------------------------------------------------------------------------
125,000 Grand Union Co., 12.25%, 7/15/2002 109,062
-------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.3%
--------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 116,875
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.7%
--------------------------------------------------------------------------------
125,000 Riverwood International Corp., 11.25%, 6/15/2002 130,625
--------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 116,250
-------------------------------------------------------------------------------- --------------
Total 246,875
-------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.2%
--------------------------------------------------------------------------------
125,000 American Standard, Inc., 10.50%, 6/1/2005 79,375
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
--------------------------------------------------------------------------------
150,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 138,000
-------------------------------------------------------------------------------- --------------
STEEL--0.3%
--------------------------------------------------------------------------------
125,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 118,125
-------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.2%
--------------------------------------------------------------------------------
125,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 77,187
-------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,803,680) 1,768,313
-------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.3%
--------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.3%
--------------------------------------------------------------------------------
$ 80,000 General Instrument Corp., 5.00%, 6/15/2000
(IDENTIFIED COST, $108,600) $ 110,700
-------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $21,606,703) 21,688,566
-------------------------------------------------------------------------------- --------------
*CASH EQUIVALENTS--9.5%
- -------------------------------------------------------------------------------------------------
1,875,000 U.S. Treasury Bill, 1/26/95 1,830,361
--------------------------------------------------------------------------------
1,635,000 **J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94 1,635,000
-------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) (NOTE 2B) 3,465,361
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $35,965,290) (NOTE 2A) $ 36,151,698+
-------------------------------------------------------------------------------- --------------
</TABLE>
+ The cost for federal income tax purposes amounts to $35,965,290. The net
unrealized appreciation on a federal tax basis amounts to $186,408, and is
comprised of $430,638 appreciation and $244,230 depreciation at July 31,
1994.
++ The Fund's overall exposure to stocks is 35%, after adjustment for the use
of Russell 2000 futures contracts.
* The Fund holds cash equivalents as collateral for fifteen Russell 2000
futures contracts it bought with a market value of $1,836,375. Consequently,
the Fund's exposure to small cap stocks is 5.0% of the fund.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated Funds.
(a) Non-income producing.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
Note: The categories of investments are shown as a percentage of net assets
($36,638,839) at
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost; $35,965,290) (Notes 2A and 2B)
$ 36,151,698
- -------------------------------------------------------------------------------------------------
Cash 4,692
- -------------------------------------------------------------------------------------------------
Dividend and interest receivable 376,841
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 109,766
- -------------------------------------------------------------------------------------------------
Receivable for futures variation margin (Note 2F) 13,875
- -------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 51,521
- ------------------------------------------------------------------------------------------------- --------------
Total assets 36,708,393
- ------------------------------------------------------------------------------------------------- --------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 500
- --------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,111
- --------------------------------------------------------------------------------------
Accrued expenses 67,943
- -------------------------------------------------------------------------------------- ---------
Total liabilities 69,554
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 3,620,278 shares of beneficial interest outstanding $ 36,638,839
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid-in capital $ 36,252,359
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currency, and futures contracts 120,644
- -------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 104,147
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 161,689
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 36,638,839
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------------------------
Institutional Service Shares ($34,095,554 / 3,368,810 shares of beneficial interest
outstanding) $10.12
- ------------------------------------------------------------------------------------------------- --------------
Select Shares ($2,543,285 / 251,468 shares of beneficial interest outstanding) $10.11
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $748) $ 303,428
- ---------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $402) 48,872
- --------------------------------------------------------------------------------------------------------- ---------
Total investment income (Note 2C) 352,300
- --------------------------------------------------------------------------------------------------------- ---------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------
Investment advisory fee** $ 46,808
- ----------------------------------------------------------------------------------------------
Administrative personnel and services** 2,540
- ----------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 21,500
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 2,200
- ----------------------------------------------------------------------------------------------
Legal fees 2,000
- ----------------------------------------------------------------------------------------------
Fund share registration costs 3,245
- ----------------------------------------------------------------------------------------------
Printing and postage 3,500
- ----------------------------------------------------------------------------------------------
Insurance premiums 1,500
- ----------------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 984
- ----------------------------------------------------------------------------------------------
Distribution services fee** 2,952
- ----------------------------------------------------------------------------------------------
Miscellaneous 529
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 87,788
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 46,808
- -----------------------------------------------------------------------------------
Waiver of distribution services fee** 984 47,792
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 39,996
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 312,304
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts (identified
cost basis) 104,147
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts 120,644
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts 224,791
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 537,095
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
** (See Note 4).
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------------
Net investment income $ 312,304
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($104,147 net gain, as computed for federal income tax purposes)
(Note 2E) 104,147
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts 120,644
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations 537,095
- ---------------------------------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------------
Institutional service shares (142,941)
- ----------------------------------------------------------------------------------------------
Select shares (7,674)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from distributions to shareholders (150,615)
- ---------------------------------------------------------------------------------------------- ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 38,372,316
- ----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 59,225
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (2,179,182)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from fund share transactions 36,252,359
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 36,638,839
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------------- ------------------
End of period (including undistributed net investment income of $161,689) $ 36,638,839
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein present only those of Federated Managed Growth and Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$138,797 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<S> <C> <C> <C>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
September 1994 15 Russell 2000 Futures long ($67,275)
-----------------
Net Unrealized Appreciation (Depreciation) on Futures
Contracts ($67,275)
-----------------
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Appliances 0.04% Health Care 0.07%
Banking 0.58 Insurance 0.10
Beverage and Tobacco 0.10 Machinery 0.26
Broadcasting 0.06 Merchandising 0.26
Building Supplies 0.21 Multi-Industry 0.50
Electronics Equipment 0.05 Real Estate 0.07
Energy 0.18 Textiles 0.06
Finance 0.06 Utilities 0.64
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 3,579,228 $ 35,844,784
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,573 56,122
- -----------------------------------------------------------------------------------
Shares redeemed (215,991) (2,164,819)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 3,368,810 $ 33,736,087
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
YEAR ENDED OCTOBER 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 252,594 $ 2,527,532
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 308 3,103
- -----------------------------------------------------------------------------------
Shares redeemed (1,434) (14,363)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 251,468 2,516,272
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 3,620,278 $ 36,252,359
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to July
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of the Fund for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $34,633 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,117 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations, for the
period ended
July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 42,719,963
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 10,222,883
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
Absent the anticipated voluntary waiver, the Total Institutional Service
Shares Operating Expenses are estimated to be 1.27%.
For more information on Institutional Service Shares expenses, see
"Summary of Fund Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on page 5 of the
Prospectus.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 7 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 8 of the Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
page 8 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00252-01-SS (5/94)
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.
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 March 11, 1994, 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 March 11, 1994
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
Foreign Bonds 4
Equity Asset Categories 4
Large Company Stocks 4
Utility Stocks 4
Small Company Stocks 5
Foreign Stocks 5
Cash Reserves Category 5
Acceptable Investments 5
U.S. Treasury and Other U.S. Government
Securities 5
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations
("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICs") 6
Characteristics of Mortgage-
Backed Securities 7
Corporate Bonds 7
Investment Risks 8
Equity Securities 8
Foreign Securities 8
Investment Risks 8
Cash Reserves 9
Repurchase Agreements 9
Investing in Securities of
Other Investment Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed
Delivery Transactions 9
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency
Exchange Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Institutional Service Shares 15
Administration of the Fund 15
Administrative Services 15
Shareholder Services Plan 15
Custodian 15
Transfer Agent and Dividend
Disbursing Agent 16
Legal Counsel 16
Independent Public Accountants 16
Brokerage Transactions 16
Expenses of the Fund and Institutional
Service Shares 16
Net Asset Value 17
- ------------------------------------------------------
Investing in Institutional Service Shares 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 17
By Wire 17
By Mail 17
Minimum Investment Required 18
What Shares Cost 18
Subaccounting Services 18
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 19
Capital Gains 19
Redeeming Institutional Service Shares 19
- ------------------------------------------------------
Through a Financial Institution 19
Telephone Redemption 19
Written Requests 20
Signatures 20
Receiving Payment 20
Systematic Withdrawal Program 20
Accounts with Low Balances 21
Shareholder Information 21
- ------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 21
Tax Information 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 22
Performance Information 22
- ------------------------------------------------------
Other Classes of Shares 22
- ------------------------------------------------------
Appendix 24
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Institutional Service Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
Annual Institutional Service Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1).............................................................. 0.48%
12b-1 Fee...................................................................................... None
Total Other Expenses........................................................................... 0.52%
Shareholder Servicing Fee (2).............................................................. 0.00%
Total Institutional Service Shares Operating Expenses (3)............................. 1.00%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time as its sole discretion. The
maximum management fee is 0.75%.
(2) The Institutional Service Shares have no present intention of paying or
accruing the shareholder servicing fee. If Institutional Service Shares were
paying or accruing the shareholder servicing fee, the Institutional Service
Shares would be able to pay up to 0.25% of their average daily net assets
for the shareholder servicing fee.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 1.27% absent the anticipated voluntary waiver of a portion of the
management fee.
* Total Institutional Service Shares Operating Expenses are based on average
expenses expected to be incurred during the period ending January 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $10 $32
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Select Shares. Institutional Service Shares and Select Shares are
subject to certain of the same expenses; however, Select Shares are subject to a
12b-1 fee of up to 0.75%. See "Other Classes of Shares."
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 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
Asset Allocation. The Fund will primarily invest in two types of assets: bonds
and stocks. Additionally, the Fund may invest in cash reserves. 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 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%
Foreign Bonds 0-7%
Stocks 30-50%
Large Company Stocks 0-50%
Utility Stocks 0-20%
Small Company Stocks 0-7.5%
Foreign Stocks 0-7.5%
Cash 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.
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.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. The average duration of the Fund's Bond Assets will
be not less than three nor more than five years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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.
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 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.
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 7 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 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 a 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.
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.
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. The Fund may invest up to 7.5 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 15 percent of
its total assets in cash 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 Corporation (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.
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.
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.
Cash Reserves. The Fund's cash 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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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 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:
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
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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 cash reserves asset
category 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.
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 portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this category since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions would
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution would receive payments from the Fund
at a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services would include, but not be limited to, the provision of
personal service and maintenance of shareholder accounts.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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
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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
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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: 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
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 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
- --------------------------------------------------------------------------------
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
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.
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
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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
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
- --------------------------------------------------------------------------------
Standard and Poor's Corporation 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
edge." 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 Growth and 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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Growth and Income Fund
Institutional Service Shares
Prospectus
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122007A-ISS (3/94)
FEDERATED
MANAGED GROWTH AND
INCOME FUND
[LOGO] MANAGED SERIES TRUST
------------
SELECT SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed
Growth and Income Fund is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K404
G00524-01 (9/94)
FEDERATED MANAGED GROWTH AND INCOME FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
SELECT SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Growth and Income Fund--Select Shares after page 1, following the
section entitled "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights--Select Shares" to the Table of Contents page, after
the heading "Summary of Fund Expenses."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
Net asset value, beginning of period $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.08
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency transactions,
and futures contracts 0.07
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.15
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.04)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.11
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.49%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.36%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 4.29%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.00%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 2,543
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 36%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 4:
"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."
C. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 4. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
D. Please delete the section entitled "Small Company Stocks" on page 5 and
replace it with the following. In addition, please add the heading
"Investment Risks" to the Table of Contents page after "Small Company
Stocks."
"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 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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 7. In addition,
please delete the heading "Investment Risks" which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the tenth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the last paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the first five paragraphs of the section entitled
"Distribution Plan," which begins on page 15 and replace them with the
following. In addition, please delete the heading "Distribution Plan"
from the Table of Contents page and replace it with the heading
"Distribution and Shareholder Services Plans."
"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 Service 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."
J. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Distribution and
Shareholder Services Plans," which begins on page 15. In addition, please
add the heading "Other Payments to Financial Institutions" to the Table
of Contents page after the heading "Distribution and Shareholder Services
Plans."
"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."
K. Please delete the section entitled "Administrative Services" on page 16
and replace it with the following:
"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."
L. Please delete the section entitled "Shareholder Services Plan" on page 16.
In addition, please delete the heading "Shareholder Services Plan" from
the Table of Contents page.
M. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 22:
"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."
N. Please insert the following "Financial Highlights" table for Federated
Managed Growth and Income Fund--Institutional Service Shares after page
24, following the section entitled "Other Classes of Shares." In addition,
please add the heading "Financial Highlights-- Institutional Service
Shares" to the Table of Contents page after the heading "Other Classes of
Shares."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.09
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency transactions,
and futures contracts 0.07
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.16
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.04)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.12
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.64%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.59%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 5.05%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.75%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,096
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 36%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
O. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Institutional Service Shares" and before
the section entitled "Appendix." In addition, please add the heading
"Financial Statements" to the Table of Contents page, after the heading
"Financial Highlights--Institutional Service Shares."
FEDERATED MANAGED GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--30.0%++
- -------------------------------------------------------------------------------------------------
LARGE COMPANY--17.5%
--------------------------------------------------------------------------------
BASIC INDUSTRY--1.6%
--------------------------------------------------------------------------------
2,600 (a)FMC Corp. $ 152,750
--------------------------------------------------------------------------------
2,600 Lubrizol Corp. 88,075
--------------------------------------------------------------------------------
3,500 Phelps Dodge Corp. 216,125
--------------------------------------------------------------------------------
5,500 Praxair, Inc. 123,750
-------------------------------------------------------------------------------- --------------
Total 580,700
-------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.7%
--------------------------------------------------------------------------------
4,000 Ford Motor Co. 127,000
--------------------------------------------------------------------------------
2,200 General Motors Corp. 113,025
-------------------------------------------------------------------------------- --------------
Total 240,025
-------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--2.2%
--------------------------------------------------------------------------------
1,700 Avon Products, Inc. 96,262
--------------------------------------------------------------------------------
2,800 Eastman Kodak Co. 135,450
--------------------------------------------------------------------------------
7,100 Mattel, Inc. 196,138
--------------------------------------------------------------------------------
2,800 Philip Morris Cos., Inc. 154,000
--------------------------------------------------------------------------------
3,500 Reebok International, Ltd. 124,250
--------------------------------------------------------------------------------
12,500 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 84,375
-------------------------------------------------------------------------------- --------------
Total 790,475
-------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--1.2%
--------------------------------------------------------------------------------
5,000 American Stores Co. $ 129,375
--------------------------------------------------------------------------------
3,700 Sears, Roebuck & Co. 174,825
--------------------------------------------------------------------------------
5,800 (a)Tele-Communications, Inc. 135,213
-------------------------------------------------------------------------------- --------------
Total 439,413
-------------------------------------------------------------------------------- --------------
ENERGY--2.2%
--------------------------------------------------------------------------------
4,600 Baker Hughes, Inc. 97,175
--------------------------------------------------------------------------------
3,700 Chevron Corp. 164,187
--------------------------------------------------------------------------------
2,000 Mapco, Inc. 121,250
--------------------------------------------------------------------------------
800 Noram Energy Corp. 4,800
--------------------------------------------------------------------------------
2,600 Peoples Energy Corp. 66,625
--------------------------------------------------------------------------------
2,500 Texaco, Inc. 158,750
--------------------------------------------------------------------------------
6,000 USX Marathon Group 104,250
--------------------------------------------------------------------------------
1,600 (a)Western Atlas, Inc. 77,800
-------------------------------------------------------------------------------- --------------
Total 794,837
-------------------------------------------------------------------------------- --------------
FINANCE--2.8%
--------------------------------------------------------------------------------
2,000 AMLI Residential Properties 43,000
--------------------------------------------------------------------------------
1,800 Bankers Trust of New York 120,600
--------------------------------------------------------------------------------
3,400 Citicorp 140,250
--------------------------------------------------------------------------------
2,300 Dean Witter, Discover & Co. 92,287
--------------------------------------------------------------------------------
1,400 Dreyfus Corp. 69,300
--------------------------------------------------------------------------------
1,300 Federal National Mortgage Association 112,775
--------------------------------------------------------------------------------
1,200 Mellon Bank Corp. 68,700
--------------------------------------------------------------------------------
4,200 PNC Bank Corp. 120,750
--------------------------------------------------------------------------------
2,300 Transamerica Corp. 116,725
--------------------------------------------------------------------------------
4,700 Travelers, Inc. $ 155,688
-------------------------------------------------------------------------------- --------------
Total 1,040,075
-------------------------------------------------------------------------------- --------------
HEALTHCARE--1.3%
--------------------------------------------------------------------------------
2,600 American Home Products Corp. 149,175
--------------------------------------------------------------------------------
2,300 Beckton, Dickinson & Co. 96,887
--------------------------------------------------------------------------------
2,300 Bristol-Myers Squibb Co. 121,037
--------------------------------------------------------------------------------
3,000 U.S. Healthcare, Inc. 113,625
-------------------------------------------------------------------------------- --------------
Total 480,724
-------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--1.4%
--------------------------------------------------------------------------------
900 Deere & Co. 63,113
--------------------------------------------------------------------------------
2,100 General Electric Co. 105,787
--------------------------------------------------------------------------------
2,100 (a)Litton Industries, Inc. 77,963
--------------------------------------------------------------------------------
1,100 Loews Corp. 97,075
--------------------------------------------------------------------------------
3,200 Textron, Inc. 170,400
-------------------------------------------------------------------------------- --------------
Total 514,338
-------------------------------------------------------------------------------- --------------
TECHNOLOGY--2.1%
--------------------------------------------------------------------------------
4,800 General Motors Corp., Class "E" 169,200
--------------------------------------------------------------------------------
1,900 Hewlett-Packard Co. 147,487
--------------------------------------------------------------------------------
3,400 Martin-Marietta Corp. 154,275
--------------------------------------------------------------------------------
2,600 Raytheon Co. 170,625
--------------------------------------------------------------------------------
3,900 Rockwell International Corp. 139,913
-------------------------------------------------------------------------------- --------------
Total 781,500
-------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.3%
--------------------------------------------------------------------------------
4,200 Ryder Systems, Inc. 109,725
-------------------------------------------------------------------------------- --------------
UTILITIES--1.7%
--------------------------------------------------------------------------------
2,900 AT&T Corp. $ 158,412
--------------------------------------------------------------------------------
800 British Telecommunications, ADR 47,300
--------------------------------------------------------------------------------
3,600 Duke Power Co. 137,700
--------------------------------------------------------------------------------
1,900 Enron Corp. 61,513
--------------------------------------------------------------------------------
4,400 MCI Communications Corp. 100,100
--------------------------------------------------------------------------------
2,100 Telefonos De Mexico, SA, ADR 127,575
-------------------------------------------------------------------------------- --------------
Total 632,600
-------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $6,397,281) 6,404,412
-------------------------------------------------------------------------------- --------------
UTILITY--9.7%
--------------------------------------------------------------------------------
UTILITIES--9.7%
--------------------------------------------------------------------------------
6,000 Ameritech Corp. 246,000
--------------------------------------------------------------------------------
2,900 Baltimore Gas & Electric Co. 66,337
--------------------------------------------------------------------------------
4,300 Bell Atlantic Corp. 243,487
--------------------------------------------------------------------------------
3,900 BellSouth Corp. 243,750
--------------------------------------------------------------------------------
2,800 Cincinnati Gas & Electric Co. 62,650
--------------------------------------------------------------------------------
2,900 CMS Energy Corp. 65,612
--------------------------------------------------------------------------------
2,300 Consolidated Edison Co. of New York 66,125
--------------------------------------------------------------------------------
3,100 DPL, Inc. 63,163
--------------------------------------------------------------------------------
2,000 DQE 60,250
--------------------------------------------------------------------------------
2,500 Entergy Corp. 63,750
--------------------------------------------------------------------------------
2,000 FPL Group, Inc. 63,250
--------------------------------------------------------------------------------
2,300 Florida Progress Corp. 64,400
--------------------------------------------------------------------------------
7,700 GTE Corp. 244,475
--------------------------------------------------------------------------------
2,300 General Public Utilities Corp. 59,225
--------------------------------------------------------------------------------
1,600 MCN Corp. 63,800
--------------------------------------------------------------------------------
2,100 Nipso Industries, Inc. $ 61,425
--------------------------------------------------------------------------------
2,800 Northeast Utilities Co. 65,450
--------------------------------------------------------------------------------
6,300 Nynex Corp. 242,550
--------------------------------------------------------------------------------
3,100 Pacific Enterprises 63,550
--------------------------------------------------------------------------------
3,600 Pacificorp. 63,900
--------------------------------------------------------------------------------
2,300 Peco Energy Co. 60,087
--------------------------------------------------------------------------------
3,600 Pinnacle West Capital Corp. 63,450
--------------------------------------------------------------------------------
2,800 PSI Resources, Inc. 61,950
--------------------------------------------------------------------------------
2,400 Public Service Enterprises Group 66,600
--------------------------------------------------------------------------------
3,000 Sonat, Inc. 99,375
--------------------------------------------------------------------------------
4,900 Southern Co. 95,550
--------------------------------------------------------------------------------
7,100 Southern New England Telecommunications Corp. 244,063
--------------------------------------------------------------------------------
5,400 Southwestern Bell Corp. 226,800
--------------------------------------------------------------------------------
3,000 UGI Corp. 63,375
--------------------------------------------------------------------------------
5,400 U.S. West, Inc. 217,350
--------------------------------------------------------------------------------
2,000 Utilicorp United, Inc. 59,500
--------------------------------------------------------------------------------
2,200 Western Resources, Inc. 61,875
--------------------------------------------------------------------------------
6,100 Westinghouse Electric Corp., Conv. Pfd., Series C 80,819
-------------------------------------------------------------------------------- --------------
TOTAL UTILITIES (IDENTIFIED COST, $3,488,601) 3,573,943
-------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--2.8%
--------------------------------------------------------------------------------
AUSTRALIA--0.1%
--------------------------------------------------------------------------------
6,400 Australian Consolidated Press, Ltd. 20,830
-------------------------------------------------------------------------------- --------------
BELGIUM--0.0%
--------------------------------------------------------------------------------
300 Delhaize-Le Lion 11,669
-------------------------------------------------------------------------------- --------------
FINLAND--0.1%
--------------------------------------------------------------------------------
200 Kone Corp. 'B' $ 20,835
-------------------------------------------------------------------------------- --------------
HONG KONG--0.1%
--------------------------------------------------------------------------------
5,400 Cheung Kong Holdings 26,494
-------------------------------------------------------------------------------- --------------
JAPAN--1.4%
--------------------------------------------------------------------------------
1,000 Bank of Tokyo 15,493
--------------------------------------------------------------------------------
1,000 Dai-Ichi Kangyo Bank 18,991
--------------------------------------------------------------------------------
3,000 Fuji Bank 67,770
--------------------------------------------------------------------------------
2,000 Hitachi, Ltd. 19,291
--------------------------------------------------------------------------------
2,000 Industrial Bank of Japan 60,373
--------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
--------------------------------------------------------------------------------
4,000 Kawasaki Heavy Industries 17,672
--------------------------------------------------------------------------------
3,000 Kirin Brewery Co., LTD. 37,183
--------------------------------------------------------------------------------
1,000 Matsushita Electric Industries 16,393
--------------------------------------------------------------------------------
1,000 Mitsubishi Trucking & Banking 15,993
--------------------------------------------------------------------------------
4,000 Mitsubishi Heavy Industries 31,066
--------------------------------------------------------------------------------
3,000 Mitsukoshi, Ltd. 31,186
--------------------------------------------------------------------------------
1,000 Nomura Securities Co., Ltd. 22,090
--------------------------------------------------------------------------------
1,000 Sakura Bank, Ltd. 14,094
--------------------------------------------------------------------------------
1,000 Sumitomo Bank 20,191
--------------------------------------------------------------------------------
6,000 Sumitomo Heavy Industries 24,349
--------------------------------------------------------------------------------
2,000 Takeda Chemical Industries 24,789
--------------------------------------------------------------------------------
3,000 Tokio Marine & Fire 38,383
-------------------------------------------------------------------------------- --------------
Total 527,983
-------------------------------------------------------------------------------- --------------
NETHERLANDS--0.1%
--------------------------------------------------------------------------------
200 Royal Dutch Petroleum Co. 22,600
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
--------------------------------------------------------------------------------
UNITED KINGDOM--0.5%
--------------------------------------------------------------------------------
7,000 British Petroleum PLC $ 44,621
--------------------------------------------------------------------------------
7,000 Coats Viyella PLC 22,797
--------------------------------------------------------------------------------
3,000 Eastern Electricity PLC 30,005
--------------------------------------------------------------------------------
3,000 Midlands Electricity PLC 30,375
--------------------------------------------------------------------------------
2,000 RMC Group PLC 29,372
--------------------------------------------------------------------------------
4,000 Williams Holdings PLC 22,318
--------------------------------------------------------------------------------
2,000 Wolseley PLC 25,467
-------------------------------------------------------------------------------- --------------
Total 204,955
-------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--0.5%
--------------------------------------------------------------------------------
5,400 France Growth Fund, Inc. 59,400
--------------------------------------------------------------------------------
5,700 Germany Fund, Inc. 68,400
--------------------------------------------------------------------------------
1,500 (a)Italy Fund, Inc. 15,750
--------------------------------------------------------------------------------
2,000 Swiss Helvetia Fund, Inc. 40,500
-------------------------------------------------------------------------------- --------------
Total 184,050
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $1,007,344) 1,019,416
-------------------------------------------------------------------------------- --------------
TOTAL STOCK (IDENTIFIED COST, $10,893,226) 10,997,771
-------------------------------------------------------------------------------- --------------
BONDS--59.2%
- -------------------------------------------------------------------------------------------------
TREASURY--24.6%
--------------------------------------------------------------------------------
$ 9,450,000 U.S. Treasury Notes, 5.125%, 4/30/98 (IDENTIFIED COST, $8,962,734) 9,020,592
-------------------------------------------------------------------------------- --------------
MORTGAGE-BACKED SECURITIES--15.2%
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--15.2%
--------------------------------------------------------------------------------
409,604 Federal Home Loan Bank, 7.00%, 4/1/2009 401,027
--------------------------------------------------------------------------------
781,861 Federal Home Loan Bank, 7.00%, 4/1/2009 765,489
--------------------------------------------------------------------------------
494,000 Federal Home Loan Bank, 7.50%, 7/1/2001 497,705
--------------------------------------------------------------------------------
404,446 Federal Home Loan Bank, 7.50%, 5/1/2024 395,346
--------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
--------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
--------------------------------------------------------------------------------
$ 240,061 Federal National Mortgage Association, 7.50%, 6/1/2009 $ 239,685
--------------------------------------------------------------------------------
1,923,670 Federal National Mortgage Association, 8.00%, 4/1/2009 1,923,670
--------------------------------------------------------------------------------
1,067,803 Government National Mortgage Association, 9.00%, 1/15/2023 1,113,516
--------------------------------------------------------------------------------
247,931 Government National Mortgage Association, 7.50%, 5/15/2024 240,724
-------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $5,563,673) 5,577,162
-------------------------------------------------------------------------------- --------------
INVESTMENT GRADE--7.4%
--------------------------------------------------------------------------------
AUTOMOTIVE--0.4%
--------------------------------------------------------------------------------
150,000 GMAC, 7.25%, 4/30/99 148,015
-------------------------------------------------------------------------------- --------------
BANKING--0.9%
--------------------------------------------------------------------------------
300,000 Chase Manhattan Corp., 9.00%, 2/24/99 318,060
-------------------------------------------------------------------------------- --------------
FINANCE--0.4%
--------------------------------------------------------------------------------
150,000 Household Finance Corp., 6.45%, 2/1/2009 129,581
-------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--0.8%
--------------------------------------------------------------------------------
300,000 Merrill Lynch & Co., Inc., 7.25%, 6/14/2004 302,118
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.6%
--------------------------------------------------------------------------------
200,000 Georgia PAC Corp., 10.125%, 5/15/2000 206,096
-------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCY--0.5%
--------------------------------------------------------------------------------
200,000 Tennessee Valley Authority, 7.318%, 5/31/99 202,096
-------------------------------------------------------------------------------- --------------
INSURANCE--0.6%
--------------------------------------------------------------------------------
250,000 SunAmerica, Inc., 6.58%, 1/15/2002 232,042
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.7%
--------------------------------------------------------------------------------
100,000 News American Holdings, Inc., 7.50%, 3/1/2000 97,801
--------------------------------------------------------------------------------
150,000 Valassis Inserts, Inc., 8.875%, 3/15/99 155,727
-------------------------------------------------------------------------------- --------------
Total 253,528
-------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------
INVESTMENT GRADE--CONTINUED
--------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT--1.4%
--------------------------------------------------------------------------------
$ 300,000 Republic of Malta, 7.50%, 3/29/2009 $ 281,424
--------------------------------------------------------------------------------
100,000 Hydro Quebec, 7.375%, 2/1/2003 96,498
--------------------------------------------------------------------------------
141,000 Ontario Hydro, 9.25%, 5/1/95 144,399
-------------------------------------------------------------------------------- --------------
Total 522,321
-------------------------------------------------------------------------------- --------------
UTILITIES--1.1%
--------------------------------------------------------------------------------
200,000 Duke Power Co., 7.00%, 9/1/2005 188,682
--------------------------------------------------------------------------------
200,000 Gulf States Utilities Co., 6.75%, 10/1/98 195,566
-------------------------------------------------------------------------------- --------------
Total 384,248
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENT GRADE (IDENTIFIED COST, $2,658,101) 2,698,105
--------------------------------------------------------------------------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT FOREIGN BONDS--6.9%
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.1%
--------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 41,312
-------------------------------------------------------------------------------- --------------
BELGUIM FRANC--0.3%
--------------------------------------------------------------------------------
3,200,000 Belgian Foreign Government Guarantee, 10.00%, 4/5/96 103,202
-------------------------------------------------------------------------------- --------------
BRITISH POUND--0.8%
--------------------------------------------------------------------------------
175,000 U.K. Conversion, 9.00%, 3/3/2000 275,759
-------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.3%
--------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
-------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.4%
--------------------------------------------------------------------------------
325,000 Germany Bundesobligation, 8.875%, 1/22/96 214,677
--------------------------------------------------------------------------------
250,000 Germany Bundesobligation, Deb., 7.25%, 10/20/97 162,565
--------------------------------------------------------------------------------
200,000 Treuhandanstalt, 7.75%, 10/1/2002 131,879
-------------------------------------------------------------------------------- --------------
Total 509,121
-------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.7%
--------------------------------------------------------------------------------
350,000 France O.A.T., 8.50%, 11/25/2002 $ 169,717
--------------------------------------------------------------------------------
400,000 France O.A.T., 9.80%, 1/30/96 77,636
-------------------------------------------------------------------------------- --------------
Total 247,353
-------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.3%
--------------------------------------------------------------------------------
190,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 122,518
-------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.6%
--------------------------------------------------------------------------------
20,000,000 Japan-111, 4.60%, 6/22/98 208,226
--------------------------------------------------------------------------------
25,000,000 Japan-89, 5.10%, 6/20/96 261,008
--------------------------------------------------------------------------------
20,000,000 Japan-119, Foreign Government Guarantee, 4.80%, 6/21/99 209,406
--------------------------------------------------------------------------------
25,000,000 Japan-133, 7.30%, 9/20/2000 290,769
-------------------------------------------------------------------------------- --------------
Total 969,409
-------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.4%
--------------------------------------------------------------------------------
250,000 Netherlands Government, 6.00%, 4/15/95 141,244
-------------------------------------------------------------------------------- --------------
TOTAL FOREIGN BONDS (IDENTIFIED COST, $2,509,915) 2,513,694
-------------------------------------------------------------------------------- --------------
<CAPTION>
PRINCIPAL
AMOUNT HIGH YIELD--4.8%
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.3%
--------------------------------------------------------------------------------
$ 125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 127,813
-------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.4%
--------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 150,000
-------------------------------------------------------------------------------- --------------
CABLE T.V.--0.3%
--------------------------------------------------------------------------------
125,000 Continental Cablevision, Inc., 9.50%. 8/1/2013 112,344
-------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.7%
--------------------------------------------------------------------------------
125,000 Arcadian Partners LP, Sr. Note, Series B, 10.75%, 5/1/2005 125,625
--------------------------------------------------------------------------------
$ 125,000 Polymer Group, Inc., 12.25%, 7/15/2002 $ 125,938
-------------------------------------------------------------------------------- --------------
Total 251,563
-------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.3%
--------------------------------------------------------------------------------
125,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 113,906
-------------------------------------------------------------------------------- --------------
CONTAINERS & GLASS PRODUCTS--0.4%
--------------------------------------------------------------------------------
125,000 Owens Illinois, Inc., 10.50%, 6/15/2002 127,188
-------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
--------------------------------------------------------------------------------
125,000 Grand Union Co., 12.25%, 7/15/2002 109,062
-------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.3%
--------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875% 12/1/2002 116,875
-------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.7%
--------------------------------------------------------------------------------
125,000 Riverwood International Corp., 11.25%, 6/15/2002 130,625
--------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 116,250
-------------------------------------------------------------------------------- --------------
Total 246,875
-------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.2%
--------------------------------------------------------------------------------
125,000 American Standard, Inc., 10.50%, 6/1/2005 79,375
-------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
--------------------------------------------------------------------------------
150,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 138,000
-------------------------------------------------------------------------------- --------------
STEEL--0.3%
--------------------------------------------------------------------------------
125,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 118,125
-------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.2%
--------------------------------------------------------------------------------
125,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 77,187
-------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,803,680) 1,768,313
-------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.3%
--------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.3%
--------------------------------------------------------------------------------
$ 80,000 General Instrument Corp., 5.00%, 6/15/2000
(IDENTIFIED COST, $108,600) $ 110,700
-------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $21,606,703) 21,688,566
-------------------------------------------------------------------------------- --------------
*CASH EQUIVALENTS--9.5%
- -------------------------------------------------------------------------------------------------
1,875,000 U. S. Treasury Bill, 1/26/95 1,830,361
--------------------------------------------------------------------------------
1,635,000 **J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94 1,635,000
-------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) (NOTE 2B) 3,465,361
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $35,965,290) (NOTE 2A) $ 36,151,698+
-------------------------------------------------------------------------------- --------------
</TABLE>
+ The cost for federal income tax purposes amounts to $35,965,290. The net
unrealized appreciation on a federal tax basis amounts to $186,408, and is
comprised of $430,638 appreciation and $244,230 depreciation at July 31,
1994.
++ The Fund's overall exposure to stocks is 35.0%, after adjustment for the use
of Russell 2000 futures contracts.
* The Fund holds cash equivalents as collateral for fifteen Russell 2000
futures contracts it bought with a market value of $1,836,375. Consequently,
the Fund's exposure to small cap stocks is 5.0% of the fund.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated Funds.
(a) Non-income producing.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
Note: The categories of investments are shown as a percentage of net assets
($36,638,839) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost; $35,965,290) (Notes 2A and 2B)
$ 36,151,698
- -------------------------------------------------------------------------------------------------
Cash 4,692
- -------------------------------------------------------------------------------------------------
Dividend and interest receivable 376,841
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 109,766
- -------------------------------------------------------------------------------------------------
Receivable for futures variation margin (Note 2F) 13,875
- -------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 51,521
- ------------------------------------------------------------------------------------------------- --------------
Total assets 36,708,393
- ------------------------------------------------------------------------------------------------- --------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 500
- --------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,111
- --------------------------------------------------------------------------------------
Accrued expenses 67,943
- -------------------------------------------------------------------------------------- ---------
Total liabilities 69,554
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 3,620,278 shares of beneficial interest outstanding $ 36,638,839
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid-in capital $ 36,252,359
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currency, and futures contracts 120,644
- -------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 104,147
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 161,689
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 36,638,839
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------------------------
Institutional Service Shares ($34,095,554 / 3,368,810 shares of beneficial interest
outstanding) $10.12
- ------------------------------------------------------------------------------------------------- --------------
Select Shares ($2,543,285 / 251,468 shares of beneficial interest outstanding) $10.11
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $748) $ 303,428
- ---------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $402) 48,872
- --------------------------------------------------------------------------------------------------------- ---------
Total investment income (Note 2C) 352,300
- --------------------------------------------------------------------------------------------------------- ---------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------
Investment advisory fee** $ 46,808
- ----------------------------------------------------------------------------------------------
Administrative personnel and services** 2,540
- ----------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 21,500
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 2,200
- ----------------------------------------------------------------------------------------------
Legal fees 2,000
- ----------------------------------------------------------------------------------------------
Fund share registration costs 3,245
- ----------------------------------------------------------------------------------------------
Printing and postage 3,500
- ----------------------------------------------------------------------------------------------
Insurance premiums 1,500
- ----------------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 984
- ----------------------------------------------------------------------------------------------
Distribution services fee** 2,952
- ----------------------------------------------------------------------------------------------
Miscellaneous 529
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 87,788
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 46,808
- -----------------------------------------------------------------------------------
Waiver of distribution services fee** 984 47,792
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 39,996
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 312,304
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts (identified
cost basis) 104,147
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts 120,644
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts 224,791
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 537,095
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
** (See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------------
Net investment income $ 312,304
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($104,147 net gain, as computed for federal income tax purposes)
(Note 2E) 104,147
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts 120,644
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations 537,095
- ---------------------------------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------------
Institutional Service Shares (142,941)
- ----------------------------------------------------------------------------------------------
Select Shares (7,674)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from distributions to shareholders (150,615)
- ---------------------------------------------------------------------------------------------- ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 38,372,316
- ----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 59,225
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (2,179,182)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from fund share transactions 36,252,359
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 36,638,839
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------------- ------------------
End of period (including undistributed net investment income of $161,689) $ 36,638,839
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein present only those of Federated Managed Growth and Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$138,797 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<S> <C> <C> <C>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
September 1994 15 Russell 2000 Futures long ($67,275)
-----------------
Net Unrealized Appreciation (Depreciation) on Futures
Contracts ($67,275)
-----------------
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Appliances 0.04% Health Care 0.07%
Banking 0.58 Insurance 0.10
Beverage and Tobacco 0.10 Machinery 0.26
Broadcasting 0.06 Merchandising 0.26
Building Supplies 0.21 Multi-Industry 0.50
Electronics Equipment 0.05 Real Estate 0.07
Energy 0.18 Textiles 0.06
Finance 0.06 Utilities 0.64
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 3,579,228 $ 35,844,784
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,573 56,122
- -----------------------------------------------------------------------------------
Shares redeemed (215,991) (2,164,819)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 3,368,810 $ 33,736,087
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
YEAR ENDED OCTOBER 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 252,594 $ 2,527,532
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 308 3,103
- -----------------------------------------------------------------------------------
Shares redeemed (1,434) (14,363)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 251,468 2,516,272
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 3,620,278 $ 36,252,359
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to July
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of the Fund for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $34,633 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,117 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations, for the
period ended
July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 42,719,963
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 10,222,883
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
(A Portfolio of Managed Series Trust)
Select Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
12b-1 fee 0.75%
Absent the anticipated voluntary waivers, the Total Select Shares
Operating Expenses are estimated to be 2.27%.
For more information on Select Shares expenses, see "Summary of Fund
Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on page 5.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 7 of the Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
page 8 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 8 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00252-02-SE (5/94)
Federated Managed Growth and Income Fund
(A Portfolio of Managed Series Trust)
Select Shares
Prospectus
The Select 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. 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 March 11, 1994, 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 March 11, 1994
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
Foreign Bonds 4
Equity Asset Categories 4
Large Company Stocks 4
Utility Stocks 4
Small Company Stocks 5
Foreign Stocks 5
Cash Reserves Category 5
Acceptable Investments 5
U.S. Treasury and Other U.S.
Government Securities 5
Mortgage-Backed Securities 6
Collateralized Mortgage
Obligations ("CMOs") 6
Real Estate Mortgage Investment
Conduits ("REMICS") 6
Characteristics of Mortgage-Backed
Securities 7
Corporate Bonds 7
Investment Risks 8
Equity Securities 8
Foreign Securities 8
Investment Risks 8
Cash Reserves 9
Repurchase Agreements 9
Investing in Securities of Other
Investment Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed
Delivery Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange
Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 15
Distribution Plan 15
Administration of the Fund 16
Administrative Services 16
Shareholder Services Plan 16
Custodian 16
Transfer Agent and Dividend
Disbursing Agent 16
Legal Counsel 17
Independent Public Accountants 17
Brokerage Transactions 17
Expenses of the Fund and Select Shares 17
Net Asset Value 18
- ------------------------------------------------------
Investing in Select Shares 18
- ------------------------------------------------------
Share Purchases 18
Through a Financial Institution 18
By Wire 18
By Mail 18
Minimum Investment Required 19
What Shares Cost 19
Subaccounting Services 19
Systematic Investment Program 19
Certificates and Confirmations 19
Dividends 20
Capital Gains 20
Redeeming Select Shares 20
- ------------------------------------------------------
Through a Financial Institution 20
Telephone Redemption 20
Written Requests 21
Signatures 21
Receiving Payment 21
Systematic Withdrawal Program 21
Accounts with Low Balances 21
Shareholder Information 22
- ------------------------------------------------------
Voting Rights 22
Massachusetts Partnership Law 22
Tax Information 22
- ------------------------------------------------------
Federal Income Tax 22
Pennsylvania Corporate and
Personal Property Taxes 23
Performance Information 23
- ------------------------------------------------------
Other Classes of Shares 23
- ------------------------------------------------------
Appendix 25
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Select Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)....................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
Annual Select Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)............................................................. 0.48%
12b-1 Fee (after waiver) (2).................................................................. 0.50%
Total Other Expenses.......................................................................... 0.77%
Shareholder Servicing Fee................................................................. 0.25%
Total Select Shares Operating Expenses (3)........................................... 1.75%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The maximum 12b-1 fee is 0.75%.
(3) The Total Select Shares Operating Expenses are estimated to be 2.27% absent
the anticipated voluntary waivers of a portion of the management fee and a
portion of the 12b-1 fee.
* Total Select Shares Operating Expenses are based on average expenses expected
to be incurred during the period ending January 31, 1995. During the course of
this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Select Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Trust Information" and "Investing in Select
Shares." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $18 $55
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Select Shares of the Fund. The Fund also offers another class of shares called
Institutional Service Shares. Select Shares and Institutional Service Shares are
subject to certain of the same expenses; however, Institutional Service Shares
are not subject to a 12b-1 fee. See "Other Classes of Shares."
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
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
Asset Allocation. The Fund will primarily invest in two types of assets: bonds
and stocks. Additionally, the Fund may invest in cash reserves. 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 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%
Foreign Bonds 0-7%
Stocks 30-50%
Large Company Stocks 0-50%
Utility Stocks 0-20%
Small Company Stocks 0-7.5%
Foreign Stocks 0-7.5%
Cash 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.
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.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. The average duration of the Fund's Bond Assets will
be not less than three nor more than five years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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.
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 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.
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 7 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 50 percent of its total assets in large
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 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 7.5 percent of its total assets in small
stocks.
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.
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. The Fund may invest up to 7.5 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 15 percent of
its total assets in cash 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 Corporation (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.
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.
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.
Cash Reserves. The Fund's cash 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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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.
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 portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this capacity since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
Distribution of Select 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.
Distribution Plan. Pursuant to the provisions of a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Plan"), the Fund will
pay to the distributor an amount computed at an annual rate of .75 of 1% of the
average daily net asset value of the Shares to finance any activity which is
principally intended to result in the sale of Shares subject to the Plan.
The distributor may from time to time and for such periods as its deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for Shares.
Financial institutions will receive fees from the distributor 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
distributor.
The Fund's 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 amounts or may earn a profit from future payments made by the Fund
under the Plan.
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.
Administration of the Fund
Administrative Services. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions will
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution may receive payments from the Fund at
a rate not exceeding 0.25 percent of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal service and maintenance of shareholder accounts.
In addition to receiving the payments under the Services Plan, 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.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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 Select 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, 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
- --------------------------------------------------------------------------------
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 Select 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: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Managed Growth and 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 Growth and 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
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
the 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 Select 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 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 $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.
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 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 expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
- --------------------------------------------------------------------------------
Standard and Poor's Corporation 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 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
edge." 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 Growth and 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
- ---------------------------------------------------------------------------------------------------------------------
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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Growth and Income Fund
Select Shares
Prospectus
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122006A-SEL (3/94)
FEDERATED
MANAGED GROWTH
FUND
[LOGO] MANAGED SERIES TRUST
------------
INSTITUTIONAL SERVICE
------------
SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed Growth Fund
is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K503
G00529-02 (9/94)
FEDERATED MANAGED GROWTH FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Growth Fund--Institutional Service Shares after page 1, following
the section entitled "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights--Institutional Service Shares" to the Table of
Contents page, after the heading "Summary of Fund Expenses."
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.08
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.03
- ------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.11
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 1.14%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.60%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 4.38%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.75%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 20,250
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 28%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "Small Company Stocks" on page 4 and
replace it with the following. In addition, please add the heading
"Investment Risks" to the Table of Contents page after "Small Company
Stocks."
"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 21 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."
C. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 5:
"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."
D. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 5. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds" on page 9. In addition, please delete
the heading "Investment Risks," which appears immediately following the
heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the fifth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the ninth paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the section entitled "Administrative Services" on page 15
and replace it with the following:
"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."
J. Please delete the section entitled "Shareholder Services Plan" on page
16, and replace it with the following:
"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."
K. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Shareholder Services Plan"
on page 16. In addition, please add the heading "Other Payments to
Financial Institutions" to the Table of Contents page after the heading
"Shareholder Services Plan."
"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."
L. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"As of September 6, 1994, ENBTRUST of Marysville, Kansas, acting in various
capacities for numerous accounts, was the owner of record of 69,128 Select
Shares (29.29%) of Federated Managed Growth 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."
M. Please insert the following "Financial Highlights" table for Federated
Managed Growth Fund--Select Shares after page 23, following the section
entitled "Other Classes of Shares." In addition, please add the heading
"Financial Highlights--Select Shares" to the Table of Contents page after
the heading "Other Classes of Shares."
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.05
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures
contracts 0.06
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.11
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 1.07%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.39%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 3.63%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.00%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,521
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 28%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
N. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Select Shares" and before the section
entitled "Appendix." In addition, please add the heading "Financial
Statements" to the Table of Contents page after the heading "Financial
Highlights--Select Shares."
FEDERATED MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
STOCKS--36.2%++
- ------------------------------------------------------------------------------------------------
LARGE COMPANY--21.2%*
-------------------------------------------------------------------------------
BASIC INDUSTRY--2.0%
-------------------------------------------------------------------------------
2,000 (a)FMC Corp. $ 117,500
-------------------------------------------------------------------------------
2,000 Lubrizol Corp. 67,750
-------------------------------------------------------------------------------
2,600 Phelps Dodge Corp. 160,550
-------------------------------------------------------------------------------
4,200 Praxair, Inc. 94,500
------------------------------------------------------------------------------- --------------
Total 440,300
------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.8%
-------------------------------------------------------------------------------
3,000 Ford Motor Co. 95,250
-------------------------------------------------------------------------------
1,600 General Motors Corp. 82,200
------------------------------------------------------------------------------- --------------
Total 177,450
------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--2.7%
-------------------------------------------------------------------------------
1,300 Avon Products, Inc. 73,612
-------------------------------------------------------------------------------
2,100 Eastman Kodak Co. 101,587
-------------------------------------------------------------------------------
5,300 Mattel, Inc. 146,413
-------------------------------------------------------------------------------
2,100 Philip Morris Cos., Inc. 115,500
-------------------------------------------------------------------------------
2,600 Reebok International, Ltd. 92,300
-------------------------------------------------------------------------------
9,400 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 63,450
------------------------------------------------------------------------------- --------------
Total 592,862
------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--1.5%
-------------------------------------------------------------------------------
3,800 American Stores Co. $ 98,325
-------------------------------------------------------------------------------
2,800 Sears, Roebuck & Co. 132,300
-------------------------------------------------------------------------------
4,300 (a)Tele-Communications, Inc., Class A 100,244
------------------------------------------------------------------------------- --------------
Total 330,869
------------------------------------------------------------------------------- --------------
ENERGY--2.5%
-------------------------------------------------------------------------------
3,400 Baker Hughes, Inc. 71,825
-------------------------------------------------------------------------------
2,800 Chevron Corp. 124,250
-------------------------------------------------------------------------------
1,500 Mapco, Inc. 90,937
-------------------------------------------------------------------------------
400 Peoples Energy Corp. 10,250
-------------------------------------------------------------------------------
1,900 Texaco, Inc. 120,650
-------------------------------------------------------------------------------
4,500 USX Marathon Group 78,188
-------------------------------------------------------------------------------
1,200 (a)Western Atlas, Inc. 58,350
------------------------------------------------------------------------------- --------------
Total 554,450
------------------------------------------------------------------------------- --------------
FINANCE--3.6%
-------------------------------------------------------------------------------
1,500 AMLI Residential Properties 32,250
-------------------------------------------------------------------------------
1,300 Bankers Trust of New York Corp. 87,100
-------------------------------------------------------------------------------
2,500 Citicorp 103,125
-------------------------------------------------------------------------------
1,700 Dean Witter, Discover & Co. 68,212
-------------------------------------------------------------------------------
1,100 Dreyfus Corp. 54,450
-------------------------------------------------------------------------------
1,000 Federal National Mortgage Association 86,750
-------------------------------------------------------------------------------
900 Mellon Bank Corp. 51,525
-------------------------------------------------------------------------------
3,200 PNC Financial Corp. 92,000
-------------------------------------------------------------------------------
1,700 Transamerica Corp. 86,275
-------------------------------------------------------------------------------
3,500 Travelers, Inc. 115,938
------------------------------------------------------------------------------- --------------
Total 777,625
------------------------------------------------------------------------------- --------------
HEALTHCARE--1.7%
-------------------------------------------------------------------------------
2,000 American Home Products Corp. $ 114,750
-------------------------------------------------------------------------------
1,700 Beckton, Dickinson & Co. 71,612
-------------------------------------------------------------------------------
1,700 Bristol-Myers Squibb Co. 89,462
-------------------------------------------------------------------------------
2,300 U.S. Healthcare, Inc. 87,113
------------------------------------------------------------------------------- --------------
Total 362,937
------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--1.8%
-------------------------------------------------------------------------------
700 Deere & Co. 49,087
-------------------------------------------------------------------------------
1,500 General Electric Co. 75,562
-------------------------------------------------------------------------------
1,600 (a)Litton Industries, Inc. 59,400
-------------------------------------------------------------------------------
800 Loews Corp. 70,600
-------------------------------------------------------------------------------
2,400 Textron, Inc. 127,800
------------------------------------------------------------------------------- --------------
Total 382,449
------------------------------------------------------------------------------- --------------
TECHNOLOGY--2.7%
-------------------------------------------------------------------------------
3,600 General Motors Corp., Class E 126,900
-------------------------------------------------------------------------------
1,400 Hewlett-Packard Co. 108,675
-------------------------------------------------------------------------------
2,600 Martin-Marietta Corp. 117,975
-------------------------------------------------------------------------------
1,900 Raytheon Co. 124,688
-------------------------------------------------------------------------------
3,000 Rockwell International Corp. 107,625
------------------------------------------------------------------------------- --------------
Total 585,863
------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.4%
-------------------------------------------------------------------------------
3,100 Ryder Systems, Inc. 80,988
------------------------------------------------------------------------------- --------------
UTILITIES--1.5%
-------------------------------------------------------------------------------
2,200 AT & T Corp. 120,175
-------------------------------------------------------------------------------
600 British Telecommunications, ADR 35,475
-------------------------------------------------------------------------------
1,400 Duke Power Co. 53,550
-------------------------------------------------------------------------------
1,500 Enron Corp. $ 48,562
-------------------------------------------------------------------------------
3,300 MCI Communications Corp. 75,075
------------------------------------------------------------------------------- --------------
Total 332,837
------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $4,622,730) 4,618,630
------------------------------------------------------------------------------- --------------
UTILITY--2.6%
-------------------------------------------------------------------------------
UTILITIES--2.6%
-------------------------------------------------------------------------------
800 Ameritech Corp. 32,800
-------------------------------------------------------------------------------
400 Baltimore Gas & Electric Co. 9,150
-------------------------------------------------------------------------------
600 Bell Atlantic Corp. 33,975
-------------------------------------------------------------------------------
500 BellSouth Corp. 31,250
-------------------------------------------------------------------------------
400 Cincinnati Gas & Electric Co. 8,950
-------------------------------------------------------------------------------
400 CMS Energy Corp. 9,050
-------------------------------------------------------------------------------
400 Consolidated Edison Co. of New York 11,500
-------------------------------------------------------------------------------
500 DPL, Inc. 10,187
-------------------------------------------------------------------------------
300 DQE 9,037
-------------------------------------------------------------------------------
300 Duke Power Co. 11,475
-------------------------------------------------------------------------------
400 Entergy Corp. 10,200
-------------------------------------------------------------------------------
400 Florida Progress Corp. 11,200
-------------------------------------------------------------------------------
300 FPL Group, Inc. 9,487
-------------------------------------------------------------------------------
400 General Public Utilities Corp. 10,300
-------------------------------------------------------------------------------
1,000 GTE Corp. 31,750
-------------------------------------------------------------------------------
200 MCN Corp. 7,975
-------------------------------------------------------------------------------
300 Nipsco Industries, Inc. 8,775
-------------------------------------------------------------------------------
400 Northeast Utilities Co. 9,350
-------------------------------------------------------------------------------
800 Nynex Corp. 30,800
-------------------------------------------------------------------------------
400 Pacific Enterprises $ 8,200
-------------------------------------------------------------------------------
600 Pacificorp 10,650
-------------------------------------------------------------------------------
400 Peco Energy Co. 10,450
-------------------------------------------------------------------------------
600 Pinnacle West Capital Corp. 10,575
-------------------------------------------------------------------------------
400 PSI Resources, Inc. 8,850
-------------------------------------------------------------------------------
300 Public Service Enterprise Group, Inc. 8,325
-------------------------------------------------------------------------------
400 Sonat, Inc. 13,250
-------------------------------------------------------------------------------
600 Southern Co. 11,700
-------------------------------------------------------------------------------
900 Southern New England Telecommunications 30,938
-------------------------------------------------------------------------------
700 Southwestern Bell Corp. 29,400
-------------------------------------------------------------------------------
500 UGI Corp. 10,563
-------------------------------------------------------------------------------
700 U.S. West, Inc. 28,175
-------------------------------------------------------------------------------
400 Utilicorp United, Inc. 11,900
-------------------------------------------------------------------------------
300 Western Resources, Inc. 8,438
-------------------------------------------------------------------------------
4,500 Westinghouse Electric Corp., Conv. Pfd., Series C 59,621
------------------------------------------------------------------------------- --------------
TOTAL UTILITY (IDENTIFIED COST, $550,809) 558,246
------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--9.5%
-------------------------------------------------------------------------------
AUSTRALIA--0.3%
-------------------------------------------------------------------------------
19,300 Australian Consolidated Press, Ltd. 62,815
------------------------------------------------------------------------------- --------------
BELGIUM--0.2%
-------------------------------------------------------------------------------
1,100 Delhaize-Le Lion 42,786
------------------------------------------------------------------------------- --------------
FINLAND--0.2%
-------------------------------------------------------------------------------
400 Kone Corp. 'B' 41,671
------------------------------------------------------------------------------- --------------
HONG KONG--0.4%
-------------------------------------------------------------------------------
16,800 Cheung Kong Holdings 82,425
------------------------------------------------------------------------------- --------------
JAPAN--5.7%
-------------------------------------------------------------------------------
6,000 Bank of Tokyo $ 92,958
-------------------------------------------------------------------------------
5,000 Dai Ichi Kangyo Bank 94,957
-------------------------------------------------------------------------------
3,000 Fuji Bank 67,770
-------------------------------------------------------------------------------
5,000 Hitachi, Ltd. 48,228
-------------------------------------------------------------------------------
2,000 Industrial Bank of Japan 60,373
-------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
-------------------------------------------------------------------------------
11,000 Kawasaki Heavy Industries 48,598
-------------------------------------------------------------------------------
7,000 Kirin Brewery Co., Ltd. 86,761
-------------------------------------------------------------------------------
3,000 Matsushita Electric Industries 49,178
-------------------------------------------------------------------------------
11,000 Mitsubishi Heavy Industries 85,432
-------------------------------------------------------------------------------
5,000 Mitsubishi Trust & Banking 79,964
-------------------------------------------------------------------------------
6,000 Mitsukoshi, Ltd. 62,372
-------------------------------------------------------------------------------
4,000 Nomura Securities Co., Ltd. 88,360
-------------------------------------------------------------------------------
3,000 Sakura Bank, Ltd. 42,281
-------------------------------------------------------------------------------
2,000 Sumitomo Bank 40,382
-------------------------------------------------------------------------------
13,000 Sumitomo Heavy Industries 52,756
-------------------------------------------------------------------------------
4,000 Takeda Chemical Industries 49,578
-------------------------------------------------------------------------------
4,000 Tokio Marine & Fire 51,177
-------------------------------------------------------------------------------
3,000 Tokyo Electric Power 90,859
------------------------------------------------------------------------------- --------------
Total 1,244,660
------------------------------------------------------------------------------- --------------
NETHERLANDS--0.4%
-------------------------------------------------------------------------------
700 Royal Dutch Petroleum Co. 79,100
------------------------------------------------------------------------------- --------------
SWEDEN--0.2%
-------------------------------------------------------------------------------
500 Volvo (AB), Series B 48,913
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
-------------------------------------------------------------------------------
UNITED KINGDOM--2.1%
-------------------------------------------------------------------------------
12,000 British Petroleum PLC $ 76,493
-------------------------------------------------------------------------------
24,000 Coats Viyella PLC 78,160
-------------------------------------------------------------------------------
7,000 Eastern Electricity PLC 70,011
-------------------------------------------------------------------------------
6,000 Midlands Electricity PLC 60,750
-------------------------------------------------------------------------------
4,200 RMC Group PLC 61,681
-------------------------------------------------------------------------------
11,000 Williams Holdings PLC 61,375
-------------------------------------------------------------------------------
4,000 Wolseley PLC 50,934
------------------------------------------------------------------------------- --------------
Total 459,404
------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $2,043,588) 2,061,774
------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--2.9%
-------------------------------------------------------------------------------
7,000 First Iberian Fund Inc. 53,375
-------------------------------------------------------------------------------
15,400 France Growth Fund, Inc. 169,400
-------------------------------------------------------------------------------
12,400 Germany Fund, Inc. 148,800
-------------------------------------------------------------------------------
7,800 (a)Italy Fund, Inc. 81,900
-------------------------------------------------------------------------------
2,600 Malaysia Fund, Inc. 59,150
-------------------------------------------------------------------------------
5,800 Swiss Helvetia Fund, Inc. 117,450
------------------------------------------------------------------------------- --------------
TOTAL REGISTERED INVESTMENT COMPANIES
(IDENTIFIED COST, $625,720) 630,075
------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $7,842,847) 7,868,725
------------------------------------------------------------------------------- --------------
BONDS--40.6%
- ------------------------------------------------------------------------------------------------
TREASURY--14.6%
-------------------------------------------------------------------------------
$ 3,360,000 United States Treasury Note, 6.25%, 2/15/2003
(IDENTIFIED COST, $3,144,959) 3,187,162
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--8.6%
-------------------------------------------------------------------------------
GOVERNMENT AGENCY--8.6%
-------------------------------------------------------------------------------
$ 304,583 Federal Home Loan Mortgage Corporation, 7.50%, 5/1/2024 $ 297,730
-------------------------------------------------------------------------------
220,271 Federal Home Loan Mortgage Corporation, 7.00%, 4/1/2009 215,658
-------------------------------------------------------------------------------
542,223 Federal National Mortgage Association, 8.00%, 4/1/2024 542,223
-------------------------------------------------------------------------------
269,516 Government National Mortgage Association, 7.00%, 5/15/2024 253,259
-------------------------------------------------------------------------------
301,739 Government National Mortgage Association, 9.00%, 1/15/2023 314,657
-------------------------------------------------------------------------------
239,605 Government National Mortgage Association, 9.50%, 1/15/2020 254,204
------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $1,865,079) 1,877,731
------------------------------------------------------------------------------- --------------
HIGH YIELD--4.3%
-------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.4%
-------------------------------------------------------------------------------
75,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 76,688
------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.5%
-------------------------------------------------------------------------------
100,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 100,000
------------------------------------------------------------------------------- --------------
CABLE TV--0.3%
-------------------------------------------------------------------------------
75,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 67,406
------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.3%
-------------------------------------------------------------------------------
75,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 75,375
------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.3%
-------------------------------------------------------------------------------
75,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 68,344
------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.5%
-------------------------------------------------------------------------------
100,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 101,750
------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
-------------------------------------------------------------------------------
75,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 65,437
------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.3%
-------------------------------------------------------------------------------
75,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 70,125
------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.3%
-------------------------------------------------------------------------------
$ 75,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 69,750
------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.2%
-------------------------------------------------------------------------------
75,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 47,625
------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
-------------------------------------------------------------------------------
100,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 92,000
------------------------------------------------------------------------------- --------------
STEEL--0.3%
-------------------------------------------------------------------------------
75,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 70,875
------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.2%
-------------------------------------------------------------------------------
75,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 46,313
------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $971,264) 951,688
------------------------------------------------------------------------------- --------------
OTHER CORPORATE BONDS--0.4%
-------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.4%
-------------------------------------------------------------------------------
60,000 General Instrument Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $81,450) 83,025
------------------------------------------------------------------------------- --------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT FOREIGN--12.7%
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.4%
-------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,625
------------------------------------------------------------------------------- --------------
BELGIAN FRANCS--0.4%
-------------------------------------------------------------------------------
2,500,000 Belgian Government, Foreign Government Guarantee, 10.00%,
4/5/96 80,627
------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.5%
-------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
------------------------------------------------------------------------------- --------------
DANISH KRONE--0.7%
-------------------------------------------------------------------------------
800,000 KFW International Finance, Inc., 7.00%, 5/12/2000 146,878
------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.9%
-------------------------------------------------------------------------------
250,000 Bundesobligation, 8.875%, 1/22/96 $ 165,136
-------------------------------------------------------------------------------
250,000 Bundesobligationen, Deb., 7.25%, 10/20/97 162,565
-------------------------------------------------------------------------------
150,000 Treuhandanstalt, 7.75%, 10/1/2002 98,909
------------------------------------------------------------------------------- --------------
Total 426,610
------------------------------------------------------------------------------- --------------
FRENCH FRANCS--1.2%
-------------------------------------------------------------------------------
700,000 France O.A.T., 8.50%, 11/25/2002 139,767
-------------------------------------------------------------------------------
600,000 France O.A.T., 9.80%, 1/30/96 116,454
------------------------------------------------------------------------------- --------------
Total 256,221
------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
-------------------------------------------------------------------------------
150,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 96,725
------------------------------------------------------------------------------- --------------
JAPANESE YEN--5.1%
-------------------------------------------------------------------------------
20,000,000 Japan-111, 4.60%, 6/22/98 208,226
-------------------------------------------------------------------------------
40,000,000 Japan-119, Foreign Government Guarantee, 4.80%, 6/21/99 418,811
-------------------------------------------------------------------------------
22,000,000 Japan-133, 7.30%, 9/20/2000 255,877
-------------------------------------------------------------------------------
22,000,000 Japan-89, 5.10%, 6/20/96 229,687
------------------------------------------------------------------------------- --------------
Total 1,112,601
------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.8%
-------------------------------------------------------------------------------
300,000 Netherlands Government, 6.00%, 4/15/95 169,493
------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--1.3%
-------------------------------------------------------------------------------
175,000 UK Conversion, 9.00%, 3/3/2000 275,759
------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $2,745,052) 2,751,315
------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $8,807,804) 8,850,921
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
**CASH EQUIVALENTS--23.4%
- ------------------------------------------------------------------------------------------------
$ 3,250,000 U.S. Treasury Bill, 1/26/95 $ 3,172,626
-------------------------------------------------------------------------------
1,930,000 ***J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,930,000
------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENTS (AT AMORTIZED COST) 5,102,626
------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $21,753,277) $ 21,822,272+
------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing.
+ The cost for federal income tax purposes amounts to $21,753,277. The net
unrealized appreciation on a federal tax basis amounts to $68,995, which is
comprised of $274,180 appreciation and $205,185 depreciation at July 31,
1994.
++ The Fund's overall exposure to stocks is 50.7%, after adjustment for the use
of Russell 2000 and S&P 500 futures contracts.
* The Fund holds cash equivalents as collateral for the two S & P 500 future
contracts it bought with a market value of $458,900. Consequently, the
Fund's exposure to large cap stocks is 23.3% of the fund.
** The Fund holds cash equivalents as collateral for the twenty-two Russell
2000 future contracts it bought with a market value of $2,693,350.
Consequently, the Fund's exposure to small cap stocks is 12.4% of the fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Co.
Note: The categories of investments are shown as a percentage of net assets
($21,771,177) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost, $21,753,277)
(Notes 2A and 2B) $ 21,822,272
- --------------------------------------------------------------------------------------------------
Cash 1,644
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 224,739
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 183,302
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 52,143
- --------------------------------------------------------------------------------------------------
Receivable for futures variation margin (Note 2F) 24,150
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,293
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 41,723
- -------------------------------------------------------------------------------------------------- --------------
Total assets 22,358,266
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 353,760
- -------------------------------------------------------------------------------------
Payable for foreign currency purchased 184,576
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 4,438
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,467
- -------------------------------------------------------------------------------------
Accrued expenses 42,848
- ------------------------------------------------------------------------------------- -----------
Total liabilities 587,089
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 2,159,823 shares of beneficial interest outstanding $ 21,771,177
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 21,615,189
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currency, and futures contracts (9,307)
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 75,874
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 89,421
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 21,771,177
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Institutional Service Shares (20,250,112 / 2,008,901 shares of beneficial interest outstanding) $10.08
- -------------------------------------------------------------------------------------------------- --------------
Select Shares (1,521,065 / 150,922 shares of beneficial interest outstanding) $10.08
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $591) $ 156,543
- ----------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $1,011) 19,772
- ---------------------------------------------------------------------------------------------------- -----------
Total investment income (Note 2C) 176,315
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee** $ 26,553
- -----------------------------------------------------------------------------------------
Administrative personnel and services** 2,396
- -----------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 11,162
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 437
- -----------------------------------------------------------------------------------------
Legal fees 1,000
- -----------------------------------------------------------------------------------------
Fund share registration costs 2,342
- -----------------------------------------------------------------------------------------
Printing and postage 2,248
- -----------------------------------------------------------------------------------------
Insurance premiums 1,000
- -----------------------------------------------------------------------------------------
Taxes 30
- -----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 362
- -----------------------------------------------------------------------------------------
Distribution services fee** 1,087
- -----------------------------------------------------------------------------------------
Miscellaneous 551
- ----------------------------------------------------------------------------------------- ---------
Total expenses 49,168
- -----------------------------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 26,553
- ------------------------------------------------------------------------------
Waiver of distribution services fee** 362 26,915
- ------------------------------------------------------------------------------ --------- ---------
Net expenses 22,253
- ---------------------------------------------------------------------------------------------------- -----------
Net investment income 154,062
- ---------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY,
AND FUTURES CONTRACTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) 75,874
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (9,307)
- ---------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments, foreign currency
and futures contracts 66,567
- ---------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 220,629
- ---------------------------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
**(See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 154,062
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($75,874 net gain as computed for federal tax purposes) (Note 2E) 75,874
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (9,307)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 220,629
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Services Shares (62,979)
- ------------------------------------------------------------------------------------------------
Select Shares (1,662)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (64,641)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 22,454,530
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 28,362
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (867,703)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets from Fund share transactions 21,615,189
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 21,771,177
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $89,421) $ 21,771,177
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Growth Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$108,463 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
September 1994 22 Russell 2000 Futures Long ($ 80,275)
September 1994 2 S&P 500 Index Futures Long 2,863
-----------
Net Unrealized Appreciation (Depreciation) on Futures
Contracts ($ 77,412)
-----------
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Appliances .23% Healthcare .23%
Automobiles .22 Insurance .24
Banking 2.20 Machinery 1.05
Beverage & Tobacco .40 Merchandising .72
Broadcasting .29 Multi-Industry 2.89
Building/Supplies .80 Real Estate .38
Electronic Equipment .22 Textiles .36
Energy .71 Utilities 1.18
Finance .41
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
Shares sold 2,092,512 $ 20,940,107
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,691 27,101
- -----------------------------------------------------------------------------------
Shares redeemed (86,302) (863,234)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 2,008,901 $ 20,103,974
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
Shares sold 151,240 $ 1,514,423
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 125 1,261
- -----------------------------------------------------------------------------------
Shares redeemed (443) (4,469)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 150,922 1,511,215
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 2,159,823 $ 21,615,189
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to July
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
the Fund for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $35,959 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,205 and $2,396, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended July 31, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 20,407,549
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 3,733,814
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH FUND
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
Absent the anticipated voluntary waiver, the Total Institutional Service
Shares Operating Expenses are estimated to be 1.27%.
For more information on Institutional Service Shares expenses, see
"Summary of Fund Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the subsection entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on page 4 of the
Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
page 6 of the Prospectus.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on pages 8 and 9 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
#G00251-01-SS (5/94)
Federated Managed Growth Fund
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Prospectus
The Institutional Service Shares of Federated Managed Growth 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 capital appreciation. In
pursuing its objective, the Fund will consider the current income of the
investments it selects. 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 March 11, 1994, 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 March 11, 1994
Table of Contents
- --------------------------------------------------------------------------------
Summary of Fund Expenses 1
- ------------------------------------------------------
General Information 2
- ------------------------------------------------------
Investment Information 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Asset Allocation 2
Equity Asset Categories 3
Large Company Stocks 3
Utility Stocks 4
Small Company Stocks 4
Foreign Stocks 4
Cash Reserves Category 4
Bond Asset Categories 4
U.S. Treasury Securities 5
Mortgaged-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 6
Equity Securities 6
Foreign Securities 6
Investment Risks 6
Cash Reserves 6
Repurchase Agreements 6
U.S. Treasury and Other U.S.
Government Securities 7
Mortgage-Backed Securities 7
Collateralized Mortgage Obligations
("CMOs") 7
Real Estate Mortgage Investment
Conduits ("REMICs") 8
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 9
Investment Risks 9
Investing in Securities of Other
Investment Companies 9
Restricted and Illiquid Securities 10
When-Issued and Delayed Delivery
Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange
Contracts 11
Options 11
Futures and Options on Futures 12
Risks 12
Portfolio Turnover 13
Investment Limitations 13
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Institutional Service Shares 15
Administration of the Fund 15
Administrative Services 15
Shareholder Services Plan 16
Custodian 16
Transfer Agent and Dividend
Disbursing Agent 16
Legal Counsel 16
Independent Public Accountants 16
Brokerage Transactions 16
Expenses of the Fund and Institutional
Service Shares 16
Net Asset Value 17
- ------------------------------------------------------
Investing in Institutional Service Shares 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 17
By Wire 18
By Mail 18
Minimum Investment Required 18
What Shares Cost 18
Subaccounting Services 18
Systematic Investment Program 19
Certificates and Confirmations 19
Dividends 19
Capital Gains 19
Redeeming Institutional Service Shares 19
- ------------------------------------------------------
Through a Financial Institution 19
Telephone Redemption 20
Written Requests 20
Signatures 20
Receiving Payment 20
Systematic Withdrawal Program 21
Accounts with Low Balances 21
Shareholder Information 21
- ------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 21
Tax Information 22
- ------------------------------------------------------
Federal Income Tax 22
Pennsylvania Corporate and
Personal Property Taxes 22
Performance Information 22
- ------------------------------------------------------
Other Classes of Shares 23
- ------------------------------------------------------
Appendix 24
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Institutional Service Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
Annual Institutional Service Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1).............................................................. 0.48%
12b-1 Fee...................................................................................... None
Total Other Expenses........................................................................... 0.52%
Shareholder Servicing Fee (2).............................................................. 0.00%
Total Institutional Service Shares Operating Expenses (3)............................. 1.00%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The Institutional Service Shares have no present intention of paying or
accruing the shareholder servicing fee. If Institutional Service Shares were
paying or accruing the shareholder servicing fee, the Institutional Service
Shares would be able to pay up to 0.25% of their average daily net assets
for the shareholder servicing fee.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 1.27% absent the anticipated voluntary waiver of a portion of the
management fee.
* Total Institutional Service Shares Operating Expenses are based on average
expenses expected to be incurred during the period ended January 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $10 $32
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Select Shares. Institutional Service Shares and Select Shares are
subject to certain of the same expenses; however, Select Shares are subject to a
12b-1 fee of up to 0.75%. See "Other Classes of Shares."
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 interest 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 capital appreciation. In
pursuing its objective, the Fund will consider the current income of the
investments it selects. 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: stocks
and bonds. Additionally, the Fund may invest in cash reserves. 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 50 and 70 percent of its assets in stocks. The
stock asset categories are large company stocks, utility stocks, small company
stocks, and foreign stocks.
The Fund will invest between 30 and 50 percent of its assets in bonds. The
Fund's adviser believes that bonds offer opportunities for growth of capital or
otherwise may be desirable under prevailing market or economic conditions. The
bond asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.
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>
Stocks 50-70%
Large Company Stocks 0-70%
Utility Stocks 0-7%
Small Company Stocks 0-21%
Foreign Stocks 0-21%
Cash Reserves 0-14%
Bonds 30-50%
U.S. Treasury Securities 0-45%
Mortgage-Backed Securities 0-15%
Investment-Grade Corporate Bonds 0-15%
High Yield Corporate Bonds 0-15%
Foreign Bonds 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, foreign
stocks are judged to be unusually attractive relative to other asset categories,
the allocation for foreign stocks may be moved to its upper limit. At other
times when foreign 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.
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.
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 70 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 seven 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 a 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 21 percent of its total assets in small
company stocks.
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.
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. The Fund may invest up to 21 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 14 percent of
its total assets in cash reserves.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. Generally, the Fund will invest in Bond Assets
which are believed to offer opportunities for growth of capital when the adviser
believes interest rates will decline and, therefore, the value of the debt
securities will increase, or the market value of bonds will increase due to
factors affecting certain types of bonds or particular issuers, such as
improvement in credit quality due to company fundamentals or economic conditions
or assumptions on changes in trends in prepayment rates with respect to
mortgage-backed securites. The average duration of the Fund's Bond Assets will
be not less than three nor more than seven years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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 45 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 15 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 15 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.
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 15 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.
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 15 percent of its total assets in foreign bonds.
Acceptable Investments
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 Investors Service,
Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's Corporation (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.
Cash Reserves. The Fund's cash 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.
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 Corporation (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.
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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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:
Peter R. Anderson is the portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this capacity since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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.
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.
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.
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, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions would
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution would receive payments from the Fund
at a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services would include, but not be limited to, the provision of
personal service and maintenance of shareholder accounts.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Managed Growth 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 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 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
- --------------------------------------------------------------------------------
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 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
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.
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
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
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Standard and Poor's Corporation 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
edge." 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 Growth 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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Growth Fund
Institutional Service Shares
Prospectus
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122010A-ISS (3/94)
FEDERATED
MANAGED GROWTH
FUND
[LOGO] MANAGED SERIES TRUST
------------
INSTITUTIONAL SERVICE
------------
SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed Growth Fund
is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K503
G00529-02 (9/94)
FEDERATED MANAGED GROWTH FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Growth Fund--Institutional Service Shares after page 1, following
the section entitled "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights--Institutional Service Shares" to the Table of
Contents page, after the heading "Summary of Fund Expenses."
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.08
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.03
- ------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.11
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 1.14%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.60%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 4.38%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.75%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 20,250
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 28%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "Small Company Stocks" on page 4 and
replace it with the following. In addition, please add the heading
"Investment Risks" to the Table of Contents page after "Small Company
Stocks."
"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 21 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."
C. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 5:
"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."
D. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 5. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds" on page 9. In addition, please delete
the heading "Investment Risks," which appears immediately following the
heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the fifth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the ninth paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the section entitled "Administrative Services" on page 15
and replace it with the following:
"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."
J. Please delete the section entitled "Shareholder Services Plan" on page
16, and replace it with the following:
"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."
K. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Shareholder Services Plan"
on page 16. In addition, please add the heading "Other Payments to
Financial Institutions" to the Table of Contents page after the heading
"Shareholder Services Plan."
"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."
L. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"As of September 6, 1994, ENBTRUST of Marysville, Kansas, acting in various
capacities for numerous accounts, was the owner of record of 69,128 Select
Shares (29.29%) of Federated Managed Growth 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."
M. Please insert the following "Financial Highlights" table for Federated
Managed Growth Fund--Select Shares after page 23, following the section
entitled "Other Classes of Shares." In addition, please add the heading
"Financial Highlights--Select Shares" to the Table of Contents page after
the heading "Other Classes of Shares."
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.05
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures
contracts 0.06
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.11
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 1.07%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.39%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 3.63%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.00%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,521
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 28%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
N. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Select Shares" and before the section
entitled "Appendix." In addition, please add the heading "Financial
Statements" to the Table of Contents page after the heading "Financial
Highlights--Select Shares."
FEDERATED MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
STOCKS--36.2%++
- ------------------------------------------------------------------------------------------------
LARGE COMPANY--21.2%*
-------------------------------------------------------------------------------
BASIC INDUSTRY--2.0%
-------------------------------------------------------------------------------
2,000 (a)FMC Corp. $ 117,500
-------------------------------------------------------------------------------
2,000 Lubrizol Corp. 67,750
-------------------------------------------------------------------------------
2,600 Phelps Dodge Corp. 160,550
-------------------------------------------------------------------------------
4,200 Praxair, Inc. 94,500
------------------------------------------------------------------------------- --------------
Total 440,300
------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.8%
-------------------------------------------------------------------------------
3,000 Ford Motor Co. 95,250
-------------------------------------------------------------------------------
1,600 General Motors Corp. 82,200
------------------------------------------------------------------------------- --------------
Total 177,450
------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--2.7%
-------------------------------------------------------------------------------
1,300 Avon Products, Inc. 73,612
-------------------------------------------------------------------------------
2,100 Eastman Kodak Co. 101,587
-------------------------------------------------------------------------------
5,300 Mattel, Inc. 146,413
-------------------------------------------------------------------------------
2,100 Philip Morris Cos., Inc. 115,500
-------------------------------------------------------------------------------
2,600 Reebok International, Ltd. 92,300
-------------------------------------------------------------------------------
9,400 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 63,450
------------------------------------------------------------------------------- --------------
Total 592,862
------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--1.5%
-------------------------------------------------------------------------------
3,800 American Stores Co. $ 98,325
-------------------------------------------------------------------------------
2,800 Sears, Roebuck & Co. 132,300
-------------------------------------------------------------------------------
4,300 (a)Tele-Communications, Inc., Class A 100,244
------------------------------------------------------------------------------- --------------
Total 330,869
------------------------------------------------------------------------------- --------------
ENERGY--2.5%
-------------------------------------------------------------------------------
3,400 Baker Hughes, Inc. 71,825
-------------------------------------------------------------------------------
2,800 Chevron Corp. 124,250
-------------------------------------------------------------------------------
1,500 Mapco, Inc. 90,937
-------------------------------------------------------------------------------
400 Peoples Energy Corp. 10,250
-------------------------------------------------------------------------------
1,900 Texaco, Inc. 120,650
-------------------------------------------------------------------------------
4,500 USX Marathon Group 78,188
-------------------------------------------------------------------------------
1,200 (a)Western Atlas, Inc. 58,350
------------------------------------------------------------------------------- --------------
Total 554,450
------------------------------------------------------------------------------- --------------
FINANCE--3.6%
-------------------------------------------------------------------------------
1,500 AMLI Residential Properties 32,250
-------------------------------------------------------------------------------
1,300 Bankers Trust of New York Corp. 87,100
-------------------------------------------------------------------------------
2,500 Citicorp 103,125
-------------------------------------------------------------------------------
1,700 Dean Witter, Discover & Co. 68,212
-------------------------------------------------------------------------------
1,100 Dreyfus Corp. 54,450
-------------------------------------------------------------------------------
1,000 Federal National Mortgage Association 86,750
-------------------------------------------------------------------------------
900 Mellon Bank Corp. 51,525
-------------------------------------------------------------------------------
3,200 PNC Financial Corp. 92,000
-------------------------------------------------------------------------------
1,700 Transamerica Corp. 86,275
-------------------------------------------------------------------------------
3,500 Travelers, Inc. 115,938
------------------------------------------------------------------------------- --------------
Total 777,625
------------------------------------------------------------------------------- --------------
HEALTHCARE--1.7%
-------------------------------------------------------------------------------
2,000 American Home Products Corp. $ 114,750
-------------------------------------------------------------------------------
1,700 Beckton, Dickinson & Co. 71,612
-------------------------------------------------------------------------------
1,700 Bristol-Myers Squibb Co. 89,462
-------------------------------------------------------------------------------
2,300 U.S. Healthcare, Inc. 87,113
------------------------------------------------------------------------------- --------------
Total 362,937
------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--1.8%
-------------------------------------------------------------------------------
700 Deere & Co. 49,087
-------------------------------------------------------------------------------
1,500 General Electric Co. 75,562
-------------------------------------------------------------------------------
1,600 (a)Litton Industries, Inc. 59,400
-------------------------------------------------------------------------------
800 Loews Corp. 70,600
-------------------------------------------------------------------------------
2,400 Textron, Inc. 127,800
------------------------------------------------------------------------------- --------------
Total 382,449
------------------------------------------------------------------------------- --------------
TECHNOLOGY--2.7%
-------------------------------------------------------------------------------
3,600 General Motors Corp., Class E 126,900
-------------------------------------------------------------------------------
1,400 Hewlett-Packard Co. 108,675
-------------------------------------------------------------------------------
2,600 Martin-Marietta Corp. 117,975
-------------------------------------------------------------------------------
1,900 Raytheon Co. 124,688
-------------------------------------------------------------------------------
3,000 Rockwell International Corp. 107,625
------------------------------------------------------------------------------- --------------
Total 585,863
------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.4%
-------------------------------------------------------------------------------
3,100 Ryder Systems, Inc. 80,988
------------------------------------------------------------------------------- --------------
UTILITIES--1.5%
-------------------------------------------------------------------------------
2,200 AT & T Corp. 120,175
-------------------------------------------------------------------------------
600 British Telecommunications, ADR 35,475
-------------------------------------------------------------------------------
1,400 Duke Power Co. 53,550
-------------------------------------------------------------------------------
1,500 Enron Corp. $ 48,562
-------------------------------------------------------------------------------
3,300 MCI Communications Corp. 75,075
------------------------------------------------------------------------------- --------------
Total 332,837
------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $4,622,730) 4,618,630
------------------------------------------------------------------------------- --------------
UTILITY--2.6%
-------------------------------------------------------------------------------
UTILITIES--2.6%
-------------------------------------------------------------------------------
800 Ameritech Corp. 32,800
-------------------------------------------------------------------------------
400 Baltimore Gas & Electric Co. 9,150
-------------------------------------------------------------------------------
600 Bell Atlantic Corp. 33,975
-------------------------------------------------------------------------------
500 BellSouth Corp. 31,250
-------------------------------------------------------------------------------
400 Cincinnati Gas & Electric Co. 8,950
-------------------------------------------------------------------------------
400 CMS Energy Corp. 9,050
-------------------------------------------------------------------------------
400 Consolidated Edison Co. of New York 11,500
-------------------------------------------------------------------------------
500 DPL, Inc. 10,187
-------------------------------------------------------------------------------
300 DQE 9,037
-------------------------------------------------------------------------------
300 Duke Power Co. 11,475
-------------------------------------------------------------------------------
400 Entergy Corp. 10,200
-------------------------------------------------------------------------------
400 Florida Progress Corp. 11,200
-------------------------------------------------------------------------------
300 FPL Group, Inc. 9,487
-------------------------------------------------------------------------------
400 General Public Utilities Corp. 10,300
-------------------------------------------------------------------------------
1,000 GTE Corp. 31,750
-------------------------------------------------------------------------------
200 MCN Corp. 7,975
-------------------------------------------------------------------------------
300 Nipsco Industries, Inc. 8,775
-------------------------------------------------------------------------------
400 Northeast Utilities Co. 9,350
-------------------------------------------------------------------------------
800 Nynex Corp. 30,800
-------------------------------------------------------------------------------
400 Pacific Enterprises $ 8,200
-------------------------------------------------------------------------------
600 Pacificorp 10,650
-------------------------------------------------------------------------------
400 Peco Energy Co. 10,450
-------------------------------------------------------------------------------
600 Pinnacle West Capital Corp. 10,575
-------------------------------------------------------------------------------
400 PSI Resources, Inc. 8,850
-------------------------------------------------------------------------------
300 Public Service Enterprise Group, Inc. 8,325
-------------------------------------------------------------------------------
400 Sonat, Inc. 13,250
-------------------------------------------------------------------------------
600 Southern Co. 11,700
-------------------------------------------------------------------------------
900 Southern New England Telecommunications 30,938
-------------------------------------------------------------------------------
700 Southwestern Bell Corp. 29,400
-------------------------------------------------------------------------------
500 UGI Corp. 10,563
-------------------------------------------------------------------------------
700 U.S. West, Inc. 28,175
-------------------------------------------------------------------------------
400 Utilicorp United, Inc. 11,900
-------------------------------------------------------------------------------
300 Western Resources, Inc. 8,438
-------------------------------------------------------------------------------
4,500 Westinghouse Electric Corp., Conv. Pfd., Series C 59,621
------------------------------------------------------------------------------- --------------
TOTAL UTILITY (IDENTIFIED COST, $550,809) 558,246
------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--9.5%
-------------------------------------------------------------------------------
AUSTRALIA--0.3%
-------------------------------------------------------------------------------
19,300 Australian Consolidated Press, Ltd. 62,815
------------------------------------------------------------------------------- --------------
BELGIUM--0.2%
-------------------------------------------------------------------------------
1,100 Delhaize-Le Lion 42,786
------------------------------------------------------------------------------- --------------
FINLAND--0.2%
-------------------------------------------------------------------------------
400 Kone Corp. 'B' 41,671
------------------------------------------------------------------------------- --------------
HONG KONG--0.4%
-------------------------------------------------------------------------------
16,800 Cheung Kong Holdings 82,425
------------------------------------------------------------------------------- --------------
JAPAN--5.7%
-------------------------------------------------------------------------------
6,000 Bank of Tokyo $ 92,958
-------------------------------------------------------------------------------
5,000 Dai Ichi Kangyo Bank 94,957
-------------------------------------------------------------------------------
3,000 Fuji Bank 67,770
-------------------------------------------------------------------------------
5,000 Hitachi, Ltd. 48,228
-------------------------------------------------------------------------------
2,000 Industrial Bank of Japan 60,373
-------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
-------------------------------------------------------------------------------
11,000 Kawasaki Heavy Industries 48,598
-------------------------------------------------------------------------------
7,000 Kirin Brewery Co., Ltd. 86,761
-------------------------------------------------------------------------------
3,000 Matsushita Electric Industries 49,178
-------------------------------------------------------------------------------
11,000 Mitsubishi Heavy Industries 85,432
-------------------------------------------------------------------------------
5,000 Mitsubishi Trust & Banking 79,964
-------------------------------------------------------------------------------
6,000 Mitsukoshi, Ltd. 62,372
-------------------------------------------------------------------------------
4,000 Nomura Securities Co., Ltd. 88,360
-------------------------------------------------------------------------------
3,000 Sakura Bank, Ltd. 42,281
-------------------------------------------------------------------------------
2,000 Sumitomo Bank 40,382
-------------------------------------------------------------------------------
13,000 Sumitomo Heavy Industries 52,756
-------------------------------------------------------------------------------
4,000 Takeda Chemical Industries 49,578
-------------------------------------------------------------------------------
4,000 Tokio Marine & Fire 51,177
-------------------------------------------------------------------------------
3,000 Tokyo Electric Power 90,859
------------------------------------------------------------------------------- --------------
Total 1,244,660
------------------------------------------------------------------------------- --------------
NETHERLANDS--0.4%
-------------------------------------------------------------------------------
700 Royal Dutch Petroleum Co. 79,100
------------------------------------------------------------------------------- --------------
SWEDEN--0.2%
-------------------------------------------------------------------------------
500 Volvo (AB), Series B 48,913
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
-------------------------------------------------------------------------------
UNITED KINGDOM--2.1%
-------------------------------------------------------------------------------
12,000 British Petroleum PLC $ 76,493
-------------------------------------------------------------------------------
24,000 Coats Viyella PLC 78,160
-------------------------------------------------------------------------------
7,000 Eastern Electricity PLC 70,011
-------------------------------------------------------------------------------
6,000 Midlands Electricity PLC 60,750
-------------------------------------------------------------------------------
4,200 RMC Group PLC 61,681
-------------------------------------------------------------------------------
11,000 Williams Holdings PLC 61,375
-------------------------------------------------------------------------------
4,000 Wolseley PLC 50,934
------------------------------------------------------------------------------- --------------
Total 459,404
------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $2,043,588) 2,061,774
------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--2.9%
-------------------------------------------------------------------------------
7,000 First Iberian Fund Inc. 53,375
-------------------------------------------------------------------------------
15,400 France Growth Fund, Inc. 169,400
-------------------------------------------------------------------------------
12,400 Germany Fund, Inc. 148,800
-------------------------------------------------------------------------------
7,800 (a)Italy Fund, Inc. 81,900
-------------------------------------------------------------------------------
2,600 Malaysia Fund, Inc. 59,150
-------------------------------------------------------------------------------
5,800 Swiss Helvetia Fund, Inc. 117,450
------------------------------------------------------------------------------- --------------
TOTAL REGISTERED INVESTMENT COMPANIES
(IDENTIFIED COST, $625,720) 630,075
------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $7,842,847) 7,868,725
------------------------------------------------------------------------------- --------------
BONDS--40.6%
- ------------------------------------------------------------------------------------------------
TREASURY--14.6%
-------------------------------------------------------------------------------
$ 3,360,000 United States Treasury Note, 6.25%, 2/15/2003
(IDENTIFIED COST, $3,144,959) 3,187,162
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--8.6%
-------------------------------------------------------------------------------
GOVERNMENT AGENCY--8.6%
-------------------------------------------------------------------------------
$ 304,583 Federal Home Loan Mortgage Corporation, 7.50%, 5/1/2024 $ 297,730
-------------------------------------------------------------------------------
220,271 Federal Home Loan Mortgage Corporation, 7.00%, 4/1/2009 215,658
-------------------------------------------------------------------------------
542,223 Federal National Mortgage Association, 8.00%, 4/1/2024 542,223
-------------------------------------------------------------------------------
269,516 Government National Mortgage Association, 7.00%, 5/15/2024 253,259
-------------------------------------------------------------------------------
301,739 Government National Mortgage Association, 9.00%, 1/15/2023 314,657
-------------------------------------------------------------------------------
239,605 Government National Mortgage Association, 9.50%, 1/15/2020 254,204
------------------------------------------------------------------------------- --------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $1,865,079) 1,877,731
------------------------------------------------------------------------------- --------------
HIGH YIELD--4.3%
-------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.4%
-------------------------------------------------------------------------------
75,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 76,688
------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.5%
-------------------------------------------------------------------------------
100,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 100,000
------------------------------------------------------------------------------- --------------
CABLE TV--0.3%
-------------------------------------------------------------------------------
75,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 67,406
------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.3%
-------------------------------------------------------------------------------
75,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 75,375
------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.3%
-------------------------------------------------------------------------------
75,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 68,344
------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.5%
-------------------------------------------------------------------------------
100,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 101,750
------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.3%
-------------------------------------------------------------------------------
75,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 65,437
------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.3%
-------------------------------------------------------------------------------
75,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 70,125
------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.3%
-------------------------------------------------------------------------------
$ 75,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 69,750
------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.2%
-------------------------------------------------------------------------------
75,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 47,625
------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.4%
-------------------------------------------------------------------------------
100,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 92,000
------------------------------------------------------------------------------- --------------
STEEL--0.3%
-------------------------------------------------------------------------------
75,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 70,875
------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.2%
-------------------------------------------------------------------------------
75,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 46,313
------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $971,264) 951,688
------------------------------------------------------------------------------- --------------
OTHER CORPORATE BONDS--0.4%
-------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.4%
-------------------------------------------------------------------------------
60,000 General Instrument Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $81,450) 83,025
------------------------------------------------------------------------------- --------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT FOREIGN--12.7%
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.4%
-------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,625
------------------------------------------------------------------------------- --------------
BELGIAN FRANCS--0.4%
-------------------------------------------------------------------------------
2,500,000 Belgian Government, Foreign Government Guarantee, 10.00%,
4/5/96 80,627
------------------------------------------------------------------------------- --------------
CANADIAN DOLLAR--0.5%
-------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 103,776
------------------------------------------------------------------------------- --------------
DANISH KRONE--0.7%
-------------------------------------------------------------------------------
800,000 KFW International Finance, Inc., 7.00%, 5/12/2000 146,878
------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.9%
-------------------------------------------------------------------------------
250,000 Bundesobligation, 8.875%, 1/22/96 $ 165,136
-------------------------------------------------------------------------------
250,000 Bundesobligationen, Deb., 7.25%, 10/20/97 162,565
-------------------------------------------------------------------------------
150,000 Treuhandanstalt, 7.75%, 10/1/2002 98,909
------------------------------------------------------------------------------- --------------
Total 426,610
------------------------------------------------------------------------------- --------------
FRENCH FRANCS--1.2%
-------------------------------------------------------------------------------
700,000 France O.A.T., 8.50%, 11/25/2002 139,767
-------------------------------------------------------------------------------
600,000 France O.A.T., 9.80%, 1/30/96 116,454
------------------------------------------------------------------------------- --------------
Total 256,221
------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
-------------------------------------------------------------------------------
150,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 96,725
------------------------------------------------------------------------------- --------------
JAPANESE YEN--5.1%
-------------------------------------------------------------------------------
20,000,000 Japan-111, 4.60%, 6/22/98 208,226
-------------------------------------------------------------------------------
40,000,000 Japan-119, Foreign Government Guarantee, 4.80%, 6/21/99 418,811
-------------------------------------------------------------------------------
22,000,000 Japan-133, 7.30%, 9/20/2000 255,877
-------------------------------------------------------------------------------
22,000,000 Japan-89, 5.10%, 6/20/96 229,687
------------------------------------------------------------------------------- --------------
Total 1,112,601
------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.8%
-------------------------------------------------------------------------------
300,000 Netherlands Government, 6.00%, 4/15/95 169,493
------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--1.3%
-------------------------------------------------------------------------------
175,000 UK Conversion, 9.00%, 3/3/2000 275,759
------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $2,745,052) 2,751,315
------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $8,807,804) 8,850,921
------------------------------------------------------------------------------- --------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ------------------------------------------------------------------------------- --------------
**CASH EQUIVALENTS--23.4%
- ------------------------------------------------------------------------------------------------
$ 3,250,000 U.S. Treasury Bill, 1/26/95 $ 3,172,626
-------------------------------------------------------------------------------
1,930,000 ***J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,930,000
------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENTS (AT AMORTIZED COST) 5,102,626
------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $21,753,277) $ 21,822,272+
------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing.
+ The cost for federal income tax purposes amounts to $21,753,277. The net
unrealized appreciation on a federal tax basis amounts to $68,995, which is
comprised of $274,180 appreciation and $205,185 depreciation at July 31,
1994.
++ The Fund's overall exposure to stocks is 50.7%, after adjustment for the use
of Russell 2000 and S&P 500 futures contracts.
* The Fund holds cash equivalents as collateral for the two S & P 500 future
contracts it bought with a market value of $458,900. Consequently, the
Fund's exposure to large cap stocks is 23.3% of the fund.
** The Fund holds cash equivalents as collateral for the twenty-two Russell
2000 future contracts it bought with a market value of $2,693,350.
Consequently, the Fund's exposure to small cap stocks is 12.4% of the fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Co.
Note: The categories of investments are shown as a percentage of net assets
($21,771,177) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost, $21,753,277)
(Notes 2A and 2B) $ 21,822,272
- --------------------------------------------------------------------------------------------------
Cash 1,644
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 224,739
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 183,302
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 52,143
- --------------------------------------------------------------------------------------------------
Receivable for futures variation margin (Note 2F) 24,150
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,293
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2I) 41,723
- -------------------------------------------------------------------------------------------------- --------------
Total assets 22,358,266
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for investments purchased $ 353,760
- -------------------------------------------------------------------------------------
Payable for foreign currency purchased 184,576
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 4,438
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,467
- -------------------------------------------------------------------------------------
Accrued expenses 42,848
- ------------------------------------------------------------------------------------- -----------
Total liabilities 587,089
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 2,159,823 shares of beneficial interest outstanding $ 21,771,177
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 21,615,189
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currency, and futures contracts (9,307)
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 75,874
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 89,421
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 21,771,177
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Institutional Service Shares (20,250,112 / 2,008,901 shares of beneficial interest outstanding) $10.08
- -------------------------------------------------------------------------------------------------- --------------
Select Shares (1,521,065 / 150,922 shares of beneficial interest outstanding) $10.08
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $591) $ 156,543
- ----------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $1,011) 19,772
- ---------------------------------------------------------------------------------------------------- -----------
Total investment income (Note 2C) 176,315
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee** $ 26,553
- -----------------------------------------------------------------------------------------
Administrative personnel and services** 2,396
- -----------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 11,162
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 437
- -----------------------------------------------------------------------------------------
Legal fees 1,000
- -----------------------------------------------------------------------------------------
Fund share registration costs 2,342
- -----------------------------------------------------------------------------------------
Printing and postage 2,248
- -----------------------------------------------------------------------------------------
Insurance premiums 1,000
- -----------------------------------------------------------------------------------------
Taxes 30
- -----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 362
- -----------------------------------------------------------------------------------------
Distribution services fee** 1,087
- -----------------------------------------------------------------------------------------
Miscellaneous 551
- ----------------------------------------------------------------------------------------- ---------
Total expenses 49,168
- -----------------------------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 26,553
- ------------------------------------------------------------------------------
Waiver of distribution services fee** 362 26,915
- ------------------------------------------------------------------------------ --------- ---------
Net expenses 22,253
- ---------------------------------------------------------------------------------------------------- -----------
Net investment income 154,062
- ---------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY,
AND FUTURES CONTRACTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) 75,874
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (9,307)
- ---------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments, foreign currency
and futures contracts 66,567
- ---------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 220,629
- ---------------------------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
**(See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 154,062
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($75,874 net gain as computed for federal tax purposes) (Note 2E) 75,874
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (9,307)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 220,629
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Services Shares (62,979)
- ------------------------------------------------------------------------------------------------
Select Shares (1,662)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (64,641)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 22,454,530
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 28,362
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (867,703)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets from Fund share transactions 21,615,189
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 21,771,177
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $89,421) $ 21,771,177
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Growth Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and the original futures
contract value is reflected in the "daily variation margin" account. Daily
variation margin adjustments, arising from this "marking to market"
process, are recorded by the Fund as unrealized gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering
into futures contracts include the possibility that a change in the value
of the contract may not correlate with changes in the value of the
underlying securities. For the period ended the Fund had a realized gain of
$108,463 on futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
September 1994 22 Russell 2000 Futures Long ($ 80,275)
September 1994 2 S&P 500 Index Futures Long 2,863
-----------
Net Unrealized Appreciation (Depreciation) on Futures
Contracts ($ 77,412)
-----------
</TABLE>
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
H. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Appliances .23% Healthcare .23%
Automobiles .22 Insurance .24
Banking 2.20 Machinery 1.05
Beverage & Tobacco .40 Merchandising .72
Broadcasting .29 Multi-Industry 2.89
Building/Supplies .80 Real Estate .38
Electronic Equipment .22 Textiles .36
Energy .71 Utilities 1.18
Finance .41
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
Shares sold 2,092,512 $ 20,940,107
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,691 27,101
- -----------------------------------------------------------------------------------
Shares redeemed (86,302) (863,234)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 2,008,901 $ 20,103,974
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
Shares sold 151,240 $ 1,514,423
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 125 1,261
- -----------------------------------------------------------------------------------
Shares redeemed (443) (4,469)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 150,922 1,511,215
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 2,159,823 $ 21,615,189
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to July
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
the Fund for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $35,959 and $39,068, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,205 and $2,396, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended July 31, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 20,407,549
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 3,733,814
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH FUND
(A Portfolio of Managed Series Trust)
Select Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
12b-1 fee 0.75%
Absent the anticipated voluntary waivers, the Total Select Shares
Operating Expenses are estimated to be 2.27%.
For more information on Select Shares expenses, see "Summary of Fund
Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on page 4 of the
Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
page 6 of the Prospectus.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 8 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00251-02-SE (5/94)
Federated Managed Growth Fund
(A Portfolio of Managed Series Trust)
Select Shares
Prospectus
The Select Shares of Federated Managed Growth 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 capital appreciation. In
pursuing its objective, the Fund will consider the current income of the
investments it selects. 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 March 11, 1994, 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 March 11, 1994
Table of Contents
- --------------------------------------------------------------------------------
Summary of Fund Expenses 1
- ------------------------------------------------------
General Information 2
- ------------------------------------------------------
Investment Information 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Asset Allocation 2
Equity Asset Categories 3
Large Company Stocks 3
Utility Stocks 3
Small Company Stocks 4
Foreign Stocks 4
Cash Reserves Category 4
Bond Asset Categories 4
U.S. Treasury Securities 5
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 5
Equity Securities 5
Foreign Securities 6
Investment Risks 6
Cash Reserves 6
Repurchase Agreements 6
U.S. Treasury and Other U.S.
Government Securities 6
Mortgage-Backed Securities 7
Collateralized Mortgage Obligations
("CMOs") 7
Real Estate Mortgage Investment
Conduits ("REMICS") 8
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 9
Investment Risks 9
Investing in Securities of Other
Investment Companies 9
Restricted and Illiquid Securities 10
When-Issued and Delayed Delivery
Transactions 10
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange
Contracts 11
Options 11
Futures and Options on Futures 12
Risks 12
Portfolio Turnover 13
Investment Limitations 13
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 15
Distribution Plan 15
Administration of the Fund 16
Administrative Services 16
Shareholder Services Plan 16
Custodian 17
Transfer Agent and Dividend Disbursing
Agent 17
Legal Counsel 17
Independent Public Accountants 17
Brokerage Transactions 17
Expenses of the Fund and Select Shares 17
Net Asset Value 18
- ------------------------------------------------------
Investing in Select Shares 18
- ------------------------------------------------------
Share Purchases 18
Through a Financial Institution 18
By Wire 18
By Mail 19
Minimum Investment Required 19
What Shares Cost 19
Subaccounting Services 19
Systematic Investment Program 19
Certificates and Confirmations 20
Dividends 20
Capital Gains 20
Redeeming Select Shares 20
- ------------------------------------------------------
Through a Financial Institution 20
Telephone Redemption 20
Written Requests 21
Signatures 21
Receiving Payment 21
Systematic Withdrawal Program 21
Accounts with Low Balances 22
Shareholder Information 22
- ------------------------------------------------------
Voting Rights 22
Massachusetts Partnership Law 22
Tax Information 23
- ------------------------------------------------------
Federal Income Tax 23
Pennsylvania Corporate and
Personal Property Taxes 23
Performance Information 23
- ------------------------------------------------------
Other Classes of Shares 24
- ------------------------------------------------------
Appendix 25
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Select Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable).................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
Annual Select Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)............................................................. 0.48%
12b-1 Fee (after waiver) (2).................................................................. 0.50%
Total Other Expenses.......................................................................... 0.77%
Shareholder Servicing Fee................................................................. 0.25%
Total Select Shares Operating Expenses (3)........................................... 1.75%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The maximum 12b-1 fee is 0.75%.
(3) The Total Select Shares Operating Expenses are estimated to be 2.27% absent
the anticipated voluntary waivers of a portion of the management fee and a
portion of the 12b-1 fee.
* Total Select Shares Operating Expenses are based on average expenses expected
to be incurred during the period ending January 31, 1995. During the course of
this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Select Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Trust Information" and "Investing in Select
Shares." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $18 $55
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Select Shares of the Fund. The Fund also offers another class of shares called
Institutional Service Shares. Select Shares and Institutional Service Shares are
subject to certain of the same expenses; however, Institutional Service Shares
are not subject to a 12b-1 fee. See "Other Classes of Shares."
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
The investment objective of the Fund is to seek capital appreciation. In
pursuing its objective, the Fund will consider the current income of the
investments it selects. 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: stocks
and bonds. Additionally, the Fund may invest in cash reserves. 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 50 and 70 percent of its assets in stocks. The
stock asset categories are large company stocks, utility stocks, small company
stocks, and foreign stocks.
The Fund will invest between 30 and 50 percent of its assets in bonds. The
Fund's adviser believes that bonds offer opportunities for growth of capital or
otherwise may be desirable under prevailing market or economic conditions. The
bond asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.
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>
Stocks 50-70%
Large Company Stocks 0-70%
Utility Stocks 0-7%
Small Company Stocks 0-21%
Foreign Stocks 0-21%
Cash Reserves 0-14%
Bonds 30-50%
U.S. Treasury Securities 0-45%
Mortgage-Backed Securities 0-15%
Investment-Grade Corporate Bonds 0-15%
High Yield Corporate Bonds 0-15%
Foreign Bonds 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, foreign
stocks are judged to be unusually attractive relative to other asset categories,
the allocation for foreign stocks may be moved to its upper limit. At other
times when foreign 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.
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.
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 70 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
seven 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 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 21 percent of its total assets in small
company stocks.
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.
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. The Fund may invest up to 21 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 14 percent of
its total assets in cash reserves.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. Generally, the Fund will invest in Bond Assets
which are believed to offer opportunities for growth of capital when the adviser
believes interest rates will decline and, therefore, the value of the debt
securities will increase, or the market value of bonds will increase due to
factors affecting certain types of bonds or particular issuers, such as
improvement in credit quality due to company fundamentals or economic conditions
or assumptions on changes in trends in prepayment rates with respect to
mortgage-backed securites. The average duration of the Fund's Bond Assets will
be not less than three nor more than seven years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower
expected market volatility, and a lower average duration during periods of
higher expected market volatility.
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 45 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 15 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 15 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.
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 15 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.
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 15 percent of its total assets in foreign bonds.
Acceptable Investments
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 Investors Service,
Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's Corporation (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.
Cash Reserves. The Fund's cash 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.
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. 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;
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 Corporation (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.
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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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:
Peter R. Anderson is the portfolio manager for the domestic large 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.
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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this category since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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.
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.
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.
Distribution of Select 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.
Distribution Plan. Pursuant to the provisions of a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Plan"), the Fund will
pay to the distributor an amount computed at an annual rate of .75 of 1% of the
average daily net asset value of the Shares to finance any activity which is
principally intended to result in the sale of Shares subject to the Plan.
The distributor may from time to time and for such periods as its deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for Shares.
Financial institutions will receive fees from the distributor 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
distributor.
The Fund's 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 amounts or may earn a profit from future payments made by the Fund
under the Plan.
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.
Administration of the Fund
Administrative Services. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions will
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution may receive payments from the Fund at
a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal service and maintenance of shareholder accounts.
In addition to receiving the payments under the Services Plan, 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.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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 Select 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, 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
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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 Select Shares
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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: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Managed Growth 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 Growth 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
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
the 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 Select 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 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 $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.
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 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
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 expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
- --------------------------------------------------------------------------------
Standard and Poor's Corporation 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 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
edge." 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 Growth 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
- ---------------------------------------------------------------------------------------------------------------------
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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Growth Fund
Select Shares
Prospectus
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122011A-SEL (3/94)
FEDERATED
MANAGED AGGRESSIVE
GROWTH FUND
[LOGO] MANAGED SERIES TRUST
------------
INSTITUTIONAL SERVICE
------------
SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed
Aggressive Growth Fund is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K701
G00530-02 (9/94)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Aggressive Growth Fund--Institutional Service Shares after page 1,
following the section entitled "Summary of Fund Expenses" and before the
section entitled "General Information." In addition, please add the
heading "Financial Highlights--Institutional Service Shares" to the Table
of Contents page, after the heading "Summary of Fund Expenses."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.07
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.04
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.11
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 1.06%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.60%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 3.78%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,993
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 16%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "Small Company Stocks," which begins on
page 3 and replace it with the following. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "Small
Company Stocks."
"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 a 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 40 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."
C. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 5:
"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."
D. The following should be added as a sub-section under the section entitled
"High Yield Corporate Bonds" on page 5. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 8. In addition,
please delete the heading "Investment Risks," which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the fifth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the eighth paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the section entitled "Administrative Services," which
begins on page 15 and replace it with the following:
"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."
J. Please delete the section entitled "Shareholder Services Plan" on page
15, and replace it with the following:
"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."
K. Please insert the following section entitled "Other Payments to Financial
Institutions" after the section entitled "Shareholder Services Plan" on
page 15. In addition, please add the heading "Other Payments to Financial
Institutions" to the Table of Contents page after the heading "Shareholder
Services Plan."
"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."
L. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"As of September 6, 1994, CIBAT & Co. of Laurel, Maryland, acting in various
capacities for numerous accounts, was the owner of record of 375,236
Institutional Service Shares (33.77%) of Federated Managed Aggressive Growth
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."
M. Please insert the following "Financial Highlights" table for Federated
Managed Aggressive Growth Fund--Select Shares after page 22, following the
section entitled "Other Classes of Shares." In addition, please add the
heading "Financial Highlights--Select Shares" to the Table of Contents page
after the heading "Other Classes of Shares."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.05
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures
contracts 0.04
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.09
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.07
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 0.91%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.34%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 3.04%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.52%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,027
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 16%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
N. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Select Shares" and before the section
entitled "Appendix." In addition, please add the heading "Financial
Statements" to the Table of Contents page after the heading "Financial
Highlights--Select Shares."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------- --------------
STOCKS--49.3%++
- --------------------------------------------------------------------------------------------------
LARGE COMPANY--28.8%*
---------------------------------------------------------------------------------
BASIC INDUSTRY--2.7%
---------------------------------------------------------------------------------
1,300 (a)FMC Corp. $ 76,375
---------------------------------------------------------------------------------
1,300 Lubrizol Corp. 44,038
---------------------------------------------------------------------------------
1,800 Phelps Dodge Corp. 111,150
---------------------------------------------------------------------------------
2,800 Praxair, Inc. 63,000
--------------------------------------------------------------------------------- --------------
Total 294,563
--------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--1.1%
---------------------------------------------------------------------------------
2,000 Ford Motor Co. 63,500
---------------------------------------------------------------------------------
1,100 General Motors Corp. 56,513
--------------------------------------------------------------------------------- --------------
Total 120,013
--------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--3.6%
---------------------------------------------------------------------------------
900 Avon Products, Inc. 50,962
---------------------------------------------------------------------------------
3,500 Mattel, Inc. 96,688
---------------------------------------------------------------------------------
1,400 Eastman Kodak Co. 67,725
---------------------------------------------------------------------------------
1,400 Philip Morris Cos., Inc. 77,000
---------------------------------------------------------------------------------
6,300 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 42,525
---------------------------------------------------------------------------------
1,700 Reebok International, Ltd. 60,350
--------------------------------------------------------------------------------- --------------
Total 395,250
--------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--2.0%
---------------------------------------------------------------------------------
2,500 American Stores Co. $ 64,688
---------------------------------------------------------------------------------
1,800 Sears, Roebuck & Co. 85,050
---------------------------------------------------------------------------------
2,900 (a)Tele-Communications, Inc., Class A 67,606
--------------------------------------------------------------------------------- --------------
Total 217,344
--------------------------------------------------------------------------------- --------------
ENERGY--3.3%
---------------------------------------------------------------------------------
2,300 Baker Hughes, Inc. 48,587
---------------------------------------------------------------------------------
1,800 Chevron Corp. 79,875
---------------------------------------------------------------------------------
1,000 Mapco, Inc. 60,625
---------------------------------------------------------------------------------
1,300 Texaco, Inc. 82,550
---------------------------------------------------------------------------------
3,000 USX Marathon Group 52,125
---------------------------------------------------------------------------------
800 (a)Western Atlas, Inc. 38,900
--------------------------------------------------------------------------------- --------------
Total 362,662
--------------------------------------------------------------------------------- --------------
FINANCE--4.8%
---------------------------------------------------------------------------------
1,000 AMLI Residential Properties 21,500
---------------------------------------------------------------------------------
900 Bankers Trust of New York Corp. 60,300
---------------------------------------------------------------------------------
1,700 Citicorp 70,125
---------------------------------------------------------------------------------
1,100 Dean Witter, Discover & Co. 44,138
---------------------------------------------------------------------------------
700 Dreyfus Corp. 34,650
---------------------------------------------------------------------------------
700 Federal National Mortgage Association 60,725
---------------------------------------------------------------------------------
600 Mellon Bank Corp. 34,350
---------------------------------------------------------------------------------
2,100 PNC Financial Corp. 60,375
---------------------------------------------------------------------------------
1,200 Transamerica Corp. 60,900
---------------------------------------------------------------------------------
2,300 Travelers, Inc. 76,188
--------------------------------------------------------------------------------- --------------
Total 523,251
--------------------------------------------------------------------------------- --------------
HEALTHCARE--2.2%
---------------------------------------------------------------------------------
1,300 American Home Products Corp. $ 74,587
---------------------------------------------------------------------------------
1,200 Becton, Dickinson & Co. 50,550
---------------------------------------------------------------------------------
1,200 Bristol-Myers Squibb Co. 63,150
---------------------------------------------------------------------------------
1,500 U.S. Healthcare, Inc. 56,813
--------------------------------------------------------------------------------- --------------
Total 245,100
--------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--2.4%
---------------------------------------------------------------------------------
500 Deere & Co. 35,063
---------------------------------------------------------------------------------
1,000 General Electric Co. 50,375
---------------------------------------------------------------------------------
1,100 (a)Litton Industries, Inc. 40,837
---------------------------------------------------------------------------------
600 Loews Corp. 52,950
---------------------------------------------------------------------------------
1,600 Textron, Inc. 85,200
--------------------------------------------------------------------------------- --------------
Total 264,425
--------------------------------------------------------------------------------- --------------
TECHNOLOGY--3.5%
---------------------------------------------------------------------------------
2,400 General Motors Corp., Class E 84,600
---------------------------------------------------------------------------------
900 Hewlett-Packard Co. 69,863
---------------------------------------------------------------------------------
1,700 Martin-Marietta Corp. 77,138
---------------------------------------------------------------------------------
1,300 Raytheon Co. 85,312
---------------------------------------------------------------------------------
2,000 Rockwell International Corp. 71,750
--------------------------------------------------------------------------------- --------------
Total 388,663
--------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.5%
---------------------------------------------------------------------------------
2,100 Ryder Systems, Inc. 54,862
--------------------------------------------------------------------------------- --------------
UTILITIES--2.7%
---------------------------------------------------------------------------------
1,500 AT&T Corp. 81,938
---------------------------------------------------------------------------------
400 British Telecommunications, ADR 23,650
---------------------------------------------------------------------------------
900 Duke Power Co. 34,425
---------------------------------------------------------------------------------
1,000 Enron Corp. $ 32,375
---------------------------------------------------------------------------------
2,200 MCI Communications Corp. 50,050
---------------------------------------------------------------------------------
600 Telefonos De Mexico, SA, ADR 36,450
---------------------------------------------------------------------------------
3,000 Westinghouse Electric Corp., Conv. Pfd., Series C 39,747
--------------------------------------------------------------------------------- --------------
Total 298,635
--------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $3,169,323) 3,164,768
--------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--20.5%
---------------------------------------------------------------------------------
AUSTRALIA--0.6%
---------------------------------------------------------------------------------
19,300 Australian Consolidated Press, Ltd. 62,815
--------------------------------------------------------------------------------- --------------
BELGIUM--0.4%
---------------------------------------------------------------------------------
1,100 Delhaize-Le Lion 42,786
--------------------------------------------------------------------------------- --------------
FINLAND--0.4%
---------------------------------------------------------------------------------
400 Kone Corp. 'B' 41,671
--------------------------------------------------------------------------------- --------------
HONG KONG--0.7%
---------------------------------------------------------------------------------
16,800 Cheung Kong Holdings 82,425
--------------------------------------------------------------------------------- --------------
JAPAN--9.0%
---------------------------------------------------------------------------------
4,000 Bank of Tokyo 61,972
---------------------------------------------------------------------------------
2,000 Dai Ichi Kangyo Bank 37,983
---------------------------------------------------------------------------------
2,000 Fuji Bank 45,180
---------------------------------------------------------------------------------
5,000 Hitachi Ltd. 48,228
---------------------------------------------------------------------------------
1,000 Industrial Bank of Japan 30,186
---------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
---------------------------------------------------------------------------------
11,000 Kawasaki Heavy Industries 48,598
---------------------------------------------------------------------------------
5,000 Kirin Brewery Co., Ltd. 61,972
---------------------------------------------------------------------------------
3,000 Matsushita Electric Industries 49,178
---------------------------------------------------------------------------------
10,000 Mitsubishi Heavy Industries $ 77,665
---------------------------------------------------------------------------------
3,000 Mitsubishi Trust & Banking 47,978
---------------------------------------------------------------------------------
6,000 Mitsukoshi, Ltd. 62,372
---------------------------------------------------------------------------------
3,000 Nomura Securities Co., Ltd. 66,270
---------------------------------------------------------------------------------
3,000 Sakura Bank, Ltd. 42,281
---------------------------------------------------------------------------------
2,000 Sumitomo Bank 40,382
---------------------------------------------------------------------------------
11,000 Sumitomo Heavy Industries 44,640
---------------------------------------------------------------------------------
4,000 Takeda Chemical Industries 49,578
---------------------------------------------------------------------------------
5,000 Tokio Marine & Fire 63,971
---------------------------------------------------------------------------------
2,000 Tokyo Electric Power 60,573
--------------------------------------------------------------------------------- --------------
Total 991,683
--------------------------------------------------------------------------------- --------------
NETHERLANDS--0.7%
---------------------------------------------------------------------------------
700 Royal Dutch Petroleum Co. 79,100
--------------------------------------------------------------------------------- --------------
SWEDEN--0.4%
---------------------------------------------------------------------------------
400 Volvo (AB), Series B 39,130
--------------------------------------------------------------------------------- --------------
UNITED KINGDOM--3.6%
---------------------------------------------------------------------------------
11,000 British Petroleum, PLC 70,119
---------------------------------------------------------------------------------
12,000 Coats Viyella, PLC 39,080
---------------------------------------------------------------------------------
6,000 Eastern Electricity, PLC 60,009
---------------------------------------------------------------------------------
6,000 Midlands Electricity, PLC 60,750
---------------------------------------------------------------------------------
3,800 RMC Group, PLC 55,806
---------------------------------------------------------------------------------
10,000 Williams Holdings, PLC 55,796
---------------------------------------------------------------------------------
4,000 Wolseley, PLC 50,934
--------------------------------------------------------------------------------- --------------
Total 392,494
--------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--4.7%
---------------------------------------------------------------------------------
4,500 First Iberian Fund, Inc. $ 34,313
---------------------------------------------------------------------------------
12,200 France Growth Fund, Inc. 134,200
---------------------------------------------------------------------------------
11,900 Germany Fund, Inc. 142,800
---------------------------------------------------------------------------------
6,700 (a)Italy Fund, Inc. 70,350
---------------------------------------------------------------------------------
1,900 Malaysia Fund, Inc. 43,225
---------------------------------------------------------------------------------
4,700 Swiss Helvetia Fund, Inc. 95,175
--------------------------------------------------------------------------------- --------------
Total 520,063
--------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $2,221,706) 2,252,167
--------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $5,391,029) 5,416,935
--------------------------------------------------------------------------------- --------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------
BONDS--19.4%
- --------------------------------------------------------------------------------------------------
FOREIGN--7.4%
---------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.4%
---------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 41,312
--------------------------------------------------------------------------------- --------------
BELGIUM FRANC--0.4%
---------------------------------------------------------------------------------
1,200,000 Belgian Government, Foreign Government Guarantee, 10.00%, 4/5/96 38,701
--------------------------------------------------------------------------------- --------------
CANADA DOLLAR--0.3%
---------------------------------------------------------------------------------
50,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 34,592
--------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.8%
---------------------------------------------------------------------------------
300,000 France O.A.T., 8.50%, 11/25/2002 59,900
---------------------------------------------------------------------------------
150,000 France O.A.T., 9.80%, 1/30/96 29,113
--------------------------------------------------------------------------------- --------------
Total 89,013
--------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.2%
---------------------------------------------------------------------------------
125,000 Bundesobligation, 8.875%, 1/22/96 $ 82,568
---------------------------------------------------------------------------------
75,000 Treuhandanstalt, 7.75%, 10/1/2002 49,455
--------------------------------------------------------------------------------- --------------
Total 132,023
--------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
---------------------------------------------------------------------------------
75,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 48,362
--------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.8%
---------------------------------------------------------------------------------
10,000,000 Japan-111, 4.60%, 6/22/98 104,113
---------------------------------------------------------------------------------
8,000,000 Japan-89, 5.10%, 6/20/96 83,522
---------------------------------------------------------------------------------
10,000,000 Japan-133, 7.30%, 9/20/2000 116,308
--------------------------------------------------------------------------------- --------------
Total 303,943
--------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.4%
---------------------------------------------------------------------------------
75,000 Netherlands Government, 6.00%, 4/15/95 42,373
--------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--0.7%
---------------------------------------------------------------------------------
50,000 UK Conversion, 9.00%, 3/3/2000 78,788
--------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $800,304) 809,107
--------------------------------------------------------------------------------- --------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------
HIGH YIELD--5.1%
---------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.4%
---------------------------------------------------------------------------------
$ 50,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 51,125
--------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.7%
---------------------------------------------------------------------------------
75,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 75,000
--------------------------------------------------------------------------------- --------------
CABLE T.V.--0.4%
---------------------------------------------------------------------------------
50,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 44,938
--------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.5%
---------------------------------------------------------------------------------
$ 50,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 $ 50,250
--------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.4%
---------------------------------------------------------------------------------
50,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 45,562
--------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.5%
---------------------------------------------------------------------------------
50,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 50,875
--------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.4%
---------------------------------------------------------------------------------
50,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 43,625
--------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.4%
---------------------------------------------------------------------------------
50,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 46,750
--------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.4%
---------------------------------------------------------------------------------
50,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 46,500
--------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.3%
---------------------------------------------------------------------------------
50,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 31,750
--------------------------------------------------------------------------------- --------------
STEEL--0.4%
---------------------------------------------------------------------------------
50,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 47,250
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.3%
---------------------------------------------------------------------------------
50,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 30,875
--------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $576,754) 564,500
--------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.5%
---------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.5%
---------------------------------------------------------------------------------
40,000 General Instruments Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $54,300) 55,350
--------------------------------------------------------------------------------- --------------
TREASURY--6.4%
---------------------------------------------------------------------------------
$ 720,000 U.S. Treasury Bonds, 7.25%, 5/15/2016 (IDENTIFIED COST, $688,725) $ 704,038
--------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $2,120,083) 2,132,995
--------------------------------------------------------------------------------- --------------
**CASH EQUIVALENT--30.7%
- --------------------------------------------------------------------------------------------------
2,250,000 U.S. Treasury Bill, 1/26/95 2,196,433
---------------------------------------------------------------------------------
1,180,000 ***J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,180,000
--------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) 3,376,433
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $10,887,545) $ 10,926,363+
--------------------------------------------------------------------------------- --------------
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($11,019,703) at July 31, 1994.
+ The cost for federal income tax purposes amounts to $10,887,545. The net
unrealized appreciation on a federal tax cost basis amounts to $38,818,
and is comprised of $164,251 appreciation and $125,433 depreciation at
July 31, 1994.
++ The Fund's overall exposure to stocks is 73.3%, after adjustment for the use
of Russell 2000 and S&P 500 futures contracts.
(a) Non-income producing securities.
* The Fund holds cash equivalents as collateral for the two S&P 500 futures
contracts it bought with a market value of $458,900. Consequently, the
Fund's exposure to large cap stocks is 32.9% of the fund.
** The Fund holds cash equivalents as collateral for the eighteen Russell 2000
futurescontracts it bought with a market value of $2,203,650. Consequently,
the Fund's exposure to small cap stocks is 20.0% of the fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------
Investments in securities, at value $ 9,746,363
- -------------------------------------------------------------------------------------
Investments in repurchase agreements, at amortized cost 1,180,000
- ------------------------------------------------------------------------------------- -----------
Total investments (identified and tax cost $10,887,545) (Notes 2A and 2B) $ 10,926,363
- --------------------------------------------------------------------------------------------------
Cash 4,574
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 59,537
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 36,501
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 36,465
- --------------------------------------------------------------------------------------------------
Receivable for Futures Variation Margin (Note 2G) 20,450
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2J) 27,820
- -------------------------------------------------------------------------------------------------- -------------
Total assets 11,111,710
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for foreign currency purchased 36,430
- -------------------------------------------------------------------------------------
Payable for investments purchased 32,772
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,155
- -------------------------------------------------------------------------------------
Accrued expenses 21,650
- ------------------------------------------------------------------------------------- -----------
Total liabilities 92,007
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,093,554 shares of beneficial interest outstanding $ 11,019,703
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 10,937,981
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currencies and futures contracts (29,481)
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 67,143
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 44,060
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 11,019,703
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------------------------
Institutional Service Shares (net assets of $9,992,935 / 991,579 shares of beneficial interest
outstanding) $10.08
- -------------------------------------------------------------------------------------------------- -------------
Select Shares (net assets of $1,026,768 / 101,975 shares of beneficial interest outstanding) $10.07
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $395) $ 67,832
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $895) 14,541
- --------------------------------------------------------------------------------------------------------- ---------
Total investment income (Note 2C) 82,373
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee** $ 14,124
- ----------------------------------------------------------------------------------------------
Administrative personnel and services** 2,397
- ----------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 12,000
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 400
- ----------------------------------------------------------------------------------------------
Legal fees 1,000
- ----------------------------------------------------------------------------------------------
Fund share registration costs 1,561
- ----------------------------------------------------------------------------------------------
Printing and postage 2,000
- ----------------------------------------------------------------------------------------------
Insurance premiums 1,000
- ----------------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 403
- ----------------------------------------------------------------------------------------------
Distribution services fee** 1,210
- ----------------------------------------------------------------------------------------------
Miscellaneous 555
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 36,680
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 14,124
- -----------------------------------------------------------------------------------
Waiver of distribution services fee** 403
- -----------------------------------------------------------------------------------
Reimbursement of other operating expenses** 9,714 24,241
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 12,439
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 69,934
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts (identified
cost basis) 67,143
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (29,481)
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts 37,662
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 107,596
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
** (See Note 4).
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 69,934
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($67,143 net gain, as computed for federal income tax purposes) (Note 2E) 67,143
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities, foreign currency, and futures contracts (29,481)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 107,596
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Service Shares (24,073)
- ------------------------------------------------------------------------------------------------
Select Shares (1,801)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (25,874)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 11,638,305
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 9,794
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (710,118)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from Fund share transactions 10,937,981
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 11,019,703
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $44,060) $ 11,019,703
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
* For the period from May 25, 1994 (date of initial public
investment) to July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Aggressive
Growth Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees ("the Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investment.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. OPTIONS CONTRACTS WRITTEN--The Fund may write option contracts. A written
option obligates the Fund to deliver (a call), or to receive (a put), the
contract amount upon exercise by the holder of the option. The value of the
option contract is recorded as a liability and unrealized gain or loss is
measured by the difference between the current value and the premium
received. The Fund had no option contracts outstanding at July 31, 1994.
For the period ended the Fund had a realized gain of $200 on written
options.
G. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash of U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the
financial futures contract is determined and any difference between such
value and the original futures contract value is reflected in the "daily
variation margin" account. Daily variation margin adjustments, arising from
this "marking to market" process, are recorded by the Fund as unrealized
gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended the Fund had a realized gain of $87,187 on
futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
September 1994 18 Russell 2000 Futures Long ($ 78,350)
September 1994 2 S&P 500 Index Futures Long 9,565
------------
Net Unrealized Appreciation (Depreciation) on Futures
Contracts ($ 68,785)
------------
</TABLE>
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following industries:
<TABLE>
<S> <C> <C> <C>
Appliances 0.4% Healthcare 0.4%
Automobiles 0.4 Insurance 0.6
Banking 2.8 Machinery 1.9
Beverage & Tobacco 0.6 Merchandising 1.4
Broadcasting 0.6 Multi-Industry 4.7
Building Supplies 1.5 Real Estate 0.7
Electronic Equipment 0.4 Textiles 0.4
Energy 1.4 Utilities 2.2
Finance 0.6
</TABLE>
J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration if its shares in its first fiscal year, excluding the initial
expense of registering the share, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
K. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 1,061,478 $ 10,615,003
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 919 9,275
- -----------------------------------------------------------------------------------
Shares redeemed (70,818) (705,893)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 991,579 $ 9,918,385
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 102,342 $ 1,023,302
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 52 519
- -----------------------------------------------------------------------------------
Shares redeemed (419) (4,225)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 101,975 1,019,596
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 1,093,554 $ 10,937,981
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
the Fund for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $36,187 and $39,069, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,219 and $2,396, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 8,499,321
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 973,533
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
Absent the anticipated voluntary waiver, the Total Institutional Service
Shares Operating Expenses are estimated to be 1.27%.
For more information on Institutional Service Shares expenses, see
"Summary of Fund Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category" Table
on page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on pages 3 and 4 of the
Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
pages 5 and 6 of the Prospectus.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 8 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00250-01-SS (5/94)
Federated Managed Aggressive Growth Fund
(A Portfolio of Managed Series Trust)
Institutional Service Shares
Prospectus
The Institutional Service Shares of Federated Managed Aggressive Growth 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 capital appreciation. 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 March 11, 1994, 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 March 11, 1994
Table of Contents
- --------------------------------------------------------------------------------
Summary of Fund Expenses 1
- ------------------------------------------------------
General Information 2
- ------------------------------------------------------
Investment Information 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Asset Allocation 2
Equity Asset Categories 3
Large Company Stocks 3
Small Company Stocks 3
Foreign Stocks 4
Cash Reserves Category 4
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 5
Equity Securities 5
Foreign Securities 5
Investment Risks 5
Cash Reserves 6
Repurchase Agreements 6
U.S. Treasury and Other U.S.
Government Securities 6
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations
("CMOs") 7
Real Estate Mortgage Investment Conduits
("REMICs") 7
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 8
Investment Risks 9
Investing in Securities of Other
Investment Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed Delivery
Transactions 9
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Institutional Service Shares 15
Administration of the Fund 15
Administrative Services 15
Shareholder Services Plan 15
Custodian 15
Transfer Agent and Dividend
Disbursing Agent 15
Legal Counsel 15
Independent Public Accountants 16
Brokerage Transactions 16
Expenses of the Fund and Institutional
Service Shares 16
Net Asset Value 16
- ------------------------------------------------------
Investing in Institutional Service Shares 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 17
By Wire 17
By Mail 17
Minimum Investment Required 17
What Shares Cost 18
Subaccounting Services 18
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 18
Capital Gains 19
Redeeming Institutional Service Shares 19
- ------------------------------------------------------
Through a Financial Institution 19
Telephone Redemption 19
Written Requests 19
Signatures 20
Receiving Payment 20
Systematic Withdrawal Program 20
Accounts with Low Balances 20
Shareholder Information 21
- ------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 21
Tax Information 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 21
Performance Information 22
- ------------------------------------------------------
Other Classes of Shares 22
- ------------------------------------------------------
Appendix 23
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Institutional Service Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)..................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
Annual Institutional Service Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1).............................................................. 0.48%
12b-1 Fee...................................................................................... None
Total Other Expenses........................................................................... 0.52%
Shareholder Servicing Fee (2).............................................................. 0.00%
Total Institutional Service Shares Operating Expenses (3)............................. 1.00%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The Institutional Service Shares have no present intention of paying or
accruing the shareholder servicing fee. If Institutional Service Shares were
paying or accruing the shareholder servicing fee, the Institutional Service
Shares would be able to pay up to 0.25% of their average daily net assets
for the shareholder servicing fee.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 1.27% absent the anticipated voluntary waiver of a portion of the
management fee.
* Total Institutional Service Shares Operating Expenses are based on average
expenses expected to be incurred during the period ended January 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $10 $32
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Select Shares. Institutional Service Shares and Select Shares are
subject to certain of the same expenses; however, Select Shares are subject to a
12b-1 fee of up to 0.75%. See "Other Classes of Shares."
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 interest 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 capital appreciation. 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: stocks
and bonds. Additionally, the Fund may invest in cash reserves. 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 60 and 100 percent of its assets in stocks. The
stock asset categories are large company stocks, small company stocks, and
foreign stocks.
The Fund will invest between 0 and 40 percent of its assets in bonds. The Fund's
adviser believes that bonds offer opportunities for growth of capital or
otherwise may be desirable under prevailing market or economic conditions. The
bond asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.
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>
Stocks 60-100%
Large Company Stocks 0-100%
Small Company Stocks 0-40%
Foreign Stocks 0-40%
Cash Reserves 0-20%
Bonds 0-40%
U.S. Treasury Securities 0-32%
Mortgage-Backed Securities 0-12%
Investment-Grade Corporate Bonds 0-12%
High Yield Corporate Bonds 0-16%
Foreign Bonds 0-16%
</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, foreign
stocks are judged to be unusually attractive relative to other asset categories,
the allocation for foreign stocks may be moved to its upper limit. At other
times when foreign 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.
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.
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 100 percent of its total assets in
large company stocks.
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 40 percent of its total
assets in small company stocks.
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.
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. The Fund may invest up to 40 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 20 percent of
its total assets in cash reserves.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. Generally, the Fund will invest in Bond Assets
which are believed to offer opportunities for growth of capital when the adviser
believes interest rates will decline and, therefore, the value of the debt
securities will increase, or the market value of bonds will increase due to
factors affecting certain types of bonds or particular issuers, such as
improvement in credit quality due to company fundamentals or economic conditions
or assumptions on changes in trends in prepayment rates with respect to
mortgage-backed securites. The average duration of the Fund's Bond Assets will
be not less than three nor more than nine years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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 32 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 12 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 12 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.
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 16 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.
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 16 percent of its total assets in foreign bonds.
Acceptable Investments
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.
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 Investors Service,
Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's Corporation (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.
Cash Reserves. The Fund's cash 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.
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 Corporation (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.
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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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:
Peter R. Anderson is the portfolio manager for the domestic large 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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this category since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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.
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.
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.
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, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions would
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution would receive payments from the Fund
at a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services would include, but not be limited to, the provision of
personal service and maintenance of shareholder accounts.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Managed Aggressive Growth
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 Aggressive Growth 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 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
- --------------------------------------------------------------------------------
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
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.
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
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
- --------------------------------------------------------------------------------
Standard and Poor's Corporation 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 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
edge." 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 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 Aggressive Growth 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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Aggressive Growth Fund
Institutional Service Shares
Prospectus
A Diversified Portfolio of
Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122009A-ISS (3/94)
FEDERATED
MANAGED AGGRESSIVE
GROWTH FUND
[LOGO] MANAGED SERIES TRUST
------------
SELECT SHARES
------------
SUPPLEMENT TO PROSPECTUS
DATED MARCH 11, 1994
Federated Managed
Aggressive Growth Fund is part of
Managed Series Trust
a lifecycle investing program
from Federated Investors
SEPTEMBER 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
56166K800
G00530-01 (9/94)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(A PORTFOLIO OF MANAGED SERIES TRUST)
SELECT SHARES
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1994
A. Please insert the following "Financial Highlights" table for Federated
Managed Aggressive Growth Fund--Select Shares after page 1, following the
section entitled "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights--Select Shares" to the Table of Contents page, after
the heading "Summary of Fund Expenses."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.05
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and
futures contracts 0.04
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.09
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.07
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.91%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 1.34%(a)
- -------------------------------------------------------------------------------------------------
Net investment income 3.04%(a)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.52%(a)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,027
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 16%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "Small Company Stocks," which begins on
page 3 and replace it with the following. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "Small
Company Stocks."
"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 a 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 40 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."
C. Please add the following as the last sentence in the section entitled
"Investment-Grade Corporate Bonds" on page 5:
"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."
D. The following should be added as a sub-section entitled under the section
"High Yield Corporate Bonds" on page 5. In addition, please add the
heading "Investment Risks" to the Table of Contents page after "High Yield
Corporate Bonds."
"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."
E. Please delete the sub-section entitled "Investment Risks" under the
section entitled "Corporate Bonds," which begins on page 8. In addition,
please delete the heading "Investment Risks," which appears immediately
following the heading "Corporate Bonds" on the Table of Contents page.
F. Please delete the first sentence of the third paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"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."
G. Please delete the first sentence of the fifth paragraph under the section
entitled "Adviser's Background," which begins on page 13, and replace it
with the following:
"Peter R. Anderson is the portfolio manager for the domestic large company
stocks asset category and the senior portfolio manager for the domestic small
company stocks asset category."
H. Please add the following as the eighth paragraph of the section entitled
"Adviser's Background," which begins on page 13:
"Thomas M. Franks is the portfolio manager for the cash 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."
I. Please delete the first five paragraphs of the section entitled
"Distribution Plan" on page 15 and replace them with the following. In
addition, please delete the heading "Distribution Plan" from the Table of
Contents page and replace it with the heading "Distribution and
Shareholder Services Plans."
"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."
J. Please insert the following section entitled "Other Payments to Financial
Institutions" after the new section entitled "Distribution and
Shareholder Services Plans," which begins on page 15. In addition, please
add the heading "Other Payments to Financial Institutions" to the Table
of Contents page after the heading "Distribution and Shareholder Services
Plans."
"OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Distribution and Services Plan, 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."
K. Please delete the section entitled "Administrative Services" on page 16
and replace it with the following:
"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."
L. Please delete the section entitled "Shareholder Services Plan" on page 16.
In addition, please delete the heading "Shareholder Services Plan" from
the Table of Contents page.
M. Please insert the following as the last sentence of the first paragraph in
the section entitled "Voting Rights" on page 21:
"As of September 6, 1994, CIBAT & Co. of Laurel, Maryland, acting in various
capacities for numerous accounts, was the owner of record of 375,236
Institutional Service Shares (33.77%) of Federated Managed Aggressive Growth
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."
N. Please insert the following "Financial Highlights" table for Federated
Managed Aggressive Growth Fund--Institutional Service Shares after page
23, following the section entitled "Other Classes of Shares." In addition,
please add the heading "Financial Highlights-- Institutional Service
Shares" to the Table of Contents page after the heading "Other Classes of
Shares."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment income 0.07
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures
contracts 0.04
- ------------------------------------------------------------------------------------------------ --------
Total from investment operations 0.11
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------------------------------ --------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------------------------------ --------
TOTAL RETURN** 1.06%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 0.60%(a)
- ------------------------------------------------------------------------------------------------
Net investment income 3.78%(a)
- ------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,993
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 16%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
O. Please insert the following Financial Statements after the section
entitled "Financial Highlights--Institutional Service Shares" and before
the section entitled "Appendix." In addition, please add the heading
"Financial Statements" to the Table of Contents page after the heading
"Financial Highlights--Institutional Service Shares."
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- --------------------------------------------------------------------------------- --------------
STOCKS--49.3%++
- --------------------------------------------------------------------------------------------------
LARGE COMPANY--28.8%*
---------------------------------------------------------------------------------
BASIC INDUSTRY--2.7%
---------------------------------------------------------------------------------
1,300 (a)FMC Corp. $ 76,375
---------------------------------------------------------------------------------
1,300 Lubrizol Corp. 44,038
---------------------------------------------------------------------------------
1,800 Phelps Dodge Corp. 111,150
---------------------------------------------------------------------------------
2,800 Praxair, Inc. 63,000
--------------------------------------------------------------------------------- --------------
Total 294,563
--------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--1.1%
---------------------------------------------------------------------------------
2,000 Ford Motor Co. 63,500
---------------------------------------------------------------------------------
1,100 General Motors Corp. 56,513
--------------------------------------------------------------------------------- --------------
Total 120,013
--------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--3.6%
---------------------------------------------------------------------------------
900 Avon Products, Inc. 50,962
---------------------------------------------------------------------------------
1,400 Eastman Kodak Co. 67,725
---------------------------------------------------------------------------------
3,500 Mattel, Inc. 96,688
---------------------------------------------------------------------------------
1,400 Philip Morris Cos., Inc. 77,000
---------------------------------------------------------------------------------
6,300 (a)RJR Nabisco Holdings, Conv. Pfd., Series C 42,525
---------------------------------------------------------------------------------
1,700 Reebok International, Ltd. 60,350
--------------------------------------------------------------------------------- --------------
Total 395,250
--------------------------------------------------------------------------------- --------------
CONSUMER SERVICES--2.0%
---------------------------------------------------------------------------------
2,500 American Stores Co. $ 64,688
---------------------------------------------------------------------------------
1,800 Sears, Roebuck & Co. 85,050
---------------------------------------------------------------------------------
2,900 (a)Tele-Communications, Inc., Class A 67,606
--------------------------------------------------------------------------------- --------------
Total 217,344
--------------------------------------------------------------------------------- --------------
ENERGY--3.3%
---------------------------------------------------------------------------------
2,300 Baker Hughes, Inc. 48,587
---------------------------------------------------------------------------------
1,800 Chevron Corp. 79,875
---------------------------------------------------------------------------------
1,000 Mapco, Inc. 60,625
---------------------------------------------------------------------------------
1,300 Texaco, Inc. 82,550
---------------------------------------------------------------------------------
3,000 USX Marathon Group 52,125
---------------------------------------------------------------------------------
800 (a)Western Atlas, Inc. 38,900
--------------------------------------------------------------------------------- --------------
Total 362,662
--------------------------------------------------------------------------------- --------------
FINANCE--4.8%
---------------------------------------------------------------------------------
1,000 AMLI Residential Properties 21,500
---------------------------------------------------------------------------------
900 Bankers Trust of New York Corp. 60,300
---------------------------------------------------------------------------------
1,700 Citicorp 70,125
---------------------------------------------------------------------------------
1,100 Dean Witter, Discover & Co. 44,138
---------------------------------------------------------------------------------
700 Dreyfus Corp. 34,650
---------------------------------------------------------------------------------
700 Federal National Mortgage Association 60,725
---------------------------------------------------------------------------------
600 Mellon Bank Corp. 34,350
---------------------------------------------------------------------------------
2,100 PNC Financial Corp. 60,375
---------------------------------------------------------------------------------
1,200 Transamerica Corp. 60,900
---------------------------------------------------------------------------------
2,300 Travelers, Inc. 76,188
--------------------------------------------------------------------------------- --------------
Total 523,251
--------------------------------------------------------------------------------- --------------
HEALTHCARE--2.2%
---------------------------------------------------------------------------------
1,300 American Home Products Corp. $ 74,587
---------------------------------------------------------------------------------
1,200 Becton, Dickinson & Co. 50,550
---------------------------------------------------------------------------------
1,200 Bristol-Myers Squibb Co. 63,150
---------------------------------------------------------------------------------
1,500 U.S. Healthcare, Inc. 56,813
--------------------------------------------------------------------------------- --------------
Total 245,100
--------------------------------------------------------------------------------- --------------
INDUSTRIAL/MANUFACTURING--2.4%
---------------------------------------------------------------------------------
500 Deere & Co. 35,063
---------------------------------------------------------------------------------
1,000 General Electric Co. 50,375
---------------------------------------------------------------------------------
1,100 (a)Litton Industries, Inc. 40,837
---------------------------------------------------------------------------------
600 Loews Corp. 52,950
---------------------------------------------------------------------------------
1,600 Textron, Inc. 85,200
--------------------------------------------------------------------------------- --------------
Total 264,425
--------------------------------------------------------------------------------- --------------
TECHNOLOGY--3.5%
---------------------------------------------------------------------------------
2,400 General Motors Corp., Class E 84,600
---------------------------------------------------------------------------------
900 Hewlett-Packard Co. 69,863
---------------------------------------------------------------------------------
1,700 Martin-Marietta Corp. 77,138
---------------------------------------------------------------------------------
1,300 Raytheon Co. 85,312
---------------------------------------------------------------------------------
2,000 Rockwell International Corp. 71,750
--------------------------------------------------------------------------------- --------------
Total 388,663
--------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.5%
---------------------------------------------------------------------------------
2,100 Ryder Systems, Inc. 54,862
--------------------------------------------------------------------------------- --------------
UTILITIES--2.7%
---------------------------------------------------------------------------------
1,500 AT&T Corp. 81,938
---------------------------------------------------------------------------------
400 British Telecommunications, ADR 23,650
---------------------------------------------------------------------------------
900 Duke Power Co 34,425
---------------------------------------------------------------------------------
1,000 Enron Corp. $ 32,375
---------------------------------------------------------------------------------
2,200 MCI Communications Corp. 50,050
---------------------------------------------------------------------------------
600 Telefonos De Mexico, SA, ADR 36,450
---------------------------------------------------------------------------------
3,000 Westinghouse Electric Corp., Conv. Pfd., Series C 39,747
--------------------------------------------------------------------------------- --------------
Total 298,635
--------------------------------------------------------------------------------- --------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $3,169,323) 3,164,768
--------------------------------------------------------------------------------- --------------
FOREIGN EQUITY--20.5%
---------------------------------------------------------------------------------
AUSTRALIA--0.6%
---------------------------------------------------------------------------------
19,300 Australian Consolidated Press, Ltd. 62,815
--------------------------------------------------------------------------------- --------------
BELGIUM--0.4%
---------------------------------------------------------------------------------
1,100 Delhaize-Le Lion 42,786
--------------------------------------------------------------------------------- --------------
FINLAND--0.4%
---------------------------------------------------------------------------------
400 Kone Corp. 'B' 41,671
--------------------------------------------------------------------------------- --------------
HONG KONG--0.7%
---------------------------------------------------------------------------------
16,800 Cheung Kong Holdings 82,425
--------------------------------------------------------------------------------- --------------
JAPAN--9.0%
---------------------------------------------------------------------------------
4,000 Bank of Tokyo 61,972
---------------------------------------------------------------------------------
2,000 Dai Ichi Kangyo Bank 37,983
---------------------------------------------------------------------------------
2,000 Fuji Bank 45,180
---------------------------------------------------------------------------------
5,000 Hitachi Ltd. 48,228
---------------------------------------------------------------------------------
1,000 Industrial Bank of Japan 30,186
---------------------------------------------------------------------------------
1,000 Ito Yokado Co. 52,676
---------------------------------------------------------------------------------
11,000 Kawasaki Heavy Industries 48,598
---------------------------------------------------------------------------------
5,000 Kirin Brewery Co., Ltd. 61,972
---------------------------------------------------------------------------------
3,000 Matsushita Electric Industries 49,178
---------------------------------------------------------------------------------
10,000 Mitsubishi Heavy Industries $ 77,665
---------------------------------------------------------------------------------
3,000 Mitsubishi Trust & Banking 47,978
---------------------------------------------------------------------------------
6,000 Mitsukoshi, Ltd. 62,372
---------------------------------------------------------------------------------
3,000 Nomura Securities Co., Ltd. 66,270
---------------------------------------------------------------------------------
3,000 Sakura Bank, Ltd. 42,281
---------------------------------------------------------------------------------
2,000 Sumitomo Bank 40,382
---------------------------------------------------------------------------------
11,000 Sumitomo Heavy Industries 44,640
---------------------------------------------------------------------------------
4,000 Takeda Chemical Industries 49,578
---------------------------------------------------------------------------------
5,000 Tokio Marine & Fire 63,971
---------------------------------------------------------------------------------
2,000 Tokyo Electric Power 60,573
--------------------------------------------------------------------------------- --------------
Total 991,683
--------------------------------------------------------------------------------- --------------
NETHERLANDS--0.7%
---------------------------------------------------------------------------------
700 Royal Dutch Peteroluem Co. 79,100
--------------------------------------------------------------------------------- --------------
SWEDEN--0.4%
---------------------------------------------------------------------------------
400 Volvo (AB), Series B 39,130
--------------------------------------------------------------------------------- --------------
UNITED KINGDOM--3.6%
---------------------------------------------------------------------------------
11,000 British Petroleum, PLC 70,119
---------------------------------------------------------------------------------
12,000 Coats Viyella, PLC 39,080
---------------------------------------------------------------------------------
6,000 Eastern Electricity, PLC 60,009
---------------------------------------------------------------------------------
6,000 Midlands Electricity, PLC 60,750
---------------------------------------------------------------------------------
3,800 RMC Group, PLC 55,806
---------------------------------------------------------------------------------
10,000 Williams Holdings, PLC 55,796
---------------------------------------------------------------------------------
4,000 Wolseley, PLC 50,934
--------------------------------------------------------------------------------- --------------
Total 392,494
--------------------------------------------------------------------------------- --------------
REGISTERED INVESTMENT COMPANIES--4.7%
---------------------------------------------------------------------------------
4,500 First Iberian Fund, Inc. $ 34,313
---------------------------------------------------------------------------------
12,200 France Growth Fund, Inc. 134,200
---------------------------------------------------------------------------------
11,900 Germany Fund, Inc. 142,800
---------------------------------------------------------------------------------
6,700 (a)Italy Fund, Inc. 70,350
---------------------------------------------------------------------------------
1,900 Malaysia Fund, Inc. 43,225
---------------------------------------------------------------------------------
4,700 Swiss Helvetia Fund, Inc. 95,175
--------------------------------------------------------------------------------- --------------
Total 520,063
--------------------------------------------------------------------------------- --------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $2,221,706) 2,252,167
--------------------------------------------------------------------------------- --------------
TOTAL STOCKS (IDENTIFIED COST, $5,391,029) 5,416,935
--------------------------------------------------------------------------------- --------------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------
BONDS--19.4%
- --------------------------------------------------------------------------------------------------
FOREIGN--7.4%
---------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.4%
---------------------------------------------------------------------------------
50,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 41,312
--------------------------------------------------------------------------------- --------------
BELGIUM FRANC--0.4%
---------------------------------------------------------------------------------
1,200,000 Belgian Government, Foreign Government Guarantee, 10.00%, 4/5/96 38,701
--------------------------------------------------------------------------------- --------------
CANADA DOLLAR--0.3%
---------------------------------------------------------------------------------
50,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 34,592
--------------------------------------------------------------------------------- --------------
FRENCH FRANC--0.8%
---------------------------------------------------------------------------------
300,000 France O.A.T., 8.50%, 11/25/2002 59,900
---------------------------------------------------------------------------------
150,000 France O.A.T., 9.80%, 1/30/96 29,113
--------------------------------------------------------------------------------- --------------
Total 89,013
--------------------------------------------------------------------------------- --------------
DEUTSCHE MARK--1.2%
---------------------------------------------------------------------------------
125,000 Bundesobligation, 8.875%, 1/22/96 $ 82,568
---------------------------------------------------------------------------------
75,000 Treuhandanstalt, 7.75%, 10/1/2002 49,455
--------------------------------------------------------------------------------- --------------
Total 132,023
--------------------------------------------------------------------------------- --------------
ITALIAN LIRA--0.4%
---------------------------------------------------------------------------------
75,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 48,362
--------------------------------------------------------------------------------- --------------
JAPANESE YEN--2.8%
---------------------------------------------------------------------------------
10,000,000 Japan-111, 4.60%, 6/22/98 104,113
---------------------------------------------------------------------------------
8,000,000 Japan-89, 5.10%, 6/20/96 83,522
---------------------------------------------------------------------------------
10,000,000 Japan-133, 7.30%, 9/20/2000 116,308
--------------------------------------------------------------------------------- --------------
Total 303,943
--------------------------------------------------------------------------------- --------------
NETHERLANDS GUILDER--0.4%
---------------------------------------------------------------------------------
75,000 Netherlands Government, 6.00%, 4/15/95 42,373
--------------------------------------------------------------------------------- --------------
UNITED KINGDOM POUND--0.7%
---------------------------------------------------------------------------------
50,000 UK Conversion, 9.00%, 3/3/2000 78,788
--------------------------------------------------------------------------------- --------------
TOTAL FOREIGN (IDENTIFIED COST, $800,304) 809,107
---------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------
HIGH YIELD--5.1%
---------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.4%
---------------------------------------------------------------------------------
$ 50,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 51,125
--------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.7%
---------------------------------------------------------------------------------
75,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 75,000
--------------------------------------------------------------------------------- --------------
CABLE T.V.--0.4%
---------------------------------------------------------------------------------
50,000 Continental Cablevision, Inc., Sr. Deb., 9.50%, 8/1/2013 44,938
--------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.5%
---------------------------------------------------------------------------------
$ 50,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 $ 50,250
--------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.4%
---------------------------------------------------------------------------------
50,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 45,562
--------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.5%
---------------------------------------------------------------------------------
50,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 50,875
--------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--0.4%
---------------------------------------------------------------------------------
50,000 Grand Union Co., Sr. Note, 12.25%, 7/15/2002 43,625
--------------------------------------------------------------------------------- --------------
FOOD SERVICES--0.4%
---------------------------------------------------------------------------------
50,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 46,750
--------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--0.4%
---------------------------------------------------------------------------------
50,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 46,500
--------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--0.3%
---------------------------------------------------------------------------------
50,000 American Standard, Inc., Sr. Sub. Disc. Deb., 10.50%, 6/1/2005 31,750
--------------------------------------------------------------------------------- --------------
STEEL--0.4%
---------------------------------------------------------------------------------
50,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 47,250
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.3%
---------------------------------------------------------------------------------
50,000 Nextel Communications, Inc., Sr. Disc. Note, 11.50%, 9/1/2003 30,875
--------------------------------------------------------------------------------- --------------
TOTAL HIGH YIELD (IDENTIFIED COST, $576,754) 564,500
--------------------------------------------------------------------------------- --------------
OTHER CORPORATE--0.5%
---------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.5%
---------------------------------------------------------------------------------
40,000 General Instruments Corp., Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $54,300) 55,350
--------------------------------------------------------------------------------- --------------
TREASURY--6.4%
---------------------------------------------------------------------------------
$ 720,000 U.S. Treasury Bonds, 7.25%, 5/15/2016 (IDENTIFIED COST, $688,725) $ 704,038
--------------------------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST, $2,120,083) 2,132,995
--------------------------------------------------------------------------------- --------------
**CASH EQUIVALENT--30.7%
- --------------------------------------------------------------------------------------------------
2,250,000 U.S. Treasury Bill, 1/26/95 2,196,433
---------------------------------------------------------------------------------
1,180,000 ***J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94
(Note 2B) 1,180,000
--------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT (AT AMORTIZED COST) 3,376,433
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $10,887,545) $ 10,926,363+
--------------------------------------------------------------------------------- --------------
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($11,019,703) at July 31, 1994.
+ The cost for federal income tax purposes amounts to $10,887,545. The net
unrealized appreciation on a federal tax cost basis amounts to $38,818, and
is comprised of $164,251 appreciation and $125,433 depreciation at
July 31, 1994.
++ The Fund's overall exposure to stocks is 73.3%, after adjustment for the use
of Russell 2000 and S&P 500 futures contracts.
(a) Non-income producing securities.
* The Fund holds cash equivalents as collateral for the two S&P 500 futures
contracts it bought with a market value of $458,900. Consequently, the
Fund's exposure to large cap stocks is 32.9% of the fund.
** The Fund holds cash equivalents as collateral for the eighteen Russell 2000
futures contracts it bought with a market value of $2,203,650. Consequently,
the Fund's exposure to small cap stocks is 20.0% of the fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------
Investments in securities, at value $ 9,746,363
- -------------------------------------------------------------------------------------
Investments in repurchase agreements, at amortized cost 1,180,000
- ------------------------------------------------------------------------------------- -----------
Total investments (identified and tax cost $10,887,545) (Notes 2A and 2B) $ 10,926,363
- --------------------------------------------------------------------------------------------------
Cash 4,574
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 59,537
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 36,501
- --------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 36,465
- --------------------------------------------------------------------------------------------------
Receivable for Futures Variation Margin (Note 2G) 20,450
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2J) 27,820
- -------------------------------------------------------------------------------------------------- -------------
Total assets 11,111,710
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for foreign currency purchased 36,430
- -------------------------------------------------------------------------------------
Payable for investments purchased 32,772
- -------------------------------------------------------------------------------------
Tax withholding liability (Note 2E) 1,155
- -------------------------------------------------------------------------------------
Accrued expenses 21,650
- ------------------------------------------------------------------------------------- -----------
Total liabilities 92,007
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,093,554 shares of beneficial interest outstanding $ 11,019,703
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 10,937,981
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities
in foreign currencies and futures contracts (29,481)
- --------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments, foreign currency transactions,
and futures contracts 67,143
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 44,060
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 11,019,703
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------------------------
Institutional Service Shares (net assets of $9,992,935 / 991,579 shares of beneficial interest
outstanding) $10.08
- -------------------------------------------------------------------------------------------------- -------------
Select Shares (net assets of $1,026,768 / 101,975 shares of beneficial interest outstanding) $10.07
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JULY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $395) $ 67,832
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $895) 14,541
- --------------------------------------------------------------------------------------------------------- ---------
Total investment income (Note 2C) 82,373
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee** $ 14,124
- ----------------------------------------------------------------------------------------------
Administrative personnel and services** 2,397
- ----------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 12,000
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 400
- ----------------------------------------------------------------------------------------------
Legal fees 1,000
- ----------------------------------------------------------------------------------------------
Fund share registration costs 1,561
- ----------------------------------------------------------------------------------------------
Printing and postage 2,000
- ----------------------------------------------------------------------------------------------
Insurance premiums 1,000
- ----------------------------------------------------------------------------------------------
Taxes 30
- ----------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares** 403
- ----------------------------------------------------------------------------------------------
Distribution services fee** 1,210
- ----------------------------------------------------------------------------------------------
Miscellaneous 555
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 36,680
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 14,124
- -----------------------------------------------------------------------------------
Waiver of distribution services fee** 403
- -----------------------------------------------------------------------------------
Reimbursement of other operating expenses** 9,714 24,241
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 12,439
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 69,934
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts (identified
cost basis) 67,143
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities in foreign currency, and futures contracts (29,481)
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts 37,662
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 107,596
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
** (See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 69,934
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
($67,143 net gain, as computed for federal income tax purposes) (Note 2E) 67,143
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of assets and
liabilities, foreign currency, and futures contracts (29,481)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 107,596
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ------------------------------------------------------------------------------------------------
Institutional Service Shares (24,073)
- ------------------------------------------------------------------------------------------------
Select Shares (1,801)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from distributions to shareholders (25,874)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 11,638,305
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 9,794
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (710,118)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from Fund share transactions 10,937,981
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 11,019,703
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $44,060) $ 11,019,703
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein present only those of Federated Managed Aggressive
Growth Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
The Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees ("the Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investment.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund
understanding of the applicable country's tax rules and rates.
F. OPTIONS CONTRACTS WRITTEN--The Fund may write option contracts. A written
option obligates the Fund to deliver (a call), or to receive (a put), the
contract amount upon exercise by the holder of the option. The value of the
option contract is recorded as a liability and unrealized gain or loss is
measured by the difference between the current value and the premium
received. The Fund had no option contracts outstanding at July 31, 1994.
For the period ended the Fund had a realized gain of $200 on written
options.
G. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash of U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the
financial futures contract is determined and any difference between such
value and the original futures contract value is reflected in the "daily
variation margin" account. Daily variation margin adjustments, arising from
this "marking to market" process, are recorded by the Fund as unrealized
gains or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended the Fund had a realized gain of $87,187 on
futures contracts.
At July 31, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
EXPIRATION TO DELIVER/ APPRECIATION
DATE RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
September 1994 18 Russell 2000 Futures Long ($ 78,350)
September 1994 2 S&P 500 Index Futures Long 9,565
-----------
Contracts ($ 68,785)
-----------
</TABLE>
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At July 31, 1994 the portfolio was diversified with the following industries:
<TABLE>
<S> <C> <C> <C>
Appliances 0.4% Healthcare 0.4%
Automobiles 0.4 Insurance 0.6
Banking 2.8 Machinery 1.9
Beverage & Tobacco 0.6 Merchandising 1.4
Broadcasting 0.6 Multi-Industry 4.7
Building Supplies 1.5 Real Estate 0.7
Electronic Equipment 0.4 Textiles 0.4
Energy 1.4 Utilities 2.2
Finance 0.6
</TABLE>
J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration if its shares in its first fiscal year, excluding the initial
expense of registering the share, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
K. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JULY 31,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 1,061,478 $ 10,615,003
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 919 9,275
- -----------------------------------------------------------------------------------
Shares redeemed (70,818) (705,893)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Institutional Service Shares transactions 991,579 $ 9,918,385
- ----------------------------------------------------------------------------------- ----------- --------------
<CAPTION>
PERIOD ENDED JULY 31,
1994*
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ----------------------------------------------------------------------------------- ----------- --------------
Shares sold 102,342 $ 1,023,302
- -----------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 52 519
- -----------------------------------------------------------------------------------
Shares redeemed (419) (4,225)
- ----------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Select Shares transactions 101,975 1,019,596
- ----------------------------------------------------------------------------------- ----------- --------------
Total net change resulting from Fund share transactions 1,093,554 $ 10,937,981
- ----------------------------------------------------------------------------------- ----------- --------------
</TABLE>
* For the period from May 25, 1994 (date of initial public investment) to
July 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
the Fund for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $36,187 and $39,069, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following March 11, 1994
(date the Fund first became effective). For the period ended July 31, 1994, the
Fund paid $2,219 and $2,396, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 8,499,321
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 973,533
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
September 30, 1994
[LOGO] MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(A Portfolio of Managed Series Trust)
Select Shares
Supplement to Prospectus Dated March 11, 1994 for Minnesota Investors
Investors in the state of Minnesota should be aware of the following:
1. The maximum fees that may be charged by the Fund absent the anticipated
voluntary waivers are:
Management Fee 0.75%
12b-1 fee 0.75%
Absent the anticipated voluntary waivers, the Total Select Shares
Operating Expenses are estimated to be 2.27%.
For more information on Select Shares expenses, see "Summary of Fund
Expenses" on page 1 of the Prospectus.
2. With regard to the "Asset Category" table on page 3 of the Prospectus,
the category "High Yield Corporate Bonds" under the main category "Bonds"
should be
expanded to read as follows:
"High Yield Corporate Bonds (commonly known as junk bonds)".
3. The following sentence should be added after the "Asset Category"Table on
page 3 of the Prospectus":
"The Fund may also write covered call options and secured put options
on up to 25% of its net assets and may purchase put and call options
provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options."
For more information on options, refer to page 11 of the Prospectus under
the section entitled "Options."
4. RISKS
Investors should be aware of the risks involved with investing in the
following types of securities which the Fund is permitted to purchase.
Small Company Stocks. 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. See "Small Company Stocks" on pages 3 and 4 of the
Prospectus.
Foreign Securities. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. 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. See "Investment Risks", a subsection of "Foreign Securities" on
page 5 of the Prospectus.
Mortgage-Backed Securities. Mortgage-backed securities have certain
features which cause them to be 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. See "Characteristics of Mortgage-Backed
Securities" on page 8 of the Prospectus.
Lower Rated Corporate Bonds. Lower rated corporate bonds (commonly known
as "junk bonds") usually offer higher yields in return for increased
risk. This is because of reduced creditworthiness and increased risk of
default. See "Investment Risks", a subsection of "Corporate Bonds" on
page 9 of the Prospectus.
Foreign 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 gains, if
any, to be distributed to shareholders by the Fund. See "Currency Risks"
on page 10 of the Prospectus.
Futures and Options on Futures. 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 securities in the Fund's portfolio. See "Risks", a
subsection of "Futures and Options on Futures" on page 12 of the
Prospectus.
May 26, 1994
FEDERATED SECURITIES CORP.
Distributor
G00250-02-SE(5/94)
Federated Managed Aggressive Growth Fund
(A Portfolio of Managed Series Trust)
Select Shares
Prospectus
The Select Shares of Federated Managed Aggressive Growth 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 capital appreciation. 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 March 11, 1994, 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 March 11, 1994
Table of Contents
- --------------------------------------------------------------------------------
Summary of Fund Expenses 1
- ------------------------------------------------------
General Information 2
- ------------------------------------------------------
Investment Information 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Asset Allocation 2
Equity Asset Categories 3
Large Company Stocks 3
Small Company Stocks 3
Foreign Stocks 4
Cash Reserves Category 4
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 5
Equity Securities 5
Foreign Securities 5
Investment Risks 5
Cash Reserves 6
Repurchase Agreements 6
U.S. Treasury and Other U.S.
Government Securities 6
Mortgage-Backed Securities 6
Collateralized Mortgage Obligations ("CMOs") 7
Real Estate Mortgage Investment
Conduits ("REMICs") 7
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 8
Investment Risks 9
Investing in Securities of Other Investment
Companies 9
Restricted and Illiquid Securities 9
When-Issued and Delayed Delivery
Transactions 9
Lending of Portfolio Securities 10
Foreign Currency Transactions 10
Currency Risks 10
Forward Foreign Currency Exchange Contracts 10
Options 11
Futures and Options on Futures 11
Risks 12
Portfolio Turnover 12
Investment Limitations 12
Trust Information 13
- ------------------------------------------------------
Management of the Trust 13
Board of Trustees 13
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 15
Distribution Plan 15
Administration of the Fund 16
Administrative Services 16
Shareholder Services Plan 16
Custodian 16
Transfer Agent and Dividend Disbursing Agent 16
Legal Counsel 16
Independent Public Accountants 16
Brokerage Transactions 16
Expenses of the Fund and Select Shares 17
Net Asset Value 17
- ------------------------------------------------------
Investing in Select Shares 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 18
By Wire 18
By Mail 18
Minimum Investment Required 18
What Shares Cost 18
Subaccounting Services 19
Systematic Investment Program 19
Certificates and Confirmations 19
Dividends 19
Capital Gains 19
Redeeming Select Shares 19
- ------------------------------------------------------
Through a Financial Institution 20
Telephone Redemption 20
Written Requests 20
Signatures 20
Receiving Payment 21
Systematic Withdrawal Program 21
Accounts with Low Balances 21
Shareholder Information 21
- ------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 22
Tax Information 22
- ------------------------------------------------------
Federal Income Tax 22
Pennsylvania Corporate and
Personal Property Taxes 22
Performance Information 23
- ------------------------------------------------------
Other Classes of Shares 23
- ------------------------------------------------------
Appendix 24
- ------------------------------------------------------
Addresses Inside Back Cover
- ------------------------------------------------------
Summary of Fund Expenses
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Select Shares
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)....................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................... None
Exchange Fee..................................................................................... None
Annual Select Shares Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)................................................................ 0.48%
12b-1 Fee (after waiver) (2)..................................................................... 0.50%
Total Other Expenses............................................................................. 0.77%
Shareholder Servicing Fee.................................................................... 0.25%
Total Select Shares Operating Expenses (3).............................................. 1.75%
</TABLE>
- ------------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate the voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The maximum 12b-1 fee is 0.75%.
(3) The Total Select Shares Operating Expenses are estimated to be 2.27% absent
the anticipated voluntary waivers of a portion of the management fee and a
portion of the 12b-1 fee.
* Total Select Shares Operating Expenses are based on average expenses expected
to be incurred during the period ending January 31, 1995. During the course of
this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Select Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Trust Information" and "Investing in Select
Shares." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $18 $55
</TABLE>
The above example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending January 31,
1995.
The information set forth in the foregoing table and example relates only to
Select Shares of the Fund. The Fund also offers another class of shares called
Institutional Service Shares. Select Shares and Institutional Service Shares are
subject to certain of the same expenses; however, Institutional Service Shares
are not subject to a 12b-1 fee. See "Other Classes of Shares."
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
The investment objective of the Fund is to seek capital appreciation. 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: stocks
and bonds. Additionally, the Fund may invest in cash reserves. 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 60 and 100 percent of its assets in stocks. The
stock asset categories are large company stocks, small company stocks, and
foreign stocks.
The Fund will invest between 0 and 40 percent of its assets in bonds. The Fund's
adviser believes that bonds offer opportunities for growth of capital or
otherwise may be desirable under prevailing market or economic conditions. The
bond asset categories are U.S. Treasury securities, mortgage-backed securities,
investment-grade corporate bonds, high yield corporate bonds and foreign bonds.
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>
Stocks 60-100%
Large Company Stocks 0-100%
Small Company Stocks 0-40%
Foreign Stocks 0-40%
Cash Reserves 0-20%
Bonds 0-40%
U.S. Treasury Securities 0-32%
Mortgage-Backed Securities 0-12%
Investment-Grade Corporate Bonds 0-12%
High Yield Corporate Bonds 0-16%
Foreign Bonds 0-16%
</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, foreign
stocks are judged to be unusually attractive relative to other asset categories,
the allocation for foreign stocks may be moved to its upper limit. At other
times when foreign 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.
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.
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 100 percent of its total assets in
large company stocks.
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 40 percent of its total
assets in small company stocks.
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.
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. The Fund may invest up to 40 percent of its total assets in
foreign stocks.
Cash Reserves Category. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in cash reserves. Cash reserves will
consist of U.S. and foreign short-term money market instruments, including
interest-bearing time deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest up to 20 percent of
its total assets in cash reserves.
Bond Asset Categories. The portion of the Fund's assets which is invested in
bonds ("Bond Assets") will be allocated among the following asset categories
within the ranges specified. Generally, the Fund will invest in Bond Assets
which are believed to offer opportunities for growth of capital when the adviser
believes interest rates will decline and, therefore, the value of the debt
securities will increase, or the market value of bonds will increase due to
factors affecting certain types of bonds or particular issuers, such as
improvement in credit quality due to company fundamentals or economic conditions
or assumptions on changes in trends in prepayment rates with respect to
mortgage-backed securities. The average duration of the Fund's Bond Assets will
be not less than three nor more than nine years. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to maturity.
Securities with shorter durations generally have less volatile prices than
securities of comparable quality with longer durations. The Fund should be
expected to maintain a higher average duration during periods of lower expected
market volatility, and a lower average duration during periods of higher
expected market volatility.
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 32 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 12 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 12 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.
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 16 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.
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 16 percent of its total assets in foreign bonds.
Acceptable Investments
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.
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 Investors Service,
Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's Corporation (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.
Cash Reserves. The Fund's cash 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.
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. 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;
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 Corporation (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.
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.
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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
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.
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.
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 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 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:
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
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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 cash reserves asset
category 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:
Peter R. Anderson is the portfolio manager for the domestic large 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.
Gregory M. Melvin is the portfolio manager for the domestic small company
stocks asset category. He has served in this capacity since the Fund's
inception. Mr. Melvin joined Federated Investors in 1980 and has been a
Vice President of the Fund's investment adviser since 1984. Mr. Melvin is a
Chartered Financial Analyst and received his M.B.A. in Finance from Harvard
Business School.
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.
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.
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.
Distribution of Select 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.
Distribution Plan. Pursuant to the provisions of a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Plan"), the Fund will
pay to the distributor an amount computed at an annual rate of .75 of 1% of the
average daily net asset value of the Shares to finance any activity which is
principally intended to result in the sale of Shares subject to the Plan.
The distributor may from time to time and for such periods as its deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for Shares.
Financial institutions will receive fees from the distributor 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
distributor.
The Fund's 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 amounts or may earn a profit from future payments made by the Fund
under the Plan.
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.
Administration of the Fund
Administrative Services. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan"). Under the Services Plan, financial institutions will
enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of Shares. In return for providing these
support services, a financial institution may receive payments from the Fund at
a rate not exceeding .25 of 1% of the average daily net assets of the Shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
administrative services may include, but are not limited to, the provision of
personal service and maintenance of shareholder accounts.
In addition to receiving the payments under the Services Plan, 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.
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, Washington, D.C.
Independent Public Accountants. The independent public accountants for the Fund
are Arthur Andersen & Co., 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 Select 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, 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
- --------------------------------------------------------------------------------
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 Select 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 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: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Managed Aggressive Growth
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 Aggressive Growth 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
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
the 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 Select 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 $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.
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 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 expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
Appendix
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Standard and Poor's Corporation 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
edge." 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 Aggressive Growth 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
- ---------------------------------------------------------------------------------------------------------------------
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 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Federated Managed
Aggressive Growth Fund
Select Shares
Prospectus
A Diversified Portfolio of
Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated March 11, 1994
3122008A-SEL (3/94)
FEDERATED MANAGED INCOME FUND
FEDERATED MANAGED GROWTH AND INCOME FUND
FEDERATED MANAGED GROWTH FUND
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(Portfolios of Managed Series Trust)
Institutional Service Shares
Select Shares
Supplement to the Combined Statement of Additional Information dated March 11,
1994
A. Please insert the following section entitled "Portfolio Turnover" on
page 7, following the section entitled "Restricted and Illiquid
Securities" and before the section entitled "Weighted Average Portfolio
Duration. In addition, please add the heading "Portfolio Turnover" to
the Table of Contents page immediately following the heading "Restricted
and Illiquid Securities."
"Portfolio Turnover
The Trust'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 Portfolios. For the period
from May 25, 1994 (date of initial public investment) to
July 31, 1994, the portfolio turnover rate for the Federated
Managed Income Fund, Federated Managed Growth and Income
Fund, Federated Managed Growth Fund, and Federated Managed
Aggressive Growth Fund was 97%, 36%, 28%, and 16%,
respectively."
B. Please delete J. Christopher Donahue's "Principal Occupations During
Past Five Years" from the section entitled "Officers and Trustees,"
which begins on page 10 and replace it with the following:
"President and Trustee, Federated Investors; Trustee and
President, Federated Advisers, Federated Management, and
Federated Research; Director and President, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the
son of John F. Donahue, Chairman and Trustee of the Trust."
C. Effective July 1, 1994, John A. Staley, IV resigned his positions with
the Trust and with Federated Investors. Accordingly, please delete his
name and biographical information from the section entitled "Officers
and Trustees," which begins on page 10.
D. Please insert the following after the first paragraph of the section
entitled "Trust Ownership" on page 12:
"As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Institutional
Service Shares of Federated Managed Income Fund: Balboan &
Co., Lafayette, IN owned approximately 148,639 Shares
(5.06%); The Peoples Bank & Trust Co., Tupelo, MS owned
approximately 189,860 Shares (6.46%); J. Jones & Company,
Atmore, AL owned approximately 207,346 Shares (7.06%); and
CIBAT & Co., Laurel, MD owned approximately 478,040 Shares
(16.27%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Select Shares of
Federated Managed Income Fund: ENBTRUST, Marysville, KS
owned approximately 18,464 Shares (5.40%); The Farmers
Company, Lititz, PA owned approximately 19,920 Shares
(5.83%); Industricorp and Co., Inc., Minneapolis, MN owned
approximately 20,152 Shares (5.90%); J. Jones & Company,
Atmore, AL owned approximately 102,973 Shares (30.14%); and
IU & Co., Columbus, IN owned approximately 103,361 Shares
(30.25%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Institutional
Service Shares of Federated Managed Growth and Income Fund:
Pioneer Bank & Trust, Belle Fourche, SD owned approximately
197,826 Shares (5.19%); CIBAT & Co., Laurel, MD owned
approximately 225,678 Shares (5.93%); KNAB & Co., Rochester,
PA owned approximately 243,336 Shares (6.39%); and Careco,
Salina, KS owned approximately 465,617 Shares (12.23%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Select Shares of
Federated Managed Growth and Income Fund: ENBTRUST,
Marysville, KS owned approximately 17,257 Shares (5.61%);
Bitmore Trust Company, Phoenix, AZ owned approximately
53,756 Shares (17.48%); and IU & Co., Columbus, IN owned
approximately 119,609 Shares (38.89%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Institutional
Service Shares of Federated Managed Growth Fund: ENBTRUST,
Marysville, KS owned approximately 131,858 Shares (5.62%);
KNAB & Co., c/o Century National Bank, Rochester, PA owned
approximately 133,161 Shares (5.68%); Bayban, Bayport, MN
owned approximately 169,970 Shares (7.25%); and Careco,
Salina, KS owned approximately 270,601 Shares (11.54%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Select Shares of
Federated Managed Growth Fund: IU & Co., Columbus, IN owned
approximately 16,258 Shares (6.89%); National Financial
Services, New York, NY owned approximately 20,445 Shares
(8.66%); Lafayette Bank & Trust Company, Lafayette, IN owned
approximately 27,857 Shares (11.80%); and ENBTRUST,
Marysville, KS owned approximately 69,129 Shares (29.29%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Institutional
Service Shares of Federated Managed Aggressive Growth Fund:
Bayban, Bayport, MN owned approximately 56,733 Shares
(5.11%); KNAB & Co., c/o Century National Bank, Rochester,
PA owned approximately 56,839 Shares (5.12%); and CIBAT &
Co., Laurel, MD owned approximately 375,237 Shares (33.77%).
As of September 6, 1994, the following shareholders of
record owned 5% or more of the outstanding Select Shares of
Federated Managed Aggressive Growth Fund: IU & Co.,
Columbus, IN owned approximately 15,066 Shares (11.74%); The
Farmers Company, Lititz, PA owned approximately 16,700
Shares (13.01%); Lafayette Bank & Trust Company, Lafayette,
IN owned approximately 18,538 Shares (14.45%); ENBTRUST,
Marysville, KS owned approximately 29,195 Shares (22.75%);
and Heritage Trust Company, Grand Junction, CO owned
approximately 31,714 Shares (24.71%)."
E. Please delete the section entitled "Adviser to the Trust" on page 13 and
replace it with the following:
"Adviser to the Trust
The Trust's investment adviser is Federated Management (the
'Adviser'). It is a subsidiary of Federated Investors. All
the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife
and his son, J. Christopher Donahue."
F. Please insert the following as the last paragraph in the section
entitled "Advisory Fees" on page 13:
"For the period from January 18, 1994 (start of business) to
July 31, 1994, the Adviser for Federated Managed Income Fund
earned advisory fees of $37,514, all of which were waived.
For the period from May 25, 1994 (date of initial public
investment) to July 31, 1994, the Adviser for Federated
Managed Growth and Income Fund, Federated Managed Growth
Fund, and Federated Managed Aggressive Growth Fund earned
advisory fees of $46,808, $26,553, and $14,124,
respectively, all of which were waived."
G. Please delete the first and second paragraphs under the section entitled
"Administrative Services" on page 13, and replace them with the
following:
"Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and
services to the Portfolios for a fee as described in the
prospectus of each Portfolio. For the period from January
18, 1994 (start of business) to July 31, 1994, Federated
Managed Income Fund incurred $2,717 in administrative costs,
none of which were waived. For the period from May 25, 1994
(date of initial public investment) to July 31, 1994,
Federated Managed Growth and Income Fund, Federated Managed
Growth Fund, and Federated Managed Aggressive Growth Fund
incurred $2,540, $2,396, and, $2,397, respectively, in
administrative costs, none of which were waived. Dr. Henry
J. Gailliot, an officer of Federated Management, the Adviser
to the Trust, holds approximately 20% of the outstanding
common stock and serves as Director of Commercial Data
Services, Inc., a company which provides computer processing
services to Federated Administrative Services."
H. Please add the following as the final paragraph under the section
entitled "Brokerage Transactions" on page 14:
"From May 25, 1994 (date of initial public investment) to
July 31, 1994, Federated Managed Income Fund, Federated
Managed Growth and Income Fund, Federated Managed Growth
Fund, and Federated Managed Aggressive Growth Fund paid
brokerage commissions of $8,829, $20,801, $16,670, and
$12,536, respectively."
I. Please delete the sections entitled "Shareholder Servicing Plan" and
"Distribution Plan (Select Shares)" on page 14. In addition, please
delete the headings "Shareholder Servicing Plan" and "Distribution Plan
(Select Shares)" from the Table of Contents page.
J. Please insert the following sub-section entitled "Distribution and
Shareholder Services Plans" following the first paragraph of the section
entitled "Purchasing Shares" on page 14. In addition, please add the
heading "Distribution and Shareholder Services Plans" to the Table of
Contents page immediately following the heading "Purchasing Shares."
"Distribution and Shareholder Services Plans
The Trust has adopted a Distribution Plan with respect to
the Select Shares of each Portfolio. In addition, the Trust
has adopted a Shareholder Services Plan (the 'Services
Plan') with respect to both classes of shares of each
Portfolio. These arrangements permit the payment of fees to
financial institutions, the distributor, and Federated
Shareholder Services to stimulate distribution activities
and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and
services may include, but are not limited to, marketing
efforts; providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing
purchase and redemption transactions and automatic
investments of client account cash balances; answering
routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that
the Portfolios will be able to achieve a more predictable
flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio
management and assist the Portfolios in pursuing their
investment objectives. By identifying potential investors
whose needs are served by the Portfolios' objectives, and
properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either
arrangement, may include: (1) providing personal services to
shareholders; (2) investing shareholder assets with a
minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning
their accounts.
From January 18, 1994 (start of business) to July 31, 1994,
the Select Shares of Federated Managed Income Fund incurred
$3,936 in distribution services fees. From May 25, 1994
(date of initial public investment) to July 31, 1994, the
Select Shares of Federated Managed Growth and Income Fund,
Federated Managed Growth Fund, and Federated Managed
Aggressive Growth Fund incurred $2,952, $1,087, and $1,210,
respectively, in distribution services fees.
In addition, for the period from January 18, 1994 (start of
business) to July 31, 1994, there were no payments made
pursuant to the Shareholder Services Plan by the
Institutional Service Shares of Federated Managed Income
Fund. For the period from May 25, 1994 (date of initial
public investment) to July 31, 1994, there were no payments
made pursuant to the Shareholder Services Plan by the
Institutional Service Shares of Federated Managed Growth and
Income Fund, Federated Managed Growth Fund, or Federated
Managed Aggressive Growth Fund. For the period from January
18, 1994 (start of business) to July 31, 1994, payments made
pursuant to the Shareholder Services Plan by the Select
Shares of Federated Managed Income Fund were $1,312. For
the period from May 25, 1994 (date of initial public
investment) to July 31, 1994, payments made pursuant to the
Shareholder Services Plan by the Select Shares of Federated
Managed Growth and Income Fund, Federated Managed Growth
Fund, and Federated Managed Aggressive Growth Fund were
$984, $362, and $403, respectively."
K. Please insert the following as the first paragraph in the section
entitled "Total Return" on page 16:
"Federated Managed Income Fund's cumulative total returns
for Institutional Service Shares and Select Shares from May
25, 1994 (date of initial public investment) to July 31,
1994, were 1.45% and 1.31%, respectively. Federated Managed
Growth and Income Fund's cumulative total returns for
Institutional Service Shares and Select Shares from May 25,
1994 (date of initial public investment) to July 31, 1994,
were 1.64% and 1.49%, respectively. Federated Managed
Growth Fund's cumulative total returns for Institutional
Service Shares and Select Shares from May 25, 1994 (date of
initial public investment) to July 31, 1994, were 1.14% and
1.07%, respectively. Federated Managed Aggressive Growth
Fund's cumulative total returns for Institutional Service
Shares and Select Shares from May 25, 1994 (date of initial
public investment) to July 31, 1994, were 1.06% and 0.91%,
respectively. Cumulative total return reflects a
Portfolio's performance over a specified period of time. The
Trust's total returns for Institutional Service Shares and
Select Shares are representative of only five months of
investment activity since the Trust's effective date."
L. Please insert the following as the first paragraph in the section
entitled "Yield" on page 17:
"Federated Managed Income Fund's 30-day SEC yields for
Institutional Service Shares and Select Shares were 5.44%
and 4.69%, respectively, for the 30-day period ended July
31, 1994. Federated Managed Growth and Income Fund's 30-day
SEC yields for Institutional Service Shares and Select
Shares were 5.14% and 4.39%, respectively, for the 30-day
period ended July 31, 1994. Federated Managed Growth Fund's
30-day SEC yields for Institutional Service Shares and
Select Shares were 4.09% and 3.33%, respectively, for the 30-
day period ended July 31, 1994. Federated Managed
Aggressive Growth Fund's 30-day SEC yields for Institutional
Service Shares and Select Shares were 3.25% and 2.51%,
respectively, for the 30-day period ended July 31, 1994."
M. Please add the following two indices at the end of the list of indices
in the section entitled "Performance Comparisons," which begins on page
17:
o Lehman Brothers Government/Corporate (Total) Index is
comprised of approximately 5,000 issues which include non-
convertible bonds publicly issued by the U.S. government or
its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and publicly
issued, fixed rate, non-convertible domestic bonds of
companies in industry, public utilities and finance. The
average maturity of these bonds approximates nine years.
Tracked by Lehman Brothers, Inc., the index calculates total
returns for one month, three month, twelve month and ten
year periods and year-to-date.
o Lehman Brothers Intermediate Government/Corporate Bond
Index is an unmanaged index comprised of all the bonds
issued by the Lehman Brothers Government/Corporate Bond
Index with maturities between 1 and 9.99 years. Total
return is based on price appreciation/depreciation and
income as a percentage of the original investment. Indices
are rebalanced monthly by market capitalization.
September 30, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
56166K 10 7
56166K 20 6
56166K 30 5
56166K 40 4
56166K 50 3
56166K 60 2
56166K 70 1
56166K 80 0
005946 (9/94)
Federated Managed Income Fund
Federated Managed Growth and Income Fund
Federated Managed Growth Fund
Federated Managed Aggressive Growth Fund
(Portfolios of Managed Series Trust)
Institutional Service Shares
Select Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read with
the respective prospectuses for Institutional Service Shares and
Select Shares of Federated Managed Income Fund, Federated Managed
Growth and Income Fund, Federated Managed Growth Fund and Federated
Managed Aggressive Growth Fund, all dated March 11, 1994. This
Statement is not a prospectus itself. To receive a copy of one of the
prospectuses, call or write Managed Series Trust.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated March 11, 1994
FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
Table of Contents
- --------------------------------------------------------------------------------
General Information About the Trust 1
- ---------------------------------------------------------------
Investment Objectives and Policies 1
- ---------------------------------------------------------------
Small Company Stocks 1
Mortgage-Backed Securities 1
Corporate Debt Obligations 1
Foreign Debt Obligations 1
Convertible Securities 1
Warrants 2
Futures and Options Transactions 2
Foreign Currency Transactions 4
Repurchase Agreements 6
Reverse Repurchase Agreements 6
When-Issued and Delayed Delivery
Transactions 6
Lending of Portfolio Securities 7
Restricted and Illiquid Securities 7
Weighted Average Portfolio Duration 7
Investment Limitations 8
- ---------------------------------------------------------------
Managed Series Trust Management 10
- ---------------------------------------------------------------
Officers and Trustees 10
The Funds 12
Trust Ownership 12
Trustee Liability 12
Investment Advisory Services 13
- ---------------------------------------------------------------
Adviser to the Trust 13
Advisory Fees 13
Other Related Securities 13
Administrative Services 13
- ---------------------------------------------------------------
Brokerage Transactions 14
- ---------------------------------------------------------------
Purchasing Shares 14
- ---------------------------------------------------------------
Shareholder Servicing Plan 14
Distribution Plan (Select Shares) 14
Conversion to Federal Funds 15
Determining Net Asset Value 15
- ---------------------------------------------------------------
Determining Market Value of Securities 15
Trading in Foreign Securities 15
Redeeming Shares 15
- ---------------------------------------------------------------
Redemption in Kind 16
Tax Status 16
- ---------------------------------------------------------------
The Portfolios' Tax Status 16
Foreign Taxes 16
Shareholders' Tax Status 16
Total Return 16
- ---------------------------------------------------------------
Yield 17
- ---------------------------------------------------------------
Performance Comparisons 17
- ---------------------------------------------------------------
General Information About the Trust
- --------------------------------------------------------------------------------
Managed Series Trust (the "Trust") was established as a Massachusetts business
trust on November 15, 1993. As of the date of this Statement, the Trust consists
of the following four separate portfolios of securities (collectively, the
"Portfolios" and each individually, the "Portfolio"): Federated Managed Income
Fund; Federated Managed Growth and Income Fund; Federated Managed Growth Fund;
and Federated Managed Aggressive Growth Fund. Each Portfolio has two classes of
shares of beneficial interest, Institutional Service Shares and Select Shares.
Investment Objectives and Policies
- --------------------------------------------------------------------------------
The Prospectuses discuss the objectives of the Portfolios and the policies that
each employs to achieve those objectives. The following discussion supplements
the description of the Portfolios' investment policies set forth in the
Prospectuses. The Portfolios' respective investment objectives cannot be changed
without approval of shareholders. Except as noted, the investment policies
described below may be changed by the Board of Trustees ("Trustees") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
Small Company Stocks
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.
Mortgage-Backed Securities
Privately Issued Mortgage-Related Securities
The privately issued mortgage-related securities purchased by the
Portfolios generally represent an ownership interest in federal agency
mortgage pass-through securities, such as those issued by Government
National Mortgage Association ("GNMA"). The terms and characteristics of
the mortgage instruments may vary among pass-through mortgage loan pools.
Privately issued mortgage-related securities generally pay back principal
and interest over the life of the security. At the time the Portfolios
reinvest the payments and any unscheduled prepayments of principal
received, the Portfolios may receive a rate of interest which is actually
lower than the rate of interest paid on these securities ("prepayment
risks"). Privately issued mortgage-related securities are subject to
higher prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans may be prepaid
without penalty or premium. Prepayment risk on privately issued mortgage-
related securities tends to increase during periods of declining mortgage
interest rates because many borrowers refinance their mortgages to take
advantage of the more favorable rates. Prepayments on privately issued
mortgage-related securities are also affected by other factors, such as
the frequency with which people sell their homes or elect to make
unscheduled payments on their mortgages.
The market for privately issued mortgage-related securities has expanded
considerably since its inception. The size of the primary issuance market
and the active participation in the secondary market by securities
dealers and other investors make government-related pools highly liquid.
Corporate Debt Obligations
The corporate debt obligations in which the Portfolios invest may bear fixed,
floating, floating and contingent, or increasing rates of interest. The
Portfolios may invest in investment-grade corporate debt obligations (which are
rated BBB or higher by nationally recognized statistical rating organizations)
or high yield corporate debt obligations (which are rated BB or lower by
nationally recognized statistical rating organizations).
Foreign Debt Obligations
The Portfolios may invest in investment-grade debt securities (which are rated
BBB or higher by nationally recognized statistical rating organizations) of
nations other than the United States.
Convertible Securities
The Portfolios may invest in convertible securities. Convertible securities are
fixed-income securities that may be exchanged or converted into a predetermined
number of shares of the issuer's underlying common stock at the option of the
holder during a specified 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 a variety of
investment strategies.
The Portfolios will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of the Portfolios' investment
adviser, the investment characteristics of the underlying common shares will
assist the Portfolios in achieving their investment objectives. The Portfolios
may also elect to hold or trade convertible shares. In selecting convertible
securities, the Portfolios' investment adviser evaluates the investment
characteristics of the convertible security as a fixed-income instrument, and
the investment potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a particular
convertible security, the Portfolios' investment adviser considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.
Warrants
The Portfolios may invest in warrants. Warrants are basically options to
purchase common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than one year to twenty years,
or they may be perpetual. However, most warrants have expiration dates after
which they are worthless. In addition, a warrant is worthless if the market
price of the common stock does not exceed the warrant's exercise price during
the life of the warrant. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock. A Portfolio will not invest more than 5% of the value of
its total assets in warrants. No more than 2% of this 5% may be warrants which
are not listed on the New York or American Stock Exchanges. Warrants acquired in
units or attached to securities may be deemed to be without value for purposes
of this policy.
Futures and Options Transactions
The Portfolios may attempt to hedge all or a portion of its portfolio by buying
and selling futures contracts and options on futures contracts.
Futures Contracts
A futures contract is a firm commitment by two parties, the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. However, a
stock 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
difference between the value of the index at the close of the last
trading day of the contract and the price at which the index was
originally written. No physical delivery of the underlying security in
the index is made.
The purpose of the acquisition or sale of a futures contact by the
Portfolios is to protect the Portfolios from fluctuations in the value of
their securities caused by anticipated changes in interest rates or
market conditions. For example, in the fixed-income securities market,
price moves inversely to interest rates. A rise in rates results in a
drop in price. Conversely, a drop in rates results in a rise in price. In
order to hedge its holdings of fixed income securities against a rise in
market interest rates, a Portfolio could enter into contracts to deliver
securities at a predetermined price (i.e., "go short") to protect itself
against the possibility that the prices of its fixed-income securities
may decline during the Portfolio's anticipated holding period. A
Portfolio would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in
market interest rates.
Purchasing Put Options on Futures Contracts
The Portfolios may purchase listed put options or over-the-counter put
options on futures contracts. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price. A Portfolio would purchase put options on futures contracts to
protect its portfolio securities against decreases in value resulting
from market factors such as an anticipated increase in interest rates.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, a
Portfolio will normally close out its option by selling an identical
option. If the hedge is successful, the proceeds received by a Portfolio
upon the sale of the second option may be large enough to offset both the
premium paid by the Portfolio for the original option plus the decrease
in value of the hedged securities.
Alternatively, a Portfolio may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Portfolio would then deliver
the futures contract in return for payment of the strike price. If a
Portfolio neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and only the premium
paid for the contract will be lost.
Writing Put Options on Futures Contracts
The Portfolios may write listed put options on financial futures
contracts to hedge its portfolio against a decrease in market interest
rates. When a Portfolio writes a put option on a futures contract, it
receives a premium for undertaking the obligation to assume a long
futures position (buying a futures contract) at a fixed price at any time
during the life of the option. As market interest rates decrease, the
market price of the underlying futures contract normally increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the market.
The premium received by a Portfolio can then be used to offset the higher
prices of portfolio securities to be purchased in the future due to the
decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
a Portfolio may close out the option by buying an identical option. If
the hedge is successful, the cost of buying the second option will be
less than the premium received by a Portfolio for the initial option.
Purchasing Call Options on Futures Contracts
An additional way in which the Portfolios may hedge against decreases in
market interest rates is to buy a listed call option on a financial
futures contract. When a Portfolio purchases a call option on a futures
contract, it is purchasing the right (not the obligation) to assume a
long futures position (buy a futures contract) at a fixed price at any
time during the life of the option. As market interest rates fall, the
value of the underlying futures contract will normally increase,
resulting in an increase in value of a Portfolio's option position. When
the market price of the underlying futures contract increases above the
strike price plus premium paid, a Portfolio could exercise its option and
buy the futures contract below market price.
Prior to the exercise or expiration of the call option, a Portfolio could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, a Portfolio has completed a successful hedge.
Writing Call Options on Futures Contracts
The Portfolios may write listed call options or over-the-counter call
options on futures contracts to hedge against, for example, an increase
in market interest rates. When a Portfolio writes a call option on a
futures contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the strike price at any
time during the life of the option if the option is exercised. As market
interest rates rise or as stock prices fall, causing the prices of
futures to go down, a Portfolio's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill, causing the
value of a Portfolio's call option position to increase.
In other words, as the underlying future's price falls below the strike
price, the buyer of the option has no reason to exercise the call, so
that a Portfolio keeps the premium received for the option. This premium
can help substantially to offset the drop in value of a Portfolio's
portfolio securities.
Prior to the expiration of a call written by a Portfolio, or exercise of
it by the buyer, a Portfolio may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by a Portfolio for the
initial option. The net premium income of a Portfolio will then
substantially offset the decrease in value of the hedged securities.
Limitation on Open Futures Positions
A Portfolio will not maintain open positions in futures contracts it has
sold or options it has written on futures contracts if, in the aggregate,
the value of the option positions (marked to market) exceeds the current
market value of its securities portfolio plus or minus the unrealized
gain or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, a Portfolio will take prompt
action to close out a sufficient number of open contracts to bring its
open futures and options positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Portfolios do not pay or
receive money upon the purchase or sale of a futures contract. Rather, a
Portfolio is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with the custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that futures
contracts initial margin does not involve a borrowing by a Portfolio to
finance the transactions. Initial margin is in the nature of a
performance bond or good-faith deposit on the contract which is returned
to a Portfolio upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Portfolio is valued daily at the official
settlement price of the exchange on which it is traded. Each day a
Portfolio pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by a Portfolio but is instead settlement between a Portfolio and the
broker of an amount one would owe the other if the futures contract
expired. In computing its daily net asset value, a Portfolio will mark to
market its open futures positions.
The Portfolios are also required to deposit and maintain margin when they
write call options on futures contracts.
Purchasing and Writing Over-the-Counter Options
The Portfolios may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or
writers of the options for those options on portfolio securities held by
a Portfolio and not traded on an exchange.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options
are third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while over-the-counter options
may not.
Foreign Currency Transactions
Currency Risks
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the
Portfolios value their assets daily in U.S. dollars, the Portfolios may
not convert their holdings of foreign currencies to U.S. dollars daily.
The Portfolios may incur conversion costs when they convert their
holdings to another currency. Foreign exchange dealers may realize a
profit on the difference between the price at which the Portfolios buy
and sell currencies.
The Portfolios will engage in foreign currency exchange transactions in
connection with their investments in the securities. The Portfolios will
conduct their foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through forward contracts to purchase or sell foreign
currencies.
Forward Foreign Currency Exchange Contracts
The Portfolios may enter into forward foreign currency exchange contracts
in order to protect themselves against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and a foreign
currency involved in an underlying transaction. However, forward foreign
currency exchange contracts may limit potential gains which could result
from a positive change in such currency relationships. The Portfolios'
investment adviser believes that it is important to have the flexibility
to enter into forward foreign currency exchange contracts whenever it
determines that it is in the Portfolios' best interest to do so. The
Portfolios will not speculate in foreign currency exchange.
The Portfolios will not enter into forward foreign currency exchange
contracts or maintain a net exposure in such contracts when they would be
obligated to deliver an amount of foreign currency in excess of the value
of their portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency or
currencies that the Portfolios' investment adviser believes will tend to
be closely correlated with that currency with regard to price movements.
Generally, the Portfolios will not enter into a forward foreign currency
exchange contract with a term longer than one year.
Foreign Currency Options
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option
has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation, to sell
the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect a
Portfolio against an adverse movement in the value of a foreign currency,
the option will not limit the movement in the value of such currency. For
example, if a Portfolio were holding securities denominated in a foreign
currency that was appreciating and had purchased a foreign currency put
to hedge against a decline in the value of the currency, the Portfolio
would not have to exercise their put option. Likewise, if a Portfolio
were to enter into a contract to purchase a security denominated in
foreign currency and, in conjunction with that purchase, were to purchase
a foreign currency call option to hedge against a rise in value of the
currency, and if the value of the currency instead depreciated between
the date of purchase and the settlement date, the Portfolio would not
have to exercise its call. Instead, the Portfolio could acquire in the
spot market the amount of foreign currency needed for settlement.
Special Risks Associated with Foreign Currency Options
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
additional risks associated with foreign currency options. The markets in
foreign currency options are relatively new, and the Portfolios' ability
to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Portfolios will
not purchase or write such options unless and until, in the opinion of
the Portfolios' investment adviser, the market for them has developed
sufficiently to ensure that the risks in connection with such options are
not greater than the risks in connection with the underlying currency,
there can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e., less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. option
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until
they reopen.
Foreign Currency Futures Transactions
By using foreign currency futures contracts and options on such
contracts, the Portfolios may be able to achieve many of the same
objectives as they would through the use of forward foreign currency
exchange contracts. The Portfolios may be able to achieve these
objectives possibly more effectively and at a lower cost by using futures
transactions instead of forward foreign currency exchange contracts.
Special Risks Associated with Foreign Currency Futures Contracts and
Related Options
Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition,
there are risks assocated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
futures currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency foreign currency
futures contracts is relatively new. The ability to establish and close
out positions on such options is subject to the maintenance of a liquid
secondary market. To reduce this risk, the Portfolios will not purchase
or write options on foreign currency futures contracts unless and until,
in the opinion of the Portfolios' investment adviser, the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions in
the underlying foreign currency futures contracts. Compared to the
purchase or sale of foreign currency futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to
the Fund because the maximum amount at risk is the premium paid for the
option (plus transaction costs). However, there may be circumstances when
the purchase of a call or put option on a futures contract would result
in a loss, such as when there is no movement in the price of the
underlying currency or futures contract.
Repurchase Agreements
The Portfolios or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Portfolio, the Portfolio could receive less than the repurchase price in any
sale of such securities. In the event that a defaulting seller files for
bankruptcy or becomes insolvent, disposition of such securities by a Portfolio
might be delayed pending court action. The Portfolios believe that under the
regular procedures normally in effect for custody of a Portfolio's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of a Portfolio and allow retention or disposition of such
securities. The Portfolios will only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
deemed by the Portfolios' investment adviser to be creditworthy pursuant to
guidelines established by the Trustees.
Reverse Repurchase Agreements
The Portfolios may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Portfolio transfers possession of a portfolio instrument to another person, such
as a financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Portfolio will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable a Portfolio to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that a
Portfolio will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Portfolio, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
When-Issued and Delayed Delivery Transactions
The Portfolios may engage in when-issued and delayed delivery transactions.
These transactions are arrangements in which a Portfolio purchases securities
with payment and delivery scheduled for a future time. A Portfolio engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with its investment objective and policies, and
not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Portfolios. 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.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Portfolios sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and are maintained until the transaction is settled.
The Portfolios may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of their respective
assets.
Lending of Portfolio Securities
The collateral received when the Portfolios lend portfolio securities must be
valued daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the particular Portfolio. During
the time portfolio securities are on loan, the borrower pays the Portfolios any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Portfolios or the borrower. The Portfolios may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker.
Restricted and Illiquid Securities
The Portfolios may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law and is generally sold to institutional investors, such as
the Portfolios, who agree that they are purchasing paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Portfolios through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Portfolios believe that Section 4(2)
commercial paper and possibly certain other restricted securities which meet the
criteria for liquidity established by the Trustees are quite liquid. The
Portfolios intend, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Portfolios' investment adviser, as liquid
and not subject to the investment limitation applicable to illiquid securities.
In addition, because Section 4(2) commercial paper is liquid, the Portfolios
intend to not subject such paper to the limitation applicable to restricted
securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under the Securities and Exchange commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Portfolios believe that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
Weighted Average Portfolio Duration
Duration is a commonly used measure of the potential volatility of the price of
a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Duration measures the magnitude of the change in
the price of a debt security relative to a given change in the market rate of
interest. The duration of a debt security depends on three primary variables:
the security's coupon rate, maturity date, and level of market interest rates
for similar debt securities. Generally, debt securities with lower coupons or
longer maturities will have a longer duration than securities with higher
coupons or shorter maturities.
Duration is calculated by dividing the sum of the time-weighted values of cash
flows of a security or portfolio of securities, including principal and interest
payments, by the sum of the present values of the cash flows. Certain debt
securities, such as asset-backed securities, may be subject to prepayment at
irregular intervals. The duration of these instruments will be calculated based
upon assumptions established by the investment adviser as to the probable amount
and sequence of principal prepayments.
Mathematically, duration is measured as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PVCF1(1) PVCF2(2) PVCF3(3) PVCFn(n)
Duration p ---------- + ---------- + ---------- + . . . + -----------
PVTCF PVTCF PVTCF PVTCF
</TABLE>
where
<TABLE>
<C> <C> <S>
PVCFt p the present value of the cash flow in period t discounted at the prevailing yield-to-maturity
t p the period when the cash flow is received
n p remaining number of periods until maturity
total present value of the cash flow from the bond where the present value is determined using the
PVTCF p prevailing yield-to-maturity
</TABLE>
Investment Limitations
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Issuing Senior Securities and Borrowing Money
A Portfolio will not issue senior securities, except that it may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount
borrowed, and except to the extent that a Portfolio may enter into
futures contracts.
A Portfolio will not borrow money or engage in reverse repurchase
agreements except as a temporary, extraordinary, or emergency measure or
to facilitate management of the Portfolio by enabling it to meet
redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. A Portfolio will not
purchase any securities while any borrowings in excess of 5% of its total
assets are outstanding.
Investing in Commodities
The Portfolios will not invest in commodities, except that the Portfolios
reserve the right to engage in transactions involving financial futures
contracts, options, and forward contracts with respect to foreign
securities or currencies.
Investing in Real Estate
The Portfolios will not purchase or sell real estate, including limited
partnership interests, although the Portfolios may invest in securities
of issuers whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or which represent
interests in real estate.
Concentration of Investments
A Portfolio will not invest 25% or more of the value of its total assets
in any one industry (other than securities issued by the U.S. government,
its agencies, or instrumentalities).
Underwriting
A Portfolio will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities which the Portfolio may purchase
in accordance with its investment objective, policies, and limitations.
Selling Short and Buying on Margin
The Portfolios will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as may be
necessary for clearance of purchases and sales of portfolio securities. A
deposit or payment by a Portfolio of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
Diversification of Investments
With respect to securities comprising 75% of the value of its total
assets, a Portfolio will not purchase securities issued by any one issuer
(other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer or if it would own more than 10% of the
outstanding voting securities of such issuer. (For purposes of this
limitation a Portfolio considers instruments issued by a U.S. branch of a
domestic bank having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items").
Pledging Assets
The Portfolios will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, a Portfolio may
pledge assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of total assets at the time
of the pledge. For purposes of this limitation, the following are not
deemed to be pledges: margin deposits for the purchase and sale of
financial futures contracts and related options; and segregation of
collateral arrangements made in connection with options activities or the
purchase of securities on a when-issued basis.
Lending Cash or Securities
A Portfolio will not lend any of its assets except portfolio securities.
This shall not prevent the purchase or holding of U.S. government
obligations, corporate bonds, debentures, notes, certificates of
indebtedness, or other debt securities of any issuer, repurchase
agreements, or other transactions which are permitted by the Portfolios'
respective investment objectives, policies, or Declaration of Trust.
The above investment limitations cannot be changed with respect to a Portfolio
without approval of that Portfolio's shareholders. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
Investing in Restricted Securities
A Portfolio will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted securities which meet
the criteria for liquidity as established by the Trustees. In order to
comply with registration requirements of a certain state, each Portfolio
has agreed to limit its investment in restricted securities to 5% of its
total assets. If state requirements change, this policy may be changed
without notice to shareholders.
Investing in Illiquid Securities
A Portfolio will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter
options, and certain securities not determined by the Trustees to be
liquid.
Investing in Minerals
The Portfolios will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except they may purchase
the securities of issuers which invest in or sponsor such programs.
Investing in Warrants
A Portfolio will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, each Portfolio will limit its
investments in such warrants not listed on the New York or American Stock
Exchanges to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholder.) For
purposes of this investment restriction, warrants will be valued at the
lower of cost or market, except that warrants acquired by a Portfolio in
units with or attached to securities may be deemed to be without value.
Investing in Put Options
A Portfolio will not purchase put options on securities, unless the
securities are held in the Portfolio's portfolio or unless the Portfolio
is entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.
Writing Covered Call Options
A Portfolio will not write call options on securities unless the
securities are held in the Portfolio's portfolio or unless the Portfolio
is entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.
Investment in Securities of Other Investment Companies
A Portfolio will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of total assets in any one
investment company, and will invest no more than 10% of its total assets
in investment companies in general. A Portfolio will purchase securities
of closed-end investment companies only in open-market transactions
involving only customary broker's commissions. However, these limitations
are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. It should be
noted that investment companies incur certain expenses such as
management fees, and, therefore, any investment by a Portfolio in
shares of another investment company would be subject to such duplicate
expenses.
Investing in New Issuers
A Portfolio will not invest more than 5% of the value of its total assets
in securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Issuers Whose Securities are Owned by Officers and Trustees of
the Trust
A Portfolio will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust, the investment adviser, or a
sub-adviser owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
No Portfolio expects to borrow money in excess of 5% of the value of its net
assets during the coming fiscal year.
Managed Series Trust Management
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Officers and Trustees
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
Positions with Principal Occupations
Name and Address the Trust During Past Five Years
<S> <C> <C>
John F. Donahue\* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Trustee Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director, AEtna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company. Mr. Donahue is the father
of J. Christopher Donahue, Vice President of the Trust.
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee, or
Associates, Inc., Realtors Managing General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Property Management, Inc.
Naples, FL
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza--23rd Director, Trustee, or Managing General Partner of the Funds; formerly,
Floor Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Pittsburgh, PA Director, Ryan Homes, Inc.
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
Edward L. Flaherty, Jr.\ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Boston Financial,
F.A.
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer
Learning Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of some of the
Federated Investors Tower Trustee Funds; staff member, Federated Securities Corp. and Federated
Pittsburgh, PA Administrative Services, Inc.
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Tower Federated Management, and Federated Research; President and Director,
Pittsburgh, PA Federated Administrative Services, Inc.; Trustee, Federated Services
Company; President or Vice President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds. Mr. Donahue is the son of
John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director, Federated Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower and Treasurer President and Treasurer, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Trustee, Federated Services Company; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.;
Chairman, Treasurer and Director Federated Administrative Services,
Inc.; Trustee or Director of some of the Funds; Vice President and
Treasurer of the Funds.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Tower and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Director,
Federated Administrative Services, Inc.; Director and Executive Vice
President, Federated Securities Corp.; Vice President and Secretary of
the Funds.
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance Compa-
ny and President of its Federated Research Division.
</TABLE>
*This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
\Member of the Trust's Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
The Funds
"The Funds" and "Funds" mean the following investment companies: A. T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series,
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; FT
Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Mark Twain Funds; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; New York Municipal
Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust;
Signet Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; and
Trust for U.S. Treasury Obligations.
Trust Ownership
Officers and Trustees own less than 1% of the shares of the Trust.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
- --------------------------------------------------------------------------------
Adviser to the Trust
The Trust's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue. John F. Donahue, Chairman and Trustee
of Federated Management, is Chairman and Trustee, Federated Investors and
Chairman and Trustee of the Trust. John A. Staley, IV, President and Trustee,
Federated Management, is Vice President and Trustee, Federated Investors;
Executive Vice President, Federated Securities Corp.; and Vice President of the
Trust. J. Christopher Donahue, Trustee of Federated Management, is President and
Trustee, Federated Investors; Trustee, Federated Services Company; President and
Director, Federated Administrative Services, Inc.; and Vice President of the
Trust. John W. McGonigle, Vice President, Secretary, and Trustee of Federated
Management, is Trustee, Vice President, Secretary, and General Counsel,
Federated Investors; Trustee, Federated Services Company; Executive Vice
President, Secretary and Director, Federated Administrative Services, Inc.;
Executive Vice President and Director, Federated Securities Corp.; and Vice
President and Secretary of the Trust.
Henry J. Gailliot, Ph.D., is the investment adviser's economist and strategist.
Dr. Gailliot joined Federated Investors in 1972 and is Senior Vice
President-Economist, Federated Research Corp. and Chairman, Federated Investment
Counseling. His responsibilities include the development of Federated's economic
outlook, as well as Federated's investment policy outlook for the equity and
debt markets. Dr. Gailliot graduated with an M.S. in Industrial Administration
from Carnegie Institute of Technology and received a Ph.D. in Economics from
Carnegie Mellon University.
The Adviser shall not be liable to the Trust, the Portfolios, or any shareholder
of the Portfolios for any losses that may be sustained in the purchase, holding,
or sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus of each Portfolio.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If aPortfolio's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Portfolio for its expenses over the limitation.
If the Portfolios' monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
Administrative Services
- --------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Portfolios for a fee as
described in the prospectus of each Portfolio.
John A. Staley, IV, an officer and Trustee of the Trust, and Dr. Henry J.
Gailliot, an officer of the Federated Management, the Adviser to the Trust, hold
approximately 15% and 20%, respectively, of the outstanding common stock and
serve as Directors of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services, Inc.
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 use those that are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers who offer brokerage and research services. These
services may be furnished directly to the Portfolios or to the Adviser and may
include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers that offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
Purchasing Shares
- --------------------------------------------------------------------------------
Shares of the Portfolios are sold at the net asset value on days that the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Portfolios is explained in each Portfolio's respective prospectus under
"Investing in Institutional Service Shares" or "Investing in Select Shares."
Shareholder Servicing Plan
The Trust has adopted a Shareholder Servicing Plan (the "Services Plan") with
respect to the Institutional Service Shares and Select Shares of each Portfolio.
Pursuant to the Services Plan, financial institutions will enter into
shareholder service agreements with the Portfolios to provide administrative
support services to their customers who from time to time may be owners of
record or beneficial owners of shares of one or more Portfolios. In return for
providing these support services, a financial institution may receive payments
from one or more Portfolios at a rate not exceeding .25% of the average daily
net assets of the Select Shares of the particular Portfolio or Portfolios
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. The Services Plan
is designed to stimulate financial institutions to render administrative support
services to the Portfolios and their shareholders. These administrative support
services include, but are not limited to, the following functions: providing
office space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Portfolios; assisting clients
in changing dividend options, account designations and addresses; and providing
such other services as the Portfolios reasonably request.
Among the benefits the Trustees expects to achieve in adopting the Services Plan
are the following: (1) an efficient and effective administrative system; (2) a
more efficient use of shareholder assets by having them rapidly invested in the
Portfolios, through an automatic transfer of funds from a demand deposit account
to an investment account, with a minimum of delay and administrative detail; and
(3) an efficient and reliable shareholder records system and prompt responses to
shareholder requests and inquiries concerning their accounts.
In addition to receiving payments under the Services Plan, financial
institutions may be compensated by the Adviser, the administrator, or affiliates
thereof for providing administrative support services to holders of Select
Shares of the Portfolios. These payments will be made directly by the Adviser or
administrator and will not be made from the assets of any of the Portfolios.
Distribution Plan (Select Shares)
With respect to the Select Shares of the Portfolios, the Trust has adopted a
Plan pursuant to Rule 12b-1, which was promulgated by the SEC under the
Investment Company Act of 1940. The Plan provides for payment of fees to the
distributor to finance any activity that is principally intended to result in
the sale of Select Shares of the Portfolios. Such activities may include the
advertising and marketing of Select Shares; preparing, printing and distributing
prospectuses and sales literature to prospective shareholders, brokers or
administrators; and implementing and operating the Plan. Pursuant to the Plan,
the distributor may pay fees to brokers for distribution services as to Select
Shares.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of Select Shares of the Portfolios as to allow each Portfolio
to achieve economic viability. It is also anticipated that an increase in the
size of each Portfolio will facilitate more efficient portfolio management and
assist each Portfolio in seeking to achieve its investment objective.
Conversion to Federal Funds
It is each Portfolio's policy to be as fully invested as possible so that
maximum income may be earned. To this end, all payments from shareholders must
be in federal funds or be converted into federal funds. State Street Bank and
Trust Company acts as the shareholder's agent in depositing checks and
converting them to federal funds.
Determining Net Asset Value
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by each Portfolio are described in the prospectus. Net asset value
will not be calculated on days on which the New York Stock Exchange is closed.
Determining Market Value of Securities
Market values of each Portfolio's portfolio securities are determined as
follows:
for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;
for bonds and other fixed-income securities, as determined by an independent
pricing service;
for short-term obligations, according to the prices as furnished by an
independent pricing service;
for short-term obligations with maturities of less than 60 days, at amortized
cost, or at fair value as determined in good faith by the Trustees; and
for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
The Portfolios will value futures contracts, options, and put options on futures
at their market values established by the exchanges at the close of option
trading on such exchanges unless the Trustees determines in good faith that
another method of valuing option positions is necessary to appraise their fair
market value.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Portfolios value foreign securities at the latest closing price on the exchange
on which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Trustees, although the actual calculation may be done by
others.
Redeeming Shares
- --------------------------------------------------------------------------------
The Portfolios redeem shares at the next computed net asset value after the
particular Portfolio receives the redemption request. Redemption procedures are
explained in the prospectus under the section entitled "Redeeming Shares."
Because portfolio securities of the Portfolios may be traded on foreign
exchanges which trade on Saturdays or on holidays on which the Portfolios will
not make redemptions, the net asset value of Shares of the Portfolios may be
significantly affected on days when shareholders do not have an opportunity to
redeem their Shares.
Redemption in Kind
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the respective Portfolio's investment portfolio.
To the extent available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner that the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, under which, with respect to each Portfolio, the Trust is obligated to
redeem shares for any one shareholder in cash only up to the lesser of $250,000
or 1% of the respective class's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
Tax Status
- --------------------------------------------------------------------------------
The Portfolios' Tax Status
The Portfolios expect to pay no federal income tax because they expect to meet
the requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, each
Portfolio must, among other requirements:
derive at least 90% of its gross income from dividends, interest and gains from
the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months;
invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
However, the Portfolios may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (PFIC). Federal
income taxes may be imposed on the Portfolios upon disposition of PFIC
investments.
Each Portfolio will be treated as a single, separate entity for federal income
tax purposes so that income and losses (including capital gains and losses)
realized by a Portfolio will not be combined for tax purposes with income and
losses realized by any of the other Portfolios.
Foreign Taxes
Investment income on certain foreign securities in which the Portfolios may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which the Portfolios would be subject.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to a particular fund if that fund were a regular corporation and to
the extent designed by a fund as so qualifying. These dividends, and any
short-term capital gains, are taxable as ordinary income.
Capital Gains
Shareholders will pay federal tax on long-term capital gains distributed
to them regardless of how long they have held the shares of the
particular Portfolio.
Total Return
- --------------------------------------------------------------------------------
The average annual total return for the Portfolios is the average compounded
rate of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable value
is compounded by multiplying the number of shares owned at the end of the period
by the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
Yield
- --------------------------------------------------------------------------------
The yield for both classes of each Portfolio is determined by dividing the net
investment income per share (as defined by the SEC) earned by the particular
Portfolio over a thirty-day period by the maximum offering price per share of
the particular Portfolio on the last day of the period. This value is then
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a twelve month period and is reinvested every six months. The yield does
not necessarily reflect income actually earned by the particular Portfolio
because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions charge fees in connection with
services provided in conjunction with an investment in a Portfolio, the
performance will be reduced for those shareholders paying those fees.
Performance Comparisons
- --------------------------------------------------------------------------------
Each Portfolio's performance of both classes of shares depends upon such
variables as:
portfolio quality;
average portfolio maturity;
type of instruments in which the particular Portfolio is invested;
changes in the expenses of the Trust, the particular Portfolio or either class
of shares; and
various other factors.
Each Portfolio's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return for each class of the Portfolios.
Investors may use financial publications and/or indices to obtain a more
complete view of a Portfolio's performance of either class of shares. When
comparing performance of either class of shares, investors should consider all
relevant factors such as the composition of any index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which a Portfolio uses in advertising may include:
Lipper Analytical Services, Inc., ranks funds in various fund categories by
making competitive calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.
From time to time, a Portfolio will quote its Lipper ranking in advertising and
sales literature.
Standard & Poor's Utility Index is an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price of
the stocks. The index also provides figures for changes in price from the
beginning of the year to date and for a twelve-month period.
Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestments of all dividends paid by stocks listed on
its index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in the Standard & Poor's figures.
Standard & Poor's Small Stock Index, an index which is expected to be formally
launched at the end of the first quarter of 1994, will probably be market
weighted and consist of 600 hundred stocks of companies having between $100
million and $1 billion in market capitalization.
Europe, Australia, and Far East (EAFE) is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return is
a net dividend figure less Luxembourg withholding tax. The EAFE is monitored by
Capital International, S.A., Geneva, Switzerland.
Russell 2000 Index is a broadly diversified index consisting of approximately
2,000 small capitalization common stocks that can be used to compare to the
total returns of funds whose portfolios are invested primarily in small
capitalization common stocks.
Lehman Brothers Treasury Intermediate Bond Index (U.S. Dollars) is an index
composed of all bonds covered by the Lehman Brothers Treasury Bond Index with
maturities between one and 9.9 years. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
Lehman Brothers Treasury Long-Term Bond Index (U.S. Dollars) is an index
composed of all bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
J.P. Morgan Global Non-U.S. Government Bond Index is a total return, market
capitalization weighted index, rebalanced monthly consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
Netherlands, Spain, Sweden and United Kingdom.
Lehman Brothers Corporate Intermediate Bond Index (U.S. Dollars) is a subset of
the Lehman Brothers Corporate Bond Index covering all corporate, publicly
issued, fixed-rate, nonconvertible U.S. debt issues rated at least Baa with at
least $50 million principal outstanding and maturity less than 10 years.
Lehman Brothers Corporate B Index is an index composed of all bonds covered by
Lehman Brothers High Yield Index rated "B" by Moody's Investors Service. Bonds
have a minimum amount outstanding of $100 million and at least one year to
maturity. Total return comprises price appreciation/depreciation and income as
a percentage of the original investment. Indexes are rebalanced monthly by
market capitalization.
Lehman Brothers Mortgage-Backed Securities Index includes 15-and 30-year
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC),
and Federal National Mortgage Corporation (FNMA). Graduated payment mortgages
(GPMs) and balloons are included in the index.
Advertisements and other sales literature for both classes of shares of the
Portfolios may quote total returns which are calculated on non-standardized base
periods. The total returns represent the historic change in the value of an
investment in either class of shares of the Portfolios based on monthly or
quarterly, as applicable, reinvestment of dividends over a specified period of
time.
3122014B (3/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A.)
(b) Exhibits:
(1) (i) Conformed Copy of Declaration of Trust of the
Registrant (1);
(ii) Conformed Copy of Amendment No. 1 to Declaration of
Trust (1);
(iii) Conformed Copy of Amendment No. 2 to Declaration of
Trust (2);
(2) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Copy of Specimen Certificates for Shares of Beneficial
Interest of the Registrant (2);
(5) Conformed Copy of Investment Advisory Contract of the
Registrant (3);
(6) Conformed Copy of Distributor's Contract of the
Registrant (3);
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the Registrant;+
(9) (i) Conformed Copy of Transfer Agency and Service
Agreement of the Registrant;+
(ii) Conformed Copy of Former Shareholder Services Plan of
the Registrant dated December 1, 1993;+
(iii) Conformed Copy of Shareholder Services Plan of the
Registrant dated March 1, 1994;+
(iv) Conformed Copy of Shareholder Services Agreement of
the Registrant;+
(v) Copy of Shareholder Services Sub-Contract of the
Registrant;+
(vi) Conformed Copy of Administrative Services Agreement of
the Registrant;+
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered (2);
(11) Conformed Copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (2);
(14) Not applicable;
(15) (i) Conformed Copy of Distribution Plan;+
(ii) Copy of 12b-1 Agreement (2);
(16) Copy of Schedules for Computation of Fund Performance
Data;+
(17) (i) Conformed Copy of Power of Attorney (1);
(ii) Copy of Financial Data Schedule;+
(18) Conformed Copy of Opinion and Consent of Counsel as to
availability of Rule 485(b);+
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
_______________________
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed December 2, 1993 (File
Nos. 33-51247 and 811-7129).
(2) Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed February 11, 1994
(File Nos. 33-51247 and 811-7129).
(3) Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 2 on Form N-1A filed March 2, 1994 (File
Nos. 33-51247 and 811-7129).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class _as of September 6, 1994_
Shares of beneficial interest
(no par value)
Federated Managed Income Fund
Institutional Service Shares 2,937,480
Select Shares 341,657
Federated Managed Growth and Income Fund
Institutional Service Shares 3,808,564
Select Shares 307,531
Federated Managed Growth Fund
Institutional Service Shares 2,345,761
Select Shares 236,034
Federated Managed Aggressive Growth Fund
Institutional Service Shares 1,111,264
Select Shares 128,340
Item 27. Indemnification: (2)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Trust Information -
Management of the Trust" in Part A. The affiliations with
the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of
this Registration Statement under "Managed Series Trust
Management - Officers and Trustees." The remaining Trustee
of the investment adviser, his position with the investment
adviser, and, in parentheses, his principal occupation is:
Mark D. Olson (Partner, Wilson, Halbrook & Bayard), 107 W.
Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are: William
D. Dawson, J. Thomas Madden, and Mark L. Mallon, Executive
Vice Presidents; Henry J. Gailliot, Senior Vice President-
Economist; Peter R. Anderson, Gary J. Madich, and J. Alan
Minteer, Senior Vice Presidents; Randall A. Bauer, Jonathan
C. Conley, Deborah A. Cunningham, Mark E. Durbiano, Kathleen
M. Foody-Malus, Thomas M. Franks, Edward C. Gonzales, Jeff A.
Kozemchak, Marian R. Marinack, John W. McGonigle, Gregory M.
Melvin, Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski,
Charles A. Ritter, and Christopher H. Wiles, Vice Presidents;
Edward C. Gonzales, Treasurer; and John W. McGonigle,
Secretary. The business address of each of the Officers of
the investment adviser is Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. These individuals are
also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement under
"The Funds."
_______________________
(2) Response is incorporated by reference to Registrant's Pre-
Effective Amendenment No. 1 on Form N-1A filed February 11, 1994
(File Nos. 33-51247 and 811-7129).
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Alexander Hamilton Funds; American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash
Management Trust; Automated Government Money Trust; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; California Municipal
Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated
Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; First Union Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fountain Square Funds; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund,
Inc.; Liberty U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Marshall Funds,
Inc.; Money Market Management, Inc.; The Medalist Funds; Money
Market Obligations Trust; Money Market Trust; The Monitor Funds;
Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; SouthTrust Vulcan Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Vision Fiduciary Funds, Inc.; Vision Group of Funds,
Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment company:
Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent")
Federated Adminstrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8602
("Custodian") Boston, MA 02266-8602
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MANAGED SERIES TRUST
(formerly, Allocation Series Trust), certifies that it meets all of the
requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Pittsburgh and Commonwealth of Pennsylvania, on the 29th
day of September, 1994.
MANAGED SERIES TRUST
(formerly, Allocation Series Trust)
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
September 29, 1994
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/G. Andrew Bonnewell
G. Andrew Bonnewell Attorney In Fact September 29,
1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President and Trustee
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities
2
2.2 Delivery of Securities
2
2.3 Registration of Securities
5
2.4 Bank Accounts
6
2.5 Payments for Shares
7
2.6 Availability of Federal Funds
7
2.7 Collection of Income
7
2.8 Payment of Fund Moneys
8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents
10
2.12 Deposit of Fund Assets in Securities System
10
2.13 Segregated Account
12
2.14 Joint Repurchase Agreements
13
2.15 Ownership Certificates for Tax Purposes
13
2.16 Proxies
13
2.17 Communications Relating to Fund Portfolio Securities
13
2.18 Proper Instructions
14
2.19 Actions Permitted Without Express Authority
14
2.20 Evidence of Authority
15
2.21 Notice to Trust by Custodian Regarding Cash Movement.
15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Fusiness trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of the other Funds
and from all other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds and all
payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds
from time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest/capital stock of the Funds
as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1Holding Securities. The Custodian shall hold and physically segr
egate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a Fund and r
eceipt of payment therefor;
(2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3)In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4)To the depository agent in connection with tender or other s
imilar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer into the n
ame of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7)Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8)For exchange or conversion pursuant to any plan of merger, c
onsolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9)In the case of warrants, rights or similar securities, the s
urrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio secu
rities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent ("Tran
sfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon recei
pt of, in addition to Proper Instructions, a certified copy
of a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (o
ther than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed pursuant
to Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the terms of
this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1)The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by
law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2)The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions, whi
ch may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1)Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of
title to futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of
the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the Trust and
any other party, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2)In connection with conversion, exchange or surrender of secu
rities owned by a Fund as set forth in Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4)For the payment of any expense or liability incurred by a Fu
nd, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5)For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6)For payment of the amount of dividends received in respect of
securities sold short;
(7)For any other proper purpose, but only upon receipt of, in a
ddition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities Purchas
ed. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund. Fr
om such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each Fund in a Securities System
provided that such
securities are represented in an account ("Account") of the
Custodian in the
Securities System which shall not include any assets of the
Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2)The records of the Custodian with respect to securities of
the Funds which are
maintained in a Securities System shall identify by book-entry
those securities
belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account
of each Fund upon (i)
receipt of advice from the Securities System that such
securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. The
Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of
advice from the Securities System that payment for such
securities has been
transferred to the Account, and (ii) the making of an entry
on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund. Copies of
all advices from the Securities System of transfers of
securities for the account of a
Fund shall identify the Fund, be maintained for the Fund by
the Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the
Trust confirmation of each transfer to or from the account
of a Fund in the form of a
written advice or notice and shall furnish to the Trust
copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of
a Fund.
4)The Custodian shall provide the Trust with any report obtained by the
Custodian on the
Securities System's accounting system, internal accounting control and
procedures for
safeguarding securities deposited in the Securities System;
(5)The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable
to the Trust for any loss or damage to a Fund resulting from
use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or
any such agent to enforce effectively such rights as it
may have against the
Securities System; at the election of the Trust, it shall be
entitled to be subrogated
to the rights of the Custodian with respect to any claim
against the Securities System
or any other person which the Custodian may have as a
consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or
damage.
(7)The authorization contained in this Section 2.12 shall not
relieve the Custodian from
using reasonable care and diligence in making use of any
Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper Instruc
tions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall ex
ecute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities he
ld hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17Communications Relating to Fund Portfolio Securities. The Custo
dian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1)make payments to itself or others for minor expenses of hand
ling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securities in def
initive form;
(3)endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4)in general, attend to all non-discretionary details in conne
ction with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20Evidence of Authority. The Custodian shall be protected in acti
ng upon any instructions, notice, request, consent, certificate
or other instrument or paper reasonably believed by it to be
genuine and to have been properly executed on behalf of a Fund.
The Custodian may receive and accept a certified copy of a vote
of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination of or any action by the Board pursuant
to the Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The Custo
dian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.Duties of Custodian With Respect to the Books of Account and Calculati
on of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to t
he entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with
respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr._____________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
Exhibit 1
Managed Series Trust
Federated Managed Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth & Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Aggressive Growth Fund
Institutional Service Shares
Select Shares
Exhibit 9 (i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of the 1st day of December, 1993, by and between those
investment companies listed on Exhibit 1 as may be amended from time to time,
having their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain pricing,
accounting and recordkeeping services for each of the Funds, including any
classes of shares issued by any Fund ("Classes"), and the Company is willing
to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer agent,
dividend disbursing agent, and agent in connection with certain other
activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to select,
negotiate and subcontract for custodian services from an approved list of
qualified banks and the Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of Trustees or
Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds and determine the net asset value per
share of each Fund and/or Class, at the time and in the manner from
time to time determined by the Board and as set forth in the
Prospectus and Statement of Additional Information ("Prospectus") of
each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to
the Trust such records upon the Trust's request;
F. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the fees
set forth on Fee Schedules A ("A1, A2, A3 etc..."), annexed hereto and
incorporated herein, as may be added or amended from time to time.
Such fees do not include out-of-pocket disbursements of the Company
for which the Funds shall reimburse the Company upon receipt of a
separate invoice. Out-of-pocket disbursements shall include, but
shall not be limited to, the items specified in Schedules B ("B1, B2,
B3, etc..."), annexed hereto and incorporated herein, as may be added
or amended from time to time. Schedules B may be modified by the
Company upon not less than thirty days' prior written notice to the
Trust.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees
of Trustees or Directors of the Trust; independent auditors expenses;
Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust, the Funds,
or the Classes; law firm expenses; or other expenses not specified in
this Article 3 which may be properly payable by the Funds and/or
classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will provide
detailed information about the compensation and out-of-pocket expenses
in accordance with Schedules A and Schedules B. The Funds and or the
Classes will pay to the Company the amount of such invoice within 30
days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedules A revised Schedules dated and signed by a
duly authorized officer of the Trust and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing services under this Section One. Such person or persons
may be third-party service providers, or they may be officers and
employees who are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Trust, the Funds,
or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the Trust,
or the Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Trust, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional
Shares by virtue of any such distribution or dividend,
appropriate credits shall be made to the Shareholder's account,
for certificated Funds and/or Classes, delivered where
requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a
regular basis or upon reasonable request with the total number
of Shares which are authorized and issued and outstanding, but
shall have no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement, which are
no longer needed by the Company in performance of its services
or for its protection. If not so turned over to the Fund, such
records and documents will be retained by the Company for six
years from the year of creation, during the first two of which
such documents will be in readily accessible form. At the end
of the six year period, such records and documents will either
be turned over to the Fund or destroyed in accordance with
Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in
each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and
any laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the Trust
and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedules C ("C1, C2, C3 etc..."), attached hereto, as may be added or
amended from time to time. Such fees may be changed from time to time
subject to written agreement between the Trust and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The
Company will charge the Fund the fees set forth on Schedule C for each
such Class or sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items set out in Schedules D
("D1, D2, D3 etc..."), attached hereto, as may be added or amended
from time to time. In addition, any other expenses incurred by the
Company at the request or with the consent of the Trust and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket expenses
in accordance with Schedules C and Schedules D. The Trust or the
Funds will pay to the Company the amount of such invoice within 30
days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of the
other party.
(1) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street
Bank and its subsidiary, Boston Financial Data Services, Inc., a
Massachusetts Trust ("BFDS"), which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934, as amended, or any succeeding statute
("Section 17A(c)(1)"), or (B) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate, or (D) such other provider of services duly
registered as a transfer agent under Section 17A(c)(1) as
Company shall select; provided, however, that the Company shall
be as fully responsible to the Trust for the acts and omissions
of any subcontractor as it is for its own acts and omissions; or
(3) The Company shall upon instruction from the Trust subcontract for
the performance hereof with an Agent selected by the Trust,
other than BFDS or a provider of services selected by Company,
as described in (2) above; provided, however, that the Company
shall in no way be responsible to the Trust for the acts and
omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has
been approved by the Board as eligible for selection by the Company as
a custodian (the "Eligible Custodian"). The Company accepts such
appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
(1) evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set
forth as the form of agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for the
benefit of the Trust, with the Trust as a party to each such
agreement. The Company shall not be a party to any agreement
with any such Custodian;
(4) establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
(5) continuously monitor the nature and the quality of services
provided by the Custodians; and
(6) periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with respect
to each custodial agreement; and (iii) such other information as
the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the
1940 Act and other duties and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual fee as set forth in Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to each of the Trust/or Fund as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket expenses
in occurrence with Schedule E. The Trust and/or Fund will pay to the
Company the amount of such invoice within 30 days following the
receipt of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to
enter into this arrangement and to provide the services contemplated
in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to
such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and
in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the terms
of this Agreement, or which arise out of the Trust's or The
Fund's lack of good faith, negligence or willful misconduct or
which arise out of the breach of any representation or warranty
of the Trust or Fund hereunder or otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase,
redemption or transfer of Shares and Shareholder account
information; or
(b) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(4) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the
Fund.
(5) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund harmless
from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or
attributable to any action or failure or omission to act by the
Company as a result of the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the
Trust or the appropriate Fund for any action reasonably taken or
omitted by it in reliance upon such instructions or upon the opinion
of such counsel provided such action is not in violation of applicable
federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual
or facsimile signatures of the officers of the Trust or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be borne by
the Trust or the appropriate Fund. Additionally, the Company reserves
the right to charge for any other reasonable expenses associated with
such termination. The provisions of Article 15 shall survive the
termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this
Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, or to such other address as the Trust or the Company may
hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust and signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability
on any of them personally, and the obligations of this Agreement are
not binding upon any of the Trustees or Shareholders of the Trust, but
bind only the appropriate property of the Fund, or Class, as provided
in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Company and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or Shareholders of
the Company, but bind only the property of the Company as provided in
the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other
party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to such
successor agent at the office of the Company all properties of the
Trust held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or
before the date when such termination shall become effective, then the
Company shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the 1940 Act, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such
bank or trust company shall be the successor of the Company under this
Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a result
of work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility
of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may
assign to a successor all of or a substantial portion of its business,
or to a party controlling, controlled by, or under common control with
such party. Nothing in this Article 28 shall prevent the Company from
delegating its responsibilities to another entity to the extent
provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
Exhibit 1
Managed Series Trust
Federated Managed Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth & Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Aggressive Growth Fund
Institutional Service Shares
Select Shares
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Managed Series Trust
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st
day of December, 1993, by the Board of Trustees of MANAGED SERIES TRUST
(the "Fund"), a Massachusetts business trust with respect to certain
classes of shares ("Classes") of the portfolios of the Trust ("the
Funds") set forth in exhibits hereto.
1. This Plan is adopted to allow the Fund to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate broker/dealers and other
participating financial institutions and other persons ("Providers") for
providing services to the Fund and its shareholders. The Plan will be
administered by Federated Administrative Services, Inc. ("FAS"). In
compensation for the services provided pursuant to this Plan, Providers
will be paid a monthly fee computed at the annual rate not to exceed .25
of 1% of the average aggregate net asset value of the shares of the Fund
held during the month.
3. Any payments made by the Funds to any Provider pursuant to
this Plan will be made pursuant to the "Shareholder Services Agreement"
entered into by FAS on behalf of the Fund and the Provider. Providers
which have previously entered into "Administrative Agreements" or "Rule
12b-1 Agreements" with Federated Securities Corp. may be compensated
under this Plan for Services performed pursuant to those Agreements
until the Providers have executed a "Shareholder Services Agreement"
hereunder.
4. The Fund has the right (i) to select, in its sole
discretion, the Providers to participate in the Plan and (ii) to
terminate without cause and in its sole discretion any Shareholder
Services Agreement.
5. Quarterly in each year that this Plan remains in effect, FAS
shall prepare and furnish to the Board of Trustees of the Fund, and the
Board of Trustees shall review, a written report of the amounts expended
under the Plan.
6. This Plan shall become effective (i) after approval by
majority votes of: (a) the Fund's Board of Trustees; and (b) the
members of the Board of the Trust who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation
of the Trust's Plan or in any related documents to the Plan
("Disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan; and (ii) upon execution of an exhibit
adopting this Plan.
7. This Plan shall remain in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial year of this Plan for the
period of one year from the date set forth above and may be continued
thereafter if this Plan is approved with respect to each Class at least
annually by a majority of the Trust's Board of Trustees and a majority
of the Disinterested Trustees, cast in person at a meeting called for
the purpose of voting on such Plan. If this Plan is adopted with
respect to a class after the first annual approval by the Trustees as
described above, this Plan will be effective as to that Class upon
execution of the applicable exhibit pursuant to the provisions of
paragraph 6(ii) above and will continue in effect until the next annual
approval of this Plan by the Trustees and thereafter for successive
periods of one year subject to approval as described above.
8. All material amendments to this Plan must be approved by a
vote of the Board of Trustees of the Fund and of the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting
on it.
9. This Plan may be terminated at any time by: (a) a majority
vote of the Disinterested Trustees; or (b) a vote of a majority of the
outstanding voting securities of the Fund as defined in Section 2(a)(42)
of the Act.
10. While this Plan shall be in effect, the selection and
nomination of Disinterested Trustees of the Fund shall be committed to
the discretion of the Disinterested Trustees then in office.
11. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 9 herein.
12. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this December 1, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT A
to the
Plan
Managed Series Trust
Federated Managed Income Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of the Select Shares of
Federated Managed Income Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT B
to the
Plan
Managed Series Trust
Federated Managed Growth and Income Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of the Select Shares of
Federated Managed Growth and Income Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: Glen R. Johnson
President
EXHIBIT C
to the
Plan
Managed Series Trust
Federated Managed Growth Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of the Select Shares of
Federated Managed Growth Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT D
to the
Plan
Managed Series Trust
Federated Managed Aggressive Growth Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of the Select Shares of
Federated Managed Aggressive Growth Fund held during the month.
Witness the due execution hereof this 1st day of March, 1994.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
Exhibit No. 9 (iii) under Form N-1A
Exhibit No. 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st
day of March, 1994, by the Boards of Directors or Trustees, as
applicable (the "Boards"), of those investment companies listed on
Exhibit 1 hereto as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (individually referred to herein as a "Fund"
and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder
Services ("FSS") for providing personal services and/or the maintenance
of shareholder accounts to the Funds and their shareholders. In
compensation for the services provided pursuant to this Plan, FSS may be
paid a monthly fee computed at the annual rate not to exceed .25 of 1%
of the average aggregate net asset value of the shares of each Fund held
during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan
will be made pursuant to a "Shareholder Services Agreement" between FSS
and each of the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS
shall prepare and furnish to the Boards of the Funds, and the Boards
shall review, a written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund
(i) after approval by majority votes of: (a) such Fund's Board; and (b)
the members of the Board of such Fund who are not interested persons of
such Fund and have no direct or indirect financial interest in the
operation of such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a meeting
called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund
presently set forth on an exhibit and any subsequent Fund added pursuant
to an exhibit during the initial year of this Plan for the period of one
year from the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Fund at least annually by a
majority of the relevant Fund's Board and a majority of the Independent
Trustees or
Directors, of such Fund as applicable, cast in person at a meeting
called for the purpose of voting on the renewal of such Plan. If this
Plan is adopted with respect to a fund after the first annual approval
by the Trustees or Directors as described above, this Plan will be
effective as to that Fund at such time as Exhibit 1 hereto is amended to
add such Fund and will continue in effect until the next annual approval
of this Plan by the Funds' Boards and thereafter for successive periods
of one year subject to approval as described above.
7. All material amendments to this Plan must be approved by a
vote of the Board of each Fund and of the Independent Directors or
Trustees of such Fund, cast in person at a meeting called for such
purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement; or
(b) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
9. While this Plan shall be in effect, the selection and
nomination of Independent Directors or Trustees of each Fund shall be
committed to the discretion of the Independent Directors or Trustees
then in office.
10. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth
above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Managed Series Trust
Federated Managed Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth & Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Aggressive Growth Fund
Institutional Service Shares
Select Shares
Exhibit No. 9(iv) under Form N-1A
Exhibit No. 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between
those investment companies listed on Exhibit 1, as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have
approved a Shareholder Services Plan (the "Plan") and this form of
Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services"). In
addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Funds' agent to select, negotiate and
subcontract for the performance of Services. FSS hereby accepts such
appointments. FSS agrees to provide or cause to be provided Services
which, in its best judgment (subject to supervision and control of the
Funds' Boards of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. FSS further agrees to provide
the Funds, upon request, a written description of the Services which FSS
is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS
and FSS agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable monthly,
up to 0.25% of 1% of average net assets of each Fund.
For the payment period in which this Agreement becomes effective
or terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that
this Agreement is in effect with respect to such Fund during the month.
To enable the Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement will be
disclosed to and authorized by any person or entity receiving Services,
and will not result in an excessive fee to FSS.
3. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year only if the form of this Agreement is approved at least annually by
the Board of each Fund, including a majority of the members of the Board
of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Funds'
Plan or in any related documents to the Plan ("Independent Board
Members") cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
5. FSS agrees to obtain any taxpayer identification number
certification from each shareholder of the Funds to which it provides
Services that is required under Section 3406 of the Internal Revenue
Code, and any applicable Treasury regulations, and to provide each Fund
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or
agent of any Fund, shall be deemed, when rendering services to such Fund
or acting on any business of such Fund (other than services or business
in connection with the duties of FSS hereunder) to be rendering such
services to or acting solely for such Fund and not as an officer,
trustee, partner, employee or agent or one under the control or
direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. FSS is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Fund that is
a Massachusetts business trust and agrees that the obligations assumed
by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FSS shall not seek
satisfaction of any such obligations from the shareholders of such Fund,
the Trustees, Officers, Employees or Agents of such Fund, or any of
them.
9. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to any Fund and to such Fund at the following address:
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President and if delivered to FSS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 3
and 4, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by any Fund,
or of the Funds in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party. Nothing in this Section 14 shall prevent FSS from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Managed Series Trust
Federated Managed Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth & Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Aggressive Growth Fund
Institutional Service Shares
Select Shares
Exhibit No. 9(v) under Form N-1A
Exhibit No. 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Disinterested Board Members of the
Fund or by a vote of a majority of the outstanding voting
securities of the Fund as defined in the Investment Company Act
of 1940 on not more than sixty (60) days' written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of
the Internal Revenue Code, and any applicable Treasury regulations, and
to provide the Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 5
and 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
11. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Funds covered by this Agreement:
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of ______
of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the quarter.
Exhibit No. 9(vi) under Form N-1A
Exhibit No. 10 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day of
March, 1994, between those investment companies listed on Exhibit 1, as may
be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh PA 15222-3779
(individually referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS is
willing to render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable (the "Boards"), FAS will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the Funds'
governing documents and any amendments thereto, including the
Declaration of Trust or Articles of Incorporation, as
appropriate,(which has already been prepared and filed), the By-
laws and minutes of meetings of their Boards, Committees, and
shareholders;
(b) prepare and file with the Securities
and Exchange Commission and the appropriate state securities
authorities the registration statements for the Funds and the
Funds' shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements,
and such other documents all as may be necessary to enable the
Funds to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and administer
contracts on behalf of the Funds with, among others, each Fund's
investment adviser, distributor, custodian, and transfer agent,
subject to any applicable restrictions of the Boards or the 1940
Act;
(d) supervise the Funds' custodians in the
maintenance of the Funds' general ledgers and in the preparation
of the Funds' financial statements, including oversight of
expense accruals and payments, the determination of the net
asset value of the Funds and the declaration and payment of
dividends and other distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering the
investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations of
the Funds' custodians and transfer agents;
(h) coordinate the layout and printing of
publicly disseminated prospectuses and reports;
(i) perform internal audit examinations in
accordance with a charter to be adopted by FAS and the Funds;
(j) assist with the design, development,
and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination, appointment, or
election as officers of the Funds, who will be responsible for
the management of certain of the Funds' affairs as determined by
the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall agree
in writing to perform for the Funds hereunder, shall hereafter be referred to
as "Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or shareholder
service agent, pursuant to their respective agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including the
compensation of FAS employees who serve on the Funds' Boards, or as officers
of the Funds. Each Fund shall be responsible for all other expenses incurred
by FAS on behalf of such Fund, including without limitation postage and
courier expenses, printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to members of such Fund's Board who are not FAS
employees, and trade association dues.
4. Compensation. For the Administrative Services provided, each
Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at an
annual rate, payable daily, as specified below, based upon the total assets
of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during any
year of this Agreement be less than, or be paid at a rate less than would
aggregate, $125,000, per individual Fund, with an additional $30,000 for each
class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any error
of judgment or mistake of law or for any loss suffered by any
Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, trustee, partner, employee
or agent of FAS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed,
when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee,
partner, employee or agent or one under the control or direction
of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement
with respect to each Fund shall commence on the date hereof, and extend for a
period of one year, renewable annually by the approval of the Board of
Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Funds. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of each Fund
that is a Massachusetts business trust and agrees that the obligations
assumed by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FAS shall not seek satisfaction of
any such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of FAS as provided in
the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall be
in writing (including facsimile communication) and shall be duly given if
delivered to any Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FAS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written. The captions in this Agreement
are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction
or effect. If any provision of this Agreement shall be held or made invalid
by a court or regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Section 5, hereof, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of assignment
by any Fund, or of the Funds, in the case of assignment by FAS, except that
any party may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control with
such party. Nothing in this Section 14 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Managed Series Trust
Federated Managed Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth & Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Aggressive Growth Fund
Institutional Service Shares
Select Shares
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 1 to Form N-1A Registration Statement of Managed
Series Trust of our report dated January 21, 1994, on the financial
statements of Federated Managed Income Fund (one of the portfolios
comprising the Managed Series Trust), included in or made part of this
registration statement.
By: ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
September 28, 1994
Exhibit 15(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Managed Series Trust
RULE 12b-1 PLAN
This Plan ("Plan") is adopted as of this 1st day of December,
1993, by the Board of Trustees of MANAGED SERIES TRUST (the "Trust"), a
Massachusetts business trust with respect to certain classes of shares
("Classes") of the portfolios of the Trust (the "Funds") set forth in
exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended ("Act"), so as to allow the
Trust to make payments as contemplated herein, in conjunction with the
distribution of Shares of the Funds ("Shares").
2. This Plan is designed to finance activities of Federated
Securities Corp. ("FSC") principally intended to result in the sale of
Shares to include: (a) providing incentives to financial institutions
("Institutions") to sell Shares; (b) advertising and marketing of Shares
to include preparing, printing and distributing prospectuses and sales
literature to prospective shareholders and with Institutions; and (c)
implementing and operating the Plan. In compensation for services
provided pursuant to this Plan, FSC will be paid a fee in respect of the
following Classes set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will be made
pursuant to the "Distributor's Contract" entered into by the Trust and
FSC. Any payments made by FSC to Institutions with funds received as
compensation under this Plan will be made pursuant to the "Rule 12b-1
Agreement" entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole discretion, the
Institutions to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC
shall prepare and furnish to the Board of Trustees of the Trust, and the
Board of Trustees shall review, a written report of the amounts expended
under the Plan and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class
(i) after approval by majority votes of: (a) the Trust's Board of
Trustees; (b) the members of the Board of the Trust who are not
interested persons of the Trust and have no direct or indirect financial
interest in the operation of the Trust's Plan or in any related
documents to the Plan ("Disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on the Plan; and (c) the
outstanding voting securities of the particular Class, as defined in
Section 2(a)(42) of the Act and (ii) upon execution of an exhibit
adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial year of this Plan for the
period of one year from the date set forth above and may be continued
thereafter if this Plan is approved with respect to each Class at least
annually by a majority of the Trust's Board of Trustees and a majority
of the Disinterested Trustees, cast in person at a meeting called for
the purpose of voting on such Plan. If this Plan is adopted with
respect to a Class after the first annual approval by the Trustees as
described above, this Plan will be effective as to that Class upon
execution of the applicable exhibit pursuant to the provisions of
paragraph 6(ii) above and will continue in effect until the next annual
approval of this Plan by the Trustees and thereafter for successive
periods of one year subject to approval as described above.
8. All material amendments to this Plan must be approved by a
vote of the Board of Trustees of the Trust and of the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting
on it.
9. This Plan may not be amended in order to increase materially
the costs which the Classes may bear for distribution pursuant to the
Plan without being approved by a majority vote of the outstanding voting
securities of the Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular
Class at any time by: (a) a majority vote of the Disinterested Trustees;
or (b) a vote of a majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of the Act; or (c) by
FSC on 60 days' notice to the Trust.
11. While this Plan shall be in effect, the selection and
nomination of Disinterested Trustees of the Trust shall be committed to
the discretion of the Disinterested Trustees then in office.
12. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Plan
Managed Series Trust
Federated Managed Income Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
FSC will be paid a monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the Select Shares of
Federated Managed Income Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT B
to the
Plan
Managed Series Trust
Federated Managed Growth and Income Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
FSC will be paid a monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the Select Shares of
Federated Managed Growth and Income Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT C
to the
Plan
Managed Series Trust
Federated Managed Growth Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
FSC will be paid a monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the Select Shares of
Federated Managed Growth Fund held during the month.
Witness the due execution hereof this 1st day of December, 1993.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
EXHIBIT D
to the
Plan
Managed Series Trust
Federated Managed Aggressive Growth Fund - Select Shares
This Plan is adopted by MANAGED SERIES TRUST with respect to the
Class of Shares of the portfolios of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
FSC will be paid a monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the Select Shares of
Federated Managed Aggressive Growth Fund held during the month.
Witness the due execution hereof this 1st day of March, 1994.
MANAGED SERIES TRUST
By: /s/ Glen R. Johnson
President
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601 Reg. S-K
Initial
Fund Performance Data Invest of: $1,000
Offering
Fed Mged Inc Fund (SS) Price/Share= $10.00
Schedule for Computation of
Return Since Inception NAV= $10.00
ending 7/31/94
FYE: October 31
<TABLE>
<CAPTION>
Beginning Capital Reinvest Ending
DECLARED: MONTHLY Reinvest Period Dividend Gain Price Period Ending
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price
<C> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.000 0.000 $0.00 100.000 $10.00
6/16/94 100.000 0.045 0.000 $10.04 100.448 $10.04
6/30/94 100.448 0.000 0.000 $0.00 100.448 $9.98
7/18/94 100.448 0.050 0.000 $10.01 100.950 $10.01
7/31/94 100.950 0.000 0.000 $0.00 100.950 $10.05
$1,000 (1+T) = Ending Value
T = 1.45%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Fed Mged Income Fund (SS) Yield = 2{( $103,501.47 - $12,309.05 )+1)^6-1}=
Computation of SEC Yield 2,529,724 * $10.05 - 0.01960)
As of: July 31, 1994
SEC Yield = 4.35%
Dividend and/or Interest
Inc for the 30 days ended $103,501.47
Net Expenses for $12,309.05
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 2,529,724
Maxium offering price $10.05
per share as of 7-31-94
Undistributed net income 0.01960
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation of Initial
Fund Performance Data Invest of: $1,000
Offering
Fed Mged Inc Fund (SEL) Price/Share= $10.00
Return Since Inception NAV= $10.00
ending 7/31/94
FYE: October 31
Beginning Capital Reinvest Ending
DECLARED: MONTHLY Reinvest Period Dividend Gain Price Period
PAID: MONTHLY Dates Shares /Share /Share /Share Shares
<S> <C> <C> <C> <C> <C>
5/31/94 100.000 0.000 0.00000 $0.00 100.000
6/16/94 100.000 0.038 0.00000 $10.04 100.378
6/30/94 100.378 0.000 0.00000 $0.00 100.378
7/18/94 100.378 0.043 0.00000 $10.02 100.809
7/31/94 100.809 0.000 0.00000 $0.00 100.809
$1,000 (1+T) = Ending Value
T = 1.31%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Fed Mged Income Fund (SEL) Yield = 2{( $11,995.63 - $3,232.62 )+1)^6-1}=
Computation of SEC Yield 293,158 * $10.05 - 0.01690)
As of: July 31, 1994
SEC Yield = 3.60%
Dividend and/or Interest
Inc for the 30 days ended $11,995.63
Net Expenses for $3,232.62
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 293,158
Maxium offering price $10.05
per share as of 7-31-94
Undistributed net income 0.01690
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Federated Managed Growth Price/
& Income Fund Class SS Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.00
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $0.00 100.000 $10.04
6/16/94 100.000 0.0440 0.00000 $10.07 100.437 $10.07
6/30/94 100.437 0.0000 0.00000 $0.00 100.437 $9.94
7/31/94 100.437 0.0000 0.00000 $0.00 100.437 $10.12
$1,000 (1+T) = End Value
T = 1.64%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $162,437.90 - $20,823.10 )+1)^6-1}=
As of: July 29, 1994 3,306,400 * $10.12 - 0.02080)
SEC Yield = 5.14%
Dividend and/or Interest
Inc for the 30 days ended $162,437.90
Net Expenses for $20,823.10
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 3,306,400
Maxium offering price
per share as of 7-31-94 $10.12
Undistributed net income 0.02080
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Federated Managed Growth Price/
& Income Fund Class SEL Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.00
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $0.00 100.000 $10.04
6/16/94 100.000 0.0390 0.00000 $10.08 100.387 $10.08
6/30/94 100.387 0.0000 0.00000 $0.00 100.387 $9.94
7/31/94 100.387 0.0000 0.00000 $0.00 100.387 $10.11
$1,000 (1+T) = End Value
T = 1.49%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $11,513.13 - $2,930.79 )+1)^6-1}=
As of: July 29, 1994 234,397 * $10.11 - 0.0184)
SEC Yield = 4.39%
Dividend and/or Interest
Inc for the 30 days ended $11,513.13
Net Expenses for $2,930.79
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 234,397
Maxium offering price
per share as of 7-31-94 $10.11
Undistributed net income 0.01840
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Federated Managed Growth Fund Price/
Class SS Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.08
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $10.04 100.000 $10.04
6/16/94 100.000 0.0340 0.00000 $10.07 100.338 $10.07
6/30/94 100.338 0.0000 0.00000 $9.91 100.338 $9.91
7/31/94 100.338 0.0000 0.00000 $10.08 100.338 $10.08
$1,000 (1+T) = End Value
T = 1.14%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $77,554.85 - $12,114.18 )+1)^6-1}=
As of: July 29, 1994 1,924,278 * $10.08 - 0.01610 )
SEC Yield = 4.09%
Dividend and/or Interest
Inc for the 30 days ended $77,554.85
Net Expenses for $12,114.18
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 1,924,278
Maxium offering price
per share as of 8-31-94 $10.08
Undistributed net income 0.01610
</TABLE>
<TABLE>
<CAPTION>
Federated Managed Growth Fund Price/
Class SEL Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.08
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $10.04 100.000 $10.04
6/16/94 100.000 0.0270 0.00000 $10.07 100.268 $10.07
6/30/94 100.268 0.0000 0.00000 $9.91 100.268 $9.91
7/31/94 100.268 0.0000 0.00000 $10.08 100.268 $10.08
$1,000 (1+T) = End Value
T = 1.07%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $3,946.00 - $1,232.77 )+1)^6-1}=
As of: July 29, 1994 97,850 * $10.08 - 0.01280 )
SEC Yield = 3.33%
Dividend and/or Interest
Inc for the 30 days ended $3,946.00
Net Expenses for $1,232.77
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 97,850
Maxium offering price
per share as of 8-31-94 $10.08
Undistributed net income 0.01280
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Federated Managed Aggressive Price/
Growth Fund Class SS Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.08
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $0.00 100.000 $10.05
6/16/94 100.000 0.0260 0.00000 $10.09 100.258 $10.09
6/30/94 100.258 0.0000 0.00000 $0.00 100.258 $9.86
7/31/94 100.258 0.0000 0.00000 $0.00 100.258 $10.08
$1,000 (1+T) = End Value
T = 1.06%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $33,023.45 - $6,213.22 )+1)^6-1}=
As of: July 29, 1994 990,013 * $10.08 - 0.01230)
SEC Yield = 3.25%
Dividend and/or Interest
Inc for the 30 days ended $33,023.45
Net Expenses for $6,213.22
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 990,013
Maxium offering price
per share as of 7-29-94 $10.08
Undistributed net income 0.01230
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Federated Managed Aggressive Price/
Growth Fund Class SEL Share= $10.00
Return Since Inception
ending 07/31/94 NAV= $10.07
FYE: October 31
Begin Capital Reinvest Ending
DECLARED: Quarterly Reinvest Period Dividend Gain Price Period Ending
PAID: Quarterly Dates Shares /Share /Share /Share Shares Price
<S> <C> <C> <C> <C> <C> <C>
5/31/94 100.000 0.0000 0.00000 $0.00 100.000 $10.04
6/16/94 100.000 0.0210 0.00000 $10.09 100.208 $10.09
6/30/94 100.208 0.0000 0.00000 $0.00 100.208 $9.86
7/31/94 100.208 0.0000 0.00000 $0.00 100.208 $10.07
$1,000 (1+T) = End Value
T = 0.91%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Computation of SEC Yield Yield = 2{( $3,026.83 - $1,129.21 )+1)^6-1}=
As of: July 29, 1994 90,778 * $10.07 - 0.00990)
SEC Yield = 2.51%
Dividend and/or Interest
Inc for the 30 days ended $3,026.83
Net Expenses for $1,129.21
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 90,778
Maxium offering price
per share as of 7-29-94 $10.07
Undistributed net income 0.00990
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
INSTITUTIONAL SERVICE SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 30,237,902
<INVESTMENTS-AT-VALUE> 30,339,855
<RECEIVABLES> 643,055
<ASSETS-OTHER> 52,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,035,439
<PAYABLE-FOR-SECURITIES> 647,038
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370,576
<TOTAL-LIABILITIES> 1,017,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,874,395
<SHARES-COMMON-STOCK> 2,660,693
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 61,052
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,591)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,969
<NET-ASSETS> 26,743,166
<DIVIDEND-INCOME> 24,172
<INTEREST-INCOME> 323,930
<OTHER-INCOME> 0
<EXPENSES-NET> 27,867
<NET-INVESTMENT-INCOME> 320,235
<REALIZED-GAINS-CURRENT> (11,591)
<APPREC-INCREASE-CURRENT> 93,969
<NET-CHANGE-FROM-OPS> 402,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 235,828
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,709,675
<NUMBER-OF-SHARES-REDEEMED> 54,429
<SHARES-REINVESTED> 5,448
<NET-CHANGE-IN-ASSETS> 29,917,825
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37,514
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,193
<AVERAGE-NET-ASSETS> 24,994,663
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .110
<PER-SHARE-GAIN-APPREC> .040
<PER-SHARE-DIVIDEND> .100
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> 48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
SELECT SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 30,237,902
<INVESTMENTS-AT-VALUE> 30,339,855
<RECEIVABLES> 643,055
<ASSETS-OTHER> 52,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,035,439
<PAYABLE-FOR-SECURITIES> 647,038
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370,576
<TOTAL-LIABILITIES> 1,017,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,874,395
<SHARES-COMMON-STOCK> 325,764
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 61,052
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,591)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,969
<NET-ASSETS> 3,274,659
<DIVIDEND-INCOME> 24,172
<INTEREST-INCOME> 323,930
<OTHER-INCOME> 0
<EXPENSES-NET> 27,867
<NET-INVESTMENT-INCOME> 320,235
<REALIZED-GAINS-CURRENT> (11,591)
<APPREC-INCREASE-CURRENT> 93,969
<NET-CHANGE-FROM-OPS> 402,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,355
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 328,736
<NUMBER-OF-SHARES-REDEEMED> 3,111
<SHARES-REINVESTED> 138
<NET-CHANGE-IN-ASSETS> 29,917,825
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37,514
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,193
<AVERAGE-NET-ASSETS> 2,776,013
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .100
<PER-SHARE-GAIN-APPREC> .030
<PER-SHARE-DIVIDEND> .080
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> 123
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
INSTITUTIONAL SERVICE SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 35,965,290
<INVESTMENTS-AT-VALUE> 36,151,698
<RECEIVABLES> 500,482
<ASSETS-OTHER> 56,213
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,708,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,554
<TOTAL-LIABILITIES> 69,554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,252,359
<SHARES-COMMON-STOCK> 3,368,810
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 161,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,147
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120,644
<NET-ASSETS> 34,095,554
<DIVIDEND-INCOME> 48,872
<INTEREST-INCOME> 303,428
<OTHER-INCOME> 0
<EXPENSES-NET> 39,996
<NET-INVESTMENT-INCOME> 312,304
<REALIZED-GAINS-CURRENT> 104,147
<APPREC-INCREASE-CURRENT> 120,644
<NET-CHANGE-FROM-OPS> 537,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 142,941
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,579,228
<NUMBER-OF-SHARES-REDEEMED> 215,991
<SHARES-REINVESTED> 5,573
<NET-CHANGE-IN-ASSETS> 36,638,839
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,808
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 87,788
<AVERAGE-NET-ASSETS> 32,538,073
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.090
<PER-SHARE-GAIN-APPREC> 0.070
<PER-SHARE-DIVIDEND> 0.040
<PER-SHARE-DISTRIBUTIONS> 000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.120
<EXPENSE-RATIO> 59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
SELECT SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 35,965,290
<INVESTMENTS-AT-VALUE> 36,151,698
<RECEIVABLES> 500,482
<ASSETS-OTHER> 56,213
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,708,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,554
<TOTAL-LIABILITIES> 69,554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,252,359
<SHARES-COMMON-STOCK> 251,468
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 161,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 104,147
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120,644
<NET-ASSETS> 2,543,285
<DIVIDEND-INCOME> 48,872
<INTEREST-INCOME> 303,428
<OTHER-INCOME> 0
<EXPENSES-NET> 39,996
<NET-INVESTMENT-INCOME> 312,304
<REALIZED-GAINS-CURRENT> 104,147
<APPREC-INCREASE-CURRENT> 120,644
<NET-CHANGE-FROM-OPS> 537,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,674
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 252,594
<NUMBER-OF-SHARES-REDEEMED> 1,434
<SHARES-REINVESTED> 308
<NET-CHANGE-IN-ASSETS> 36,638,839
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,808
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 87,788
<AVERAGE-NET-ASSETS> 32,538,073
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.080
<PER-SHARE-GAIN-APPREC> 0.070
<PER-SHARE-DIVIDEND> 0.040
<PER-SHARE-DISTRIBUTIONS> 000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.110
<EXPENSE-RATIO> 136
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
Managed Series Trust
Federated Managed Growth Fund
Institutional Service Shares
<ARTICLE> 6
<PERIOD-TYPE> 2-Mos
<FISCAL-YEAR-END> Oct-31,1994
<PERIOD-END> Jul-31-1994
<INVESTMENTS-AT-COST> 21,753,277
<INVESTMENTS-AT-VALUE> 21,822,272
<RECEIVABLES> 492,627
<ASSETS-OTHER> 43,367
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,358,266
<PAYABLE-FOR-SECURITIES> 353,760
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 233,329
<TOTAL-LIABILITIES> 587,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,615,189
<SHARES-COMMON-STOCK> 2,008,901
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 89,421
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,307)
<NET-ASSETS> 20,250,112
<DIVIDEND-INCOME> 19,772
<INTEREST-INCOME> 156,543
<OTHER-INCOME> 0
<EXPENSES-NET> 22,253
<NET-INVESTMENT-INCOME> 154,062
<REALIZED-GAINS-CURRENT> 75,874
<APPREC-INCREASE-CURRENT> (9,307)
<NET-CHANGE-FROM-OPS> 220,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 62,979
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,092,512
<NUMBER-OF-SHARES-REDEEMED> 86,302
<SHARES-REINVESTED> 2,691
<NET-CHANGE-IN-ASSETS> 21,771,177
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,553
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,168
<AVERAGE-NET-ASSETS> 18,343,191
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .080
<PER-SHARE-GAIN-APPREC> .030
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
Managed Series Trust
Federated Managed Growth Fund
Select Shares
<ARTICLE> 6
<PERIOD-TYPE> 2-Mos
<FISCAL-YEAR-END> Oct-31,1994
<PERIOD-END> Jul-31-1994
<INVESTMENTS-AT-COST> 21,753,277
<INVESTMENTS-AT-VALUE> 21,822,272
<RECEIVABLES> 492,627
<ASSETS-OTHER> 43,367
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,358,266
<PAYABLE-FOR-SECURITIES> 353,760
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 233,329
<TOTAL-LIABILITIES> 587,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,615,189
<SHARES-COMMON-STOCK> 150,922
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 89,421
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,307)
<NET-ASSETS> 1,521,065
<DIVIDEND-INCOME> 19,772
<INTEREST-INCOME> 156,543
<OTHER-INCOME> 0
<EXPENSES-NET> 22,253
<NET-INVESTMENT-INCOME> 154,062
<REALIZED-GAINS-CURRENT> 75,874
<APPREC-INCREASE-CURRENT> (9,307)
<NET-CHANGE-FROM-OPS> 220,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,662
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151,240
<NUMBER-OF-SHARES-REDEEMED> 443
<SHARES-REINVESTED> 125
<NET-CHANGE-IN-ASSETS> 21,771,177
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,553
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,168
<AVERAGE-NET-ASSETS> 18,343,191
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .060
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 139
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
INSTITUTIONAL SERVICE SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 10,887,545
<INVESTMENTS-AT-VALUE> 10,926,363
<RECEIVABLES> 152,953
<ASSETS-OTHER> 32,394
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,111,710
<PAYABLE-FOR-SECURITIES> 32,772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59,235
<TOTAL-LIABILITIES> 92,007
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,937,981
<SHARES-COMMON-STOCK> 991,579
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 44,060
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 67,143
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (29,481)
<NET-ASSETS> 9,992,935
<DIVIDEND-INCOME> 14,541
<INTEREST-INCOME> 67,832
<OTHER-INCOME> 0
<EXPENSES-NET> 12,439
<NET-INVESTMENT-INCOME> 69,934
<REALIZED-GAINS-CURRENT> 67,143
<APPREC-INCREASE-CURRENT> (29,481)
<NET-CHANGE-FROM-OPS> 107,596
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24,073
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,061,478
<NUMBER-OF-SHARES-REDEEMED> 70,818
<SHARES-REINVESTED> 919
<NET-CHANGE-IN-ASSETS> 11,019,703
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,124
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 36,680
<AVERAGE-NET-ASSETS> 9,982,106
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .070
<PER-SHARE-GAIN-APPREC> .040
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 17(ii) under Form N-1A
Exhibit 27 under Item 601 Reg. S-K
MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SELECT SHARES
<ARTICLE> 6
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 10,887,545
<INVESTMENTS-AT-VALUE> 10,926,363
<RECEIVABLES> 152,953
<ASSETS-OTHER> 32,394
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,111,710
<PAYABLE-FOR-SECURITIES> 32,772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59,235
<TOTAL-LIABILITIES> 92,007
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,937,981
<SHARES-COMMON-STOCK> 101,975
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 44,060
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 67,143
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (29,481)
<NET-ASSETS> 1,026,768
<DIVIDEND-INCOME> 14,541
<INTEREST-INCOME> 67,832
<OTHER-INCOME> 0
<EXPENSES-NET> 12,439
<NET-INVESTMENT-INCOME> 69,934
<REALIZED-GAINS-CURRENT> 67,143
<APPREC-INCREASE-CURRENT> (29,481)
<NET-CHANGE-FROM-OPS> 107,596
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,801
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,342
<NUMBER-OF-SHARES-REDEEMED> 419
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 11,019,703
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,124
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 36,680
<AVERAGE-NET-ASSETS> 9,982,106
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .040
<PER-SHARE-DIVIDEND> .020
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 134
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
Exhibit No. 18 Under Form N-1A
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
September 27, 1994
Managed Series Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Managed Series Trust ("Trust") we have reviewed Post-
effective Amendment No. 1 to the Trust's Registration Statement to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
(File No. 33-51247). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective pursuant to said
Rule on September 29, 1994.
Our review also included an examination of other relevant portions of
the amended 1933 Act Registration Statement of the Trust and such other
documents and records deemed appropriate. On the basis of this review we are
of the opinion that Post-effective Amendment No. 1 does not contain
disclosures which would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation letter as a part
of the Trust's Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and as part of any application or
registration statement filed under the Securities Laws of the States of the
United States.
Very truly yours,
Houston, Houston & Donnelly
By: Thomas J. Donnelly
TJD:heh
