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. 1 . X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 1 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, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as possible after
the effectiveness of the
Registration Statement
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of shares.
Amendment Pursuant to Rule 473
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a), may determine.
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 Growtha nd
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) 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; (1-4)
Shareholder Services Plan; (1b-4b)
Distribution Plan; (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.
(Note: Major Headings Only)
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 (1b-4b) Distribution Plan.
Item 22. Calculation of Performance
Data (1-4) Total Return; (1-4) Yield;
(1-4) Performance Comparisons.
Item 23. Financial Statements Filed in Part A of (1).
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 , 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 , 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
Dollar Roll Transactions 7
Corporate Bonds 8
Equity Securities 8
Foreign Securities 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
Currenty Risks 10
Forward Foreign Currency Exchange
Contracts 10
Options 11
Futures and Options on Futures 11
Risks 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 14
Administration of the Fund 14
Administrative Services 14
Shareholder Services Plan 14
Custodian 14
Transfer Agent and Dividend
Disbursing Agent 14
Legal Counsel 14
Independent Public Accountants 14
Brokerage Transactions 14
Expenses of the Fund and Institutional Service
Shares 15
NET ASSET VALUE 15
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
Share Purchases 15
Through a Financial Institution 16
By Wire 16
By Mail 16
Minimum Investment Required 16
What Shares Cost 16
Subaccounting Services 17
Systematic Investment Program 17
Certificates and Confirmations 17
Dividends 17
Capital Gains 17
REDEEMING INSTITUTIONAL SERVICE SHARES 17
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 18
Written Requests 18
Signatures 18
Receiving Payment 19
Systematic Withdrawal Program 19
Accounts with Low Balances 19
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 20
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 22
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 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
Deferred Sales Load (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
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 this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The maximum shareholder servicing fee is 0.25%.
(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. As noted in the table above, the Fund charges no
redemption fee for Institutional Service Shares................................................ $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. 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, foreign stocks and cash reserves.
The following is a summary of the asset categories and the amount of the Fund's
total assets which may be invested in each asset category:
<TABLE>
<S> <C>
ASSET CATEGORY RANGE
BONDS 70-90%
U.S. Treasury Securities 0-90%
Mortgage-Backed Securities 0-45%
Investment-Grade Corporate Bonds 0-45%
High Yield Corporate Bonds 0-9%
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. 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 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.
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. 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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 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. 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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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 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
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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 , 1994
3122013A-ISS (2/94)
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 , 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 , 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
Dollar Roll Transactions 7
Corporate Bonds 8
Equity Securities 8
Foreign Securities 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
Investment Limitations 12
TRUST INFORMATION 12
- ------------------------------------------------------
Management of the Trust 12
Board of Trustees 12
Investment Adviser 13
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 13
Distribution Plan 13
Administration of the Fund 14
Administrative Services 14
Shareholder Services Plan 14
Custodian 15
Transfer Agent and Dividend
Disbursing Agent 15
Legal Counsel 15
Independent Public Accountants 15
Brokerage Transactions 15
Expenses of the Fund and Select Shares 15
NET ASSET VALUE 16
- ------------------------------------------------------
INVESTING IN SELECT SHARES 16
- ------------------------------------------------------
Share Purchases 16
Through a Financial Institution 16
By Wire 16
By Mail 17
Minimum Investment Required 17
What Shares Cost 17
Subaccounting Services 17
Systematic Investment Program 17
Certificates and Confirmations 18
Dividends 18
Capital Gains 18
REDEEMING SELECT SHARES 18
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 18
Written Requests 19
Signatures 19
Receiving Payment 19
Systematic Withdrawal Program 19
Accounts with Low Balances 20
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
Massachusetts Partnership Law 20
TAX INFORMATION 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 21
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 22
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 23
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 24
- ------------------------------------------------------
APPENDIX 25
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
</TABLE>
<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
Deferred Sales Load (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%
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 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. As noted in the table above, the Fund charges no
redemption fee for Select Shares............................................................... $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. Institutional Service Shares and Select 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,
foreign stocks and cash reserves.
The following is a summary of the asset categories and the amount of the Fund's
total assets which may be invested in each asset category:
<TABLE>
<S> <C>
ASSET CATEGORY RANGE
BONDS 70-90%
U.S. Treasury Securities 0-90%
Mortgage-Backed Securities 0-45%
Investment-Grade Corporate Bonds 0-45%
High Yield Corporate Bonds 0-9%
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. 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 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.
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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 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. 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.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to.75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $76 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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.
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 , 1994
3122012A-SEL (2/94)
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 , 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 ____________, 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
Mortgaged-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
Dollar Roll Transactions 7
Corporate Bonds 7
Equity Securities 8
Foreign Securities 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 10
Futures and Options on Futures 11
Risks 12
Investment Limitations 12
TRUST INFORMATION 12
- ------------------------------------------------------
Management of the Trust 12
Board of Trustees 12
Investment Adviser 12
Advisory Fees 13
Adviser's Background 13
Distribution of Institutional Service Shares 13
Administration of the Fund 13
Administrative Services 13
Shareholder Services Plan 14
Custodian 14
Transfer Agent and Dividend
Disbursing Agent 14
Legal Counsel 14
Independent Public Accountants 14
Brokerage Transactions 14
Expenses of the Fund and Institutional
Service Shares 14
NET ASSET VALUE 15
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
Share Purchases 15
Through a Financial Institution 15
By Wire 16
By Mail 16
Minimum Investment Required 16
What Shares Cost 16
Subaccounting Services 16
Systematic Investment Program 17
Certificates and Confirmations 17
Dividends 17
Capital Gains 17
REDEEMING INSTITUTIONAL SERVICE SHARES 17
- ------------------------------------------------------
Through a Financial Institution 17
Telephone Redemption 18
Written Requests 18
Signatures 18
Receiving Payment 18
Systematic Withdrawal Program 19
Accounts with Low Balances 19
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 19
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
APPENDIX 22
- ------------------------------------------------------
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
Deferred Sales Load (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
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 maximum shareholder servicing fee is 0.25%.
(3) The Total Institutional Service Share Operating Expenses are anticipated 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. As noted in the table above, the Fund charges no
redemption fee for Institutional Service Shares................................................ $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, foreign stocks and cash reserves.
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. 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 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.
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.
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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 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.
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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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 Standard & Poor's.
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 ______________, 1994
3122007A-ISS (2/94)
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 , 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 , 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
Dollar Roll Transactions 7
Corporate Bonds 7
Equity Securities 8
Foreign Securities 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 10
Futures and Options on Futures 11
Risks 12
Investment Limitations 12
TRUST INFORMATION 12
- ------------------------------------------------------
Management of the Trust 12
Board of Trustees 12
Investment Adviser 12
Advisory Fees 13
Adviser's Background 13
Distribution of Select Shares 13
Distribution Plan 13
Administration of the Fund 14
Administrative Services 14
Shareholder Services Plan 14
Custodian 15
Transfer Agent and Dividend
Disbursing Agent 15
Legal Counsel 15
Independent Public Accountants 15
Brokerage Transactions 15
Expenses of the Fund and Select Shares 15
NET ASSET VALUE 16
- ------------------------------------------------------
INVESTING IN SELECT SHARES 16
- ------------------------------------------------------
Share Purchases 16
Through a Financial Institution 16
By Wire 16
By Mail 17
Minimum Investment Required 17
What Shares Cost 17
Subaccounting Services 17
Systematic Investment Program 17
Certificates and Confirmations 18
Dividends 18
Capital Gains 18
REDEEMING SELECT SHARES 18
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 18
Written Requests 19
Signatures 19
Receiving Payment 19
Systematic Withdrawal Program 19
Accounts with Low Balances 20
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
Massachusetts Partnership Law 20
TAX INFORMATION 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 21
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 22
- ------------------------------------------------------
APPENDIX 23
- ------------------------------------------------------
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
Deferred Sales Load (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%
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. As noted in the table above, the Fund charges no
redemption fee for Select Shares............................................................... $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, foreign stocks and cash reserves.
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. 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 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.
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.
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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 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.
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.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $76 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter has been the Fund's portfolio manager since the Fund's
inception. 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.
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
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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 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 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
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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 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
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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 Standard & Poor's.
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 econimic 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
- ---------------------------------------------------------------------------------------------------------------------
FEDERATED MANAGED
GROWTH AND INCOME FUND
SELECT SHARES
PROSPECTUS
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated _______________, 1994
3122006A-SS (2/94)
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 , 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 , 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 5
Equity Securities 5
Foreign Securities 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") 7
Characteristics of Mortgage-Backed
Securities 8
Dollar Roll Transactions 8
Corporate Bonds 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 10
Options 11
Futures and Options on Futures 11
Risks 12
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 14
Administration of the Fund 14
Administrative Services 14
Shareholder Services Plan 14
Custodian 14
Transfer Agent and Dividend
Disbursing Agent 14
Legal Counsel 15
Independent Public Accountants 15
Brokerage Transactions 15
Expenses of the Fund and Institutional
Service Shares 15
NET ASSET VALUE 15
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 16
- ------------------------------------------------------
Share Purchases 16
Through a Financial Institution 16
By Wire 16
By Mail 16
Minimum Investment Required 16
What Shares Cost 17
Subaccounting Services 17
Systematic Investment Program 17
Certificates and Confirmations 17
Dividends 17
Capital Gains 18
REDEEMING INSTITUTIONAL SERVICE SHARES 18
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 18
Written Requests 18
Signatures 19
Receiving Payment 19
Systematic Withdrawal Program 19
Accounts with Low Balances 20
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
Massachusetts Partnership Law 20
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
APPENDIX 22
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
</TABLE>
<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
Deferred Sales Load (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
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 maximum shareholder servicing fee is 0.25%.
(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. As noted in the table above, the Fund charges no
redemption fee for Institutional Service Shares................................................ $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, foreign stocks and cash reserves.
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 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.
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. 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.
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 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. 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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period
between the sale and repurchase, the Fund will not be entitled to
receive interest and principal payments on the securities sold.
Proceeds of the sale will be invested in short-term instruments, and
the income from these investments, together with any additional fee
income received on the sale, will generate income for the Fund
exceeding the yield. When the Fund enters into a dollar roll
transaction, liquid assets of the Fund, in a dollar amount sufficient
to make payment for the obligations to be repurchased, are segregated
at the trade date. These securities are marked to market daily and are
maintained until the transaction is settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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 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
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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
- --------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
FEDERATED MANAGED
GROWTH FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated ____________, 1994
3122010A-ISS (2/94)
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 , 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 , 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 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
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
Dollar Roll Transactions 8
Corporate Bonds 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 10
Options 11
Futures and Options on Futures 11
Risks 12
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 14
Distribution Plan 14
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 15
Brokerage Transactions 16
Expenses of the Fund and Select Shares 16
NET ASSET VALUE 16
- ------------------------------------------------------
INVESTING IN SELECT SHARES 17
- ------------------------------------------------------
Share Purchases 17
Through a Financial Institution 17
By Wire 17
By Mail 17
Minimum Investment Required 17
What Shares Cost 17
Subaccounting Services 18
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 18
Capital Gains 18
REDEEMING SELECT SHARES 19
- ------------------------------------------------------
Through a Financial Institution 19
Telephone Redemption 19
Written Requests 19
Signatures 19
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>
<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
Deferred Sales Load (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%
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. As noted in the table above, the Fund charges no
redemption fee for Select Shares............................................................... $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, foreign stocks and cash reserves.
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 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.
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 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. 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.
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 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. 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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
the Fund enters into a dollar roll transaction, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations
to be repurchased, are segregated at the trade date. These securities
are marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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 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
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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 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
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<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
- ---------------------------------------------------------------------------------------------------------------------
FEDERATED MANAGED
GROWTH FUND
SELECT SHARES
PROSPECTUS
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated _______________, 1994
3122011A-SS (2/94)
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 , 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 , 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
Mortgaged-Backed Securities 4
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 5
Equity Securities 5
Foreign Securities 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 7
Dollar Roll Transactions 8
Corporate Bonds 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
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 14
Administration of the Fund 14
Administrative Services 14
Shareholder Services Plan 14
Custodian 14
Transfer Agent and Dividend
Disbursing Agent 14
Legal Counsel 14
Independent Public Accountants 14
Brokerage Transactions 14
Expenses of the Fund and Institutional
Service Shares 15
NET ASSET VALUE 15
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
Share Purchases 15
Through a Financial Institution 16
By Wire 16
By Mail 16
Minimum Investment Required 16
What Shares Cost 16
Subaccounting Services 17
Systematic Investment Program 17
Certificates and Confirmations 17
Dividends 17
Capital Gains 17
REDEEMING INSTITUTIONAL SERVICE SHARES 17
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 18
Written Requests 18
Signatures 18
Receiving Payment 19
Systematic Withdrawal Program 19
Accounts with Low Balances 19
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 20
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
APPENDIX 22
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
</TABLE>
<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
Deferred Sales Load (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
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 maximum shareholder servicing fee is 0.25%.
(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. As noted in the table above, the Fund charges no
redemption fee for Institutional Service Shares................................................ $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, foreign
stocks and cash reserves.
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 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 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. 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.
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 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. 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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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 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
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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
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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
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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 Standard & Poor's.
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 _______________, 1994
3122009A-ISS (2/94)
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 , 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 , 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 4
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Foreign Bonds 5
Acceptable Investments 5
Equity Securities 5
Foreign Securities 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 7
Dollar Roll Transactions 8
Corporate Bonds 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
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 14
Distribution Plan 14
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 15
Brokerage Transactions 15
Expenses of the Fund and Select Shares 15
NET ASSET VALUE 16
- ------------------------------------------------------
INVESTING IN SELECT SHARES 16
- ------------------------------------------------------
Share Purchases 16
Through a Financial Institution 16
By Wire 17
By Mail 17
Minimum Investment Required 17
What Shares Cost 17
Subaccounting Services 17
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 18
Capital Gains 18
REDEEMING SELECT SHARES 18
- ------------------------------------------------------
Through a Financial Institution 18
Telephone Redemption 19
Written Requests 19
Signatures 19
Receiving Payment 19
Systematic Withdrawal Program 20
Accounts with Low Balances 20
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
Massachusetts Partnership Law 20
TAX INFORMATION 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 21
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 22
- ------------------------------------------------------
APPENDIX 23
- ------------------------------------------------------
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
Deferred Sales Load (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%
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. As noted in the table above, the Fund charges no
redemption fee for Select Shares............................................................... $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, foreign
stocks and cash reserves.
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 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. 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.
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 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. 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.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and
manage prepayment risks, the Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA
and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
security to a financial institution, such as a bank or broker/dealer,
and simultaneously agrees to repurchase a substantially similar
security (i.e., same type, coupon and maturity) from the institution at
a later date at an agreed upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the
sale, will generate income for the Fund exceeding the yield. When the
Fund enters into a dollar roll transaction, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.
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.
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. A
description of the rating categories is contained in the Appendix to this
prospectus.
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.
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 has been the Fund's portfolio manager since the Fund's
inception. 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.
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 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
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
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 , 1994
3122008A-SS (2/94)
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 , 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 , 1994
[LOGO] 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
INVESTMENT LIMITATIONS 7
- ---------------------------------------------------------------
MANAGED SERIES TRUST MANAGEMENT 9
- ---------------------------------------------------------------
Officers and Trustees 9
The Funds 11
Trust Ownership 12
Trustee Liability 12
INVESTMENT ADVISORY SERVICES 12
- ---------------------------------------------------------------
Adviser to the Trust 12
Advisory Fees 12
Other Related Securities 13
ADMINISTRATIVE SERVICES 13
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 13
- ---------------------------------------------------------------
PURCHASING SHARES 13
- ---------------------------------------------------------------
Shareholder Servicing Plan 13
Distribution Plan (Select Shares) 14
Conversion to Federal Funds 14
DETERMINING NET ASSET VALUE 14
- ---------------------------------------------------------------
Determining Market Value of Securities 14
Trading in Foreign Securities 15
REDEEMING SHARES 15
- ---------------------------------------------------------------
Redemption in Kind 15
TAX STATUS 15
- ---------------------------------------------------------------
The Portfolios' Tax Status 15
Foreign Taxes 16
Shareholders' Tax Status 16
TOTAL RETURN 16
- ---------------------------------------------------------------
YIELD 16
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 16
- ---------------------------------------------------------------
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 small companies; that
is, the stocks of large 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.
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.
</TABLE>
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
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 U.S. Government Money Market
Trust; Liberty Term Trust, Inc.--1999; 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; 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; 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
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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.
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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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.
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 quarterly
reinvestment of dividends over a specified period of time.
3122014B (2/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A of (1).)
(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) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Copy of Specimen Certificates for Shares of Beneficial
Interest of the Registrant;+
(5) Form of Investment Advisory Contract of the Registrant;+
(6) Form of Distributor's Contract of the Registrant;+
(7) Not applicable;
(8) Copy of Custodian Agreement of the Registrant;+
(9) (i) Copy of Transfer Agency and Service Agreement of the
Registrant;+
(ii) Form of Shareholder Services Plan of the Registrant;+
(iii) Copy of Shareholder Services Agreement of the
Registrant;+
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered;+
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding;+
(14) Not applicable;
(15) (i) Form of Distribution Plan;+
(ii) Copy of 12b-1 Agreement;+
(16) Schedules for Computation of Fund Performance Data (to
be filed with four- to six-month update);
(17) Conformed copy of Power of Attorney (1).
Item 25. Persons Controlled by or Under Common Control with Registrant:
As a newly formed company, all of the outstanding shares of the
Registrant are currently owned by Federated Management, the
adviser to each of the Funds in the Trust. Other companies
controlled by the adviser, and thus under common control with the
Registrant are: 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).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class _as of January 18, 1994_
Shares of beneficial interest
(no par value)
Federated Managed Income Fund
Institutional Service Shares 1
Select Shares 0
Federated Managed Growth and Income Fund
Institutional Service Shares 0
Select Shares 0
Federated Managed Growth Fund
Institutional Service Shares 0
Select Shares 0
Federated Managed Aggressive Growth Fund
Institutional Service Shares 0
Select Shares 0
Item 27. Indemnification:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Article XI of Registrant's Declaration of
Trust. The Investment Advisory Contract between the Registrant
and Federated Management ("Adviser") provides that, in the absence
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the obligations or duties under the Investment
Advisory Contract on the part of Adviser, Adviser shall not be
liable to the Registrant or to any shareholder for any act or
omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase,
holding, or sale of any security. Registrant's Trustees and
Officers are covered by an Investment Trust Errors and Omissions
Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, Officers, and
controlling persons of the Registrant by the Registrant pursuant
to the Declaration of Trust or otherwise, the Registrant is aware
that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim
for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
Trustees, Officers, or controlling persons of the Registrant in
connection with the successful defense of any act, suit, or
proceeding) is asserted by such Trustees, Officers, or controlling
persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for
Trustees, Officers, and controlling persons of the Registrant by
the Registrant, pursuant to the Declaration of Trust or otherwise,
the Registrant is aware of the position of the Securities and
Exchange Commission as set forth in Investment Company Act Release
No. IC-11330. Therefore, the Registrant undertakes that, in
addition to complying with the applicable provisions of the
Declaration of Trust or otherwise, in the absence of a final
decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not
be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party Trustees who are not
interested persons of the Registrant or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable
for an act of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties. The Registrant further undertakes
that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an
Officer, Trustee, or controlling person of the Registrant will not
be made absent the fulfillment of at least one of the following
conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising
by reason of any lawful advances; or (iii) a majority of a quorum
of disinterested non-party Trustees or independent legal counsel
in a written opinion makes a factual determination that there is
reason to believe the indemnitee will be entitled to
indemnification.
Item 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: Mark
L. Mallon, Executive Vice President; Henry J. Gailliot,
Senior Vice President-Economist; Peter R. Anderson, William
D. Dawson, J. Thomas Madden, Gary J. Madich, and J. Alan
Minteer, Senior Vice Presidents; Jonathan C. Conley, Deborah
A. Cunningham, Mark E. Durbiano, Roger A. Early, Kathleen M.
Foody-Malus, David C. Francis, Thomas M. Franks, Edward C.
Gonzales, Jeff A. Kozemchak, 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."
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: A.T. Ohio Tax-Free Money Fund; American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management
Trust; Automated Government Money Trust; BankSouth Select Funds;
BayFunds; The Biltmore Funds; The Biltmore Municipal Funds; The
Boulevard Funds; California Municipal Cash Trust; Cambridge Series
Trust; Cash Trust Series, Inc.; Cash Trust Series II; 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; Financial Reserves 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; 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.; Money Market
Obligations Trust; Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Signet Select Funds;
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.; and Vision Group of Funds,
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.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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 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.
James S. Hamilton 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
Mark W. Bloss 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
Mary J. Combs 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Theodore Fadool, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher 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
Christopher T. Fives 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
James M. Heaton 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
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
Keith Nixon 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Timothy C. Pillion 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
Thomas E. Territ 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
R. Edmond Connell, Jr. Assistant 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
H. Joseph Kennedy 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:
Location
of Type of
Regulation Record Record Fund
270.31a-1(a) 2 General Ledger B
2 Cash Transaction Statement D
2 Monthly Cash Summary Report M
2 Purchases Report D
2 Sales Report D
2 Realized Gain/Loss Report D
2 Securities Movement and Control
List of Assets for Close
of Business B
270.31a-1(b)(1) 2 Daily Portfolio Transaction
Detail D
2 Daily Settled Pur. and Sales
Journal D
2 Money Market Monthly Transaction
Journal M
2 Money Market Gen. Ledger Activity
Journal M
270.31a-1(b)2(i) 2 General Ledger B
2 Money Market Gen. Ledger Activity
Journal M
2 Open Trades/Secs. Out for Transfer
Report D
2 Securities Movement and Control
List of Assets for Close of
Business B
2 Fed. Reserve 3E Safe-Keeping Acct.
2 Listing of Securities held
by the fund B
2 Div. Income Summary Report D
2 Div. and Interest Receivable
Report D
2 Earned Income Report B
2 Money Market Daily Accrual Report M
2 Money Market Daily Amortization
Report M
2 Statement of Condition B
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
Location
of Type of
Regulation Record Record Fund
270.31a-1(b)2(ii) 2 Fund Master Ledger D
2 Corporate Action Announcement
Report D
2 Purchases Report D
2 Sales Report D
270.31a-1(b)2(iii) 2 Brokerage Alloc/Commission
Detail Report D
270.31a-1(b)2(iv) 3 Shareholder Master File - CRT B
3 Shareholder History File - CRT B
270.31a-1(b)3 2 Fund Master Ledger D
270.31a-1(b)4 1 Articles of Incorporation B
1 Declaration of Trust B
1 By-Laws B
1 Minute Books B
270.31a-1(b)5 1 Trade Tickets B
2 Purchase Report D
2 Sales Report D
270.31a-1(b)6 1 Trade Tickets B
270.31a-1(b)7 2 Fund Master Ledger D
270.31a-1(b)8 2 Statement of Condition B
2 General Ledger B
2 Money Market Gen. Ledger
Activity Journal M
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
Location
of Type of
Regulation Record Record Fund
270.31a-1(b)9 2 Brokerage Alloc./Commission
Detail Report D
1 Brokerage Commission Report B
1 Reduction and Commission Report D
1 Quarterly Brokerage Log B
270.31a-1(b)10 1 Custodian Blanket Authorization B
1 Portfolio Manager Signoff B
270.31a-1(b)11 1 Portfolio Manager Signoff B
270.31a-1(b)12 2 All supporting documentation B
270.31a-1(c) Not applicable
270.31a-1(d) 1 Direct Pmts. thru Fund Journal B
1 Exchange Purchase Journal B
1 Confirmed Pmts. Journal B
1 Fiduciary Contribution Journal B
1 Direct Payments Journal B
1 Direct Redemptions Journal B
2 General Ledger B
3 Shareholder Master File - CRT B
3 Shareholder History File - CRT B
1 Daily Div. Close-out Journal B
1 Asset Transfer/Rollover Journal B
1 Redemption Check Register B
1 Purchase Cancellations Journal B
1 Redemption Cancellation Journal B
1 Fail/Free Report B
1 Broker/Dealer Order Ticket B
1 Inv. Services Order Breakdowns B
1 EDGE Transaction Journal B
1 Shareholder Receipt-Retail B
3 Account Application-Retail B
3 Additional Deposit Slip-Retail B
1 Trade Cancel Form B
1 Confirmation Statement B
3 Shareholder Statement B
1 Form U-4 B
1 Fingerprint Card B
1 Form U-4 Status Report B
1 Form U-4 Score Report B
1 Form U-5 B
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
Location
of Type of
Regulation Record Record Fund
270.31a-1(e) Not applicable
270.31a-1(f) 2 General Ledger B
1 Portfolio Manager Signoff B
1 Trade Tickets B
270.31a-2(a)(1) 2 Daily Portfolio Transaction
Detail D
2 Daily Settled Pur. and Sales
Journal D
2 Money Market Monthly Transaction
Journal M
2 Money Market Gen. Ledger Activity
Journal M
2 Open Trades/Secs. Out for
Transfer Report D
2 Securities Movement and Control
List of Assets for Close
of Business B
2 Fed. Reserve 3E Safe-Keeping
Acct. Listing of Securities
held by the fund B
2 Div. Income Summary Report D
2 Div. and Interest Receivable
Report D
2 Earned Income Report B
2 Money Market Daily Accrual Report M
2 Money Market Daily Amortization
Report M
2 Statement of Condition B
2 Fund Master Ledger D
2 Corporate Action Announcement
Report D
2 Brokerage Alloc./Commission
Detail Report D
3 Shareholder Master File - CRT B
3 Shareholder History File - CRT B
1 Declaration of Trust B
1 By-laws B
1 Minute Books B
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
Location
of Type of
Regulation Record Record Fund
270.31a-2(a)(2) 2 Purchases Report D
2 Sales Report D
2 General Ledger B
2 Money Market Gen. Ledger
Activity Journal M
2 Statement of Condition B
2 Fund Master Ledger D
2 Brokerage Alloc./Commission
Detail Report D
1 Trade Tickets B
1 Brokerage Commission Report B
1 Reduction and Commission Report D
1 Quarterly Brokerage Log B
1 Custodian Blanket Authorization B
1 Portfolio Manager Signoff B
270.31a-2(a)(3) 1 Sales Literature File B
270.31a-2(b) Not applicable
270.31a-2(c) 1 Direct Pmts. thru Fund Journal B
1 Exchange Purchase Journal B
1 Confirmed Pmts. Journal B
1 Fiduciary Contribution Journal B
1 Direct Payments Journal B
1 Direct Redemptions Journal B
2 General Ledger B
3 Shareholder Master File - CRT B
3 Shareholder History File - CRT B
1 Daily Div. Close-Out Journal B
1 Asset Transfer/Rollover Journal B
1 Redemption Check Register B
1 Purchase Cancellations Journal B
1 Redemption Cancellation Journal B
1 Fail/Free Report B
1 Broker/Dealer Order Ticket B
1 Inv. Services Order Breakdowns B
1 EDGE Transaction Journal B
1 Shareholder Receipt-Retail B
3 Account Application-Retail B
3 Additional Deposit Slip-Retail B
1 Trade Cancel Form B
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
Location
of Type of
Regulation Record Record Fund
270.31a-2(c) 1 Confirmation Statement B
(cont.) 3 Shareholder Statement B
1 Form U-4 B
1 Fingerprint Card B
1 Form U-4 Status Report B
1 Form U-4 Score Report B
1 Form U-5 B
270.31a-2(d) Not applicable
270.31a-2(e) 2 General Ledger B
1 Portfolio Manager Signoff B
1 Trade Tickets B
270.31a-2(f)(1) 1 Microfilm B
270.31a-2(f)(2) 1 Retention Plan B
270.31a-2(f)(3) 1 Not applicable
270.31a-3 1 Custodian Agreement B
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to file a post-effective amendment,
using financial statements which need not be certified, within
four to six months from the effective date of Registrant's 1933
Act Registration Statement.
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.
When available, 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.
(1) Registrant (2) State Street Bank & (3) Federated Services
Federated Investors Trust Company Company
Tower P.O. Box 8602 Federated
Pittsburgh, PA Boston, MA Investors Tower
15222-3779 02266-8602 Pittsburgh, PA
15222-3779
B = Both
D = Debt Equity
M = Money Market
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), 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 11th day of February, 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
February 11, 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 February 11, 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 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
Pre-Effective Amendment No. 1 to Form N-1A Registration Statement of
Managed Series Trust of our report dated January 21, 1994, included in or
made a part of this registration statement.
By: /s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania,
February 7, 1994
Exhibit 1(iii) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
ALLOCATION SERIES TRUST
Amendment No. 2
DECLARATION OF TRUST
dated November 15, 1993
THIS Declaration of Trust is amended as follows:
Delete the first paragraph of Section 1 of Article I
from the Declaration of Trust and substitute in its place
the following:
Section 1. Name. This Trust shall be known as
Managed Series Trust, and the Trustees may conduct
the business of the Trust under that name or any
other name as they may determine from time to
time.
Delete the first paragraph of Section 5 in Article III
and substitute in its place the following:
Section 5. Establishment and Designation of
Series or Class.
Without limiting the authority of the Trustees set
forth in Article XII, Section 8, inter alia, to
establish and designate any additional Series or
Class or to modify the rights and preferences of
any existing Series or Class, the Series and
Classes of the Trust shall be and are established
and designated as:
Federated Managed Agressive Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Service Shares
Select Shares
Federated Managed Growth Fund
Institutional Service Shares
Select Shares
Federated Managed Income Fund
Institutional Service Shares
Select Shares
The undersigned Assistant Secretary of Managed Series
Trust hereby certifies that the above stated Amendment is a
true and correct Amendment to the Declaration of Trust, as
adopted by the Board of Trustees of the Trust as of the 18th
day of January, 1994.
WITNESS the due execution hereof this 18th day of
January, 1994.
/s/ G. Andrew Bonnewell
G. Andrew Bonnewell
Assistant Secretary
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
(INSTITUTIONAL SERVICE SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED INCOME FUND Portfolio of MANAGED SERIES TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _______________________________________
__________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED INCOME FUND
(SELECT SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED INCOME FUND Portfolio of MANAGED SERIES TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _______________________________________
__________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
(INSTITUTIONAL SERVICE SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED GROWTH AND INCOME FUND Portfolio of MANAGED SERIES
TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH AND INCOME FUND
(SELECT SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED GROWTH AND INCOME FUND Portfolio of MANAGED SERIES
TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH FUND
(INSTITUTIONAL SERVICE SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED GROWTH FUND Portfolio of MANAGED SERIES TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED GROWTH FUND
(SELECT SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED GROWTH FUND Portfolio of MANAGED SERIES TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(INSTITUTIONAL SERVICE SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED AGGRESSIVE GROWTH FUND Portfolio of MANAGED SERIES
TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
MANAGED SERIES TRUST
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(SELECT SHARES)
P O R T F O L I O
Number Shares
______ ______
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP (applied for)
Fully Paid and Non-Assessable Shares of Beneficial Interest of
the FEDERATED MANAGED AGGRESSIVE GROWTH FUND Portfolio of MANAGED SERIES
TRUST
hereafter called the "Trust", transferable on the books of the Trust by the
owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: MANAGED SERIES TRUST
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-.......Custodian........
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
___________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated ______________________
NOTICE:___________________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
All persons dealing with MANAGED SERIES TRUST, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations entered
into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Managed Series Trust
INVESTMENT ADVISORY CONTRACT
This Contract is made this __th day of _____________,
19__, between FEDERATED MANAGEMENT, a Delaware business
trust having its principal place of business in Pittsburgh,
Pennsylvania (the "Adviser"), and MANAGED SERIES TRUST, a
Massachusetts business trust having its principal place of
business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment
company as that term is defined in the Investment
Company Act of 1940 and is registered as such with the
Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment
Adviser for each of the portfolios ("Funds") of the Trust
which executes an exhibit to this Contract, and Adviser
accepts the appointments. Subject to the direction of the
Trustees of the Trust, Adviser shall provide investment
research and supervision of the investments of the Funds and
conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of
each Fund's assets.
2. Adviser, in its supervision of the investments of
each of the Funds will be guided by each of the Fund's
investment objective and policies and the provisions and
restrictions contained in the Declaration of Trust and
By-Laws of the Trust and as set forth in the Registration
Statements and exhibits as may be on file with the
Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its
own expenses and its allocable share of Trust expenses,
including, without limitation, the expenses of organizing
the Trust and continuing its existence; fees and expenses of
Trustees and officers of the Trust; fees for investment
advisory services and administrative personnel and services;
expenses incurred in the distribution of its shares
("Shares"), including expenses of administrative support
services; fees and expenses of preparing and printing its
Registration Statements under the Securities Act of 1933 and
the Investment Company Act of 1940 and any amendments
thereto; expenses of registering and qualifying the Trust,
the Funds, and Shares of the Funds under federal and state
laws and regulations; expenses of preparing, printing, and
distributing prospectuses (and any amendments thereto) to
shareholders; interest expense, taxes, fees, and commissions
of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of
Shares, including expenses attributable to a program of
periodic issue; charges and expenses of custodians, transfer
agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing and mailing costs,
auditing, accounting, and legal expenses; reports to
shareholders and governmental officers and commissions;
expenses of meetings of Trustees and shareholders and proxy
solicitations therefor; insurance expenses; association
membership dues and such nonrecurring items as may arise,
including all losses and liabilities incurred in
administering the Trust and the Funds. Each Fund will also
pay its allocable share of such extraordinary expenses as
may arise including expenses incurred in connection with
litigation, proceedings, and claims and the legal
obligations of the Trust to indemnify its officers and
Trustees and agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all
services rendered to each Fund by Adviser hereunder, the
fees set forth in the exhibits attached hereto.
5. The net asset value of each Fund's Shares as used
herein will be calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such
periods as it deems appropriate reduce its compensation
(and, if appropriate, assume expenses of one or more of the
Funds) to the extent that any Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to
the Fund, voluntarily declare to be effective.
7. This Contract shall begin for each Fund as of the
date of execution of the applicable exhibit and shall
continue in effect with respect to each Fund presently set
forth on an exhibit (and any subsequent Funds added pursuant
to an exhibit during the initial term of this contract) for
two years from the date of this Contract set forth above and
thereafter for successive periods of one year, subject to
the provisions for termination and all of the other terms
and conditions hereof if: (a) such continuation shall be
specifically approved at least annually by the vote of a
majority of the Trustees of the Trust, including a majority
of the Trustees who are not parties to this Contract or
interested persons of any such party (other than as Trustees
of the Trust), cast in person at a meeting called for that
purpose; and (b) Adviser shall not have notified a Fund in
writing at least sixty (60) days prior to the anniversary
date of this Contract in any year thereafter that it does
not desire such continuation with respect to that Fund. If
a Fund is added after the first approval by the Trustees as
described above, this Contract will be effective as to that
Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this
Contract by the Trustees and thereafter for successive
periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it
may be terminated at any time with respect to any Fund,
without the payment of any penalty, by the Trustees of the
Trust or by a vote of the shareholders of that Fund on sixty
(60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and
shall automatically terminate in the event of any
assignment. Adviser may employ or contract with such other
person, persons, corporation, or corporations at its own
cost and expense as it shall determine in order to assist it
in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations
or duties under this Contract on the part of Adviser,
Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or
for any losses that may be sustained in the purchase,
holding, or sale of any security.
11. This Contract may be amended at any time by
agreement of the parties provided that the amendment shall
be approved both by the vote of a majority of the Trustees
of the Trust, including a majority of the Trustees who are
not parties to this Contract or interested persons of any
such party to this Contract (other than as Trustees of the
Trust) cast in person at a meeting called for that purpose,
and on behalf of a Fund by a majority of the outstanding
voting securities of such Fund.
12. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations
pursuant to this Contract of a particular Fund and of the
Trust with respect to that particular Fund be limited solely
to the assets of that particular Fund, and Adviser shall not
seek satisfaction of any such obligation from any other
Fund, the shareholders of any Fund, the Trustees, officers,
employees or agents of the Trust, or any of them.
13. The Trust and the Funds are hereby expressly put
on notice of the limitation of liability as set forth in the
Declaration of Trust of the Adviser and agree that the
obligations assumed by the Adviser pursuant to this Contract
shall be limited in any case to the Adviser and its assets
and, except to the extent expressly permitted by the
Investment Company Act of 1940, the Trust and the Funds
shall not seek satisfaction of any such obligation from the
shareholders of the Adviser, the Trustees, officers,
employees, or agents of the Adviser, or any of them.
14. This Contract shall be construed in accordance
with and governed by the laws of the Commonwealth of
Pennsylvania.
15. This Contract will become binding on the parties
hereto upon their execution of the attached exhibits to this
Contract.
16. The parties hereto acknowledge that Federated
Investors has reserved the right to grant the non-exclusive
use of the name "Federated" or any derivative thereof to any
other investment company, investment company portfolio,
investment adviser, distributor or other business
enterprise, and to withdraw from the Trust and one or more
of the Funds the use of the name "Federated." The name
"Federated" will continue to be used by the Trust and each
Fund so long as such use is mutually agreeable to Federated
Investors and the Trust.
EXHIBIT A
to the
Investment Advisory Contract
Federated Managed Income Fund
For all services rendered by Adviser hereunder, the
above-named Fund of the Trust shall pay to Adviser and
Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory
fee equal to .75 of 1% of the average daily net assets of
the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of
1/365th of .75 of 1% applied to the daily net assets of the
Fund.
The advisory fee so accrued shall be paid to Adviser
daily.
Witness the due execution hereof this __th day of
_________, 19__.
Attest: FEDERATED MANAGEMENT
By:
Secretary Senior Vice President
Attest: MANAGED SERIES TRUST
By:
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
Federated Managed Growth and Income Fund
For all services rendered by Adviser hereunder, the
above-named Fund of the Trust shall pay to Adviser and
Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory
fee equal to .75 of 1% of the average daily net assets of
the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of
1/365th of .75 of 1% applied to the daily net assets of the
Fund.
The advisory fee so accrued shall be paid to Adviser
daily.
Witness the due execution hereof this __th day of
_________, 19__.
Attest: FEDERATED MANAGEMENT
By:
Secretary Senior Vice President
Attest: MANAGED SERIES TRUST
By:
Assistant Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
Federated Managed Growth Fund
For all services rendered by Adviser hereunder, the
above-named Fund of the Trust shall pay to Adviser and
Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory
fee equal to .75 of 1% of the average daily net assets of
the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of
1/365th of .75 of 1% applied to the daily net assets of the
Fund.
The advisory fee so accrued shall be paid to Adviser
daily.
Witness the due execution hereof this __th day of
_________, 19__.
Attest: FEDERATED MANAGEMENT
By:
Secretary Senior Vice President
Attest: MANAGED SERIES TRUST
By:
Assistant Secretary Vice President
EXHIBIT D
to the
Investment Advisory Contract
Federated Managed Aggressive Growth Fund
For all services rendered by Adviser hereunder, the
above-named Fund of the Trust shall pay to Adviser and
Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory
fee equal to .75 of 1% of the average daily net assets of
the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of
1/365th of .75 of 1% applied to the daily net assets of the
Fund.
The advisory fee so accrued shall be paid to Adviser
daily.
Witness the due execution hereof this __th day of
_________, 19__.
Attest: FEDERATED MANAGEMENT
By:
Secretary Senior Vice President
Attest: MANAGED SERIES TRUST
By:
Assistant Secretary Vice President
Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Managed Series Trust
DISTRIBUTOR'S CONTRACT
AGREEMENT made this ____ day of __________, 19__, by
and between MANAGED SERIES TRUST (the "Trust"), a
Massachusetts business trust, and FEDERATED SECURITIES CORP.
("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties
hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell
and distribute shares of the Trust which may be offered in
one or more series (the "Funds") consisting of one or more
classes (the "Classes") of shares (the "Shares"), as
described and set forth on one or more exhibits to this
Agreement, at the current offering price thereof as
described and set forth in the current Prospectuses of the
Trust. FSC hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and
accept such compensation from the Trust, if any, as set
forth in the applicable exhibit to this Agreement.
2. The sale of any Shares may be suspended without
prior notice whenever in the judgment of the Trust it is in
its best interest to do so.
3. Neither FSC nor any other person is authorized by
the Trust to give any information or to make any
representation relative to any Shares other than those
contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the
Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the
Trust. FSC agrees that any other information or
representations other than those specified above which it or
any dealer or other person who purchases Shares through FSC
may make in connection with the offer or sale of Shares,
shall be made entirely without liability on the part of the
Trust. No person or dealer, other than FSC, is authorized
to act as agent for the Trust for any purpose. FSC agrees
that in offering or selling Shares as agent of the Trust, it
will, in all respects, duly conform to all applicable state
and federal laws and the rules and regulations of the
National Association of Securities Dealers, Inc., including
its Rules of Fair Practice. FSC will submit to the Trust
copies of all sales literature before using the same and
will not use such sales literature if disapproved by the
Trust.
4. This Agreement is effective with respect to each
Class as of the date of execution of the applicable exhibit
and shall continue 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 term of this
Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such
continuance is approved at least annually by the Trustees of
the Trust including a majority of the members of the Board
of Trustees of the Trust who are not interested persons of
the Trust and have no direct or indirect financial interest
in the operation of any Distribution Plan relating to the
Trust or in any related documents to such Plan
("Disinterested Trustees") cast in person at a meeting
called for that purpose. If a Class is added after the
first annual approval by the Trustees as described above,
this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by
the Trustees and thereafter for successive periods of one
year, subject to approval as described above.
5. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of
any penalty, by the vote of a majority of the Disinterested
Trustees 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 any other party to this
Agreement. This Agreement may be terminated with regard to
a particular Fund or Class by FSC on sixty (60) days'
written notice to the Trust.
6. This Agreement may not be assigned by FSC and
shall automatically terminate in the event of an assignment
by FSC as defined in the Investment Company Act of 1940, as
amended, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall
determine in order to assist it in carrying out its duties
under this Agreement.
7. FSC shall not be liable to the Trust 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 by this Agreement.
8. This Agreement may be amended at any time by
mutual agreement in writing of all the parties hereto,
provided that such amendment is approved by the Trustees of
the Trust including a majority of the Disinterested Trustees
of the Trust cast in person at a meeting called for that
purpose.
9. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of
Pennsylvania.
10. (a) Subject to the conditions set forth below,
the Trust agrees to indemnify and hold harmless FSC and each
person, if any, who controls FSC within the meaning of
Section 15 of the Securities Act of 1933 and Section 20 of
the Securities Act of 1934, as amended, against any and all
loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based
upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom
of a material fact required to be stated therein or
necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the
Trust about FSC by or on behalf of FSC expressly for use in
the Registration Statement, any Prospectuses and SAIs or any
amendment or supplement thereof.
If any action is brought against FSC or any
controlling person thereof with respect to which indemnity
may be sought against the Trust pursuant to the foregoing
paragraph, FSC shall promptly notify the Trust in writing of
the institution of such action and the Trust shall assume
the defense of such action, including the employment of
counsel selected by the Trust and payment of expenses. FSC
or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of FSC
or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Trust
in connection with the defense of such action or the Trust
shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and
expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall
not be liable for any settlement of any such claim of action
effected without its written consent. The Trust agrees
promptly to notify FSC of the commencement of any litigation
or proceedings against the Trust or any of its officers or
Trustees or controlling persons in connection with the issue
and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the
Trust, each of its Trustees, each of its officers who have
signed the Registration Statement and each other person, if
any, who controls the Trust within the meaning of Section 15
of the Securities Act of 1933, but only with respect to
statements or omissions, if any, made in the Registration
Statement or any Prospectus, SAI, or any amendment or
supplement thereof in reliance upon, and in conformity with,
information furnished to the Trust about FSC by or on behalf
of FSC expressly for use in the Registration Statement or
any Prospectus, SAI, or any amendment or supplement thereof.
In case any action shall be brought against the Trust or any
other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may
be sought against FSC, FSC shall have the rights and duties
given to the Trust, and the Trust and each other person so
indemnified shall have the rights and duties given to FSC by
the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to
protect any person against liability to the Trust or its
shareholders to which such person would otherwise be subject
by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person
or by reason of the reckless disregard by such person of the
obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities
may be permitted pursuant to Section 17 of the Investment
Company Act of 1940, as amended, for Trustees, officers, FSC
and controlling persons of the Trust by the Trust pursuant
to this Agreement, the Trust is aware of the position of the
Securities and Exchange Commission as set forth in the
Investment Company Act Release No. IC-11330. Therefore, the
Trust undertakes that in addition to complying with the
applicable provisions of this Agreement, in the absence of a
final decision on the merits by a court or other body before
which the proceeding was brought, that an indemnification
payment will not be made unless in the absence of such a
decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees, or (ii) by independent
legal counsel in a written opinion that the indemnitee was
not liable for an act of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties. The Trust
further undertakes that advancement of expenses incurred in
the defense of a proceeding (upon undertaking for repayment
unless it is ultimately determined that indemnification is
appropriate) against an officer, Trustee, FSC or controlling
person of the Trust will not be made absent the fulfillment
of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the
Trust is insured against losses arising by reason of any
lawful advances; or (iii) a majority of a quorum of
non-party Disinterested Trustees or independent legal
counsel in a written opinion makes a factual determination
that there is reason to believe the indemnitee will be
entitled to indemnification.
11. FSC is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations assumed
by the Trust pursuant to this Agreement shall be limited in
any case to the Trust and its assets and FSC shall not seek
satisfaction of any such obligation from the shareholders of
the Trust, the Trustees, officers, employees or agents of
the Trust, or any of them.
12. If at any time the Shares of any Fund are offered
in two or more Classes, FSC agrees to adopt compliance
standards as to when a class of shares may be sold to
particular investors.
13. This Agreement will become binding on the parties
hereto upon the execution of the attached exhibits to the
Agreement.
Exhibit A
to the
Distributor's Contract
Managed Series Trust
Federated Managed Income Fund - Institutional Service Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated _______________, 19__,
between MANAGED SERIES TRUST and Federated Securities Corp.,
MANAGED SERIES TRUST executes and delivers this Exhibit on
behalf of the Fund, and with respect to the separate Class
of Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19__.
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit B
to the
Distributor's Contract
Managed Series Trust
Federated Managed Income Fund - Select Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the
day of , 19 , between MANAGED SERIES TRUST and
Federated Securities Corp. with respect to Class of the
Funds set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders. In
addition, FSC is authorized to select a group of
administrators ("Administrators") to render administrative
support services to the Trust and its shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Trust share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Trust's accounts, and provides training and supervision of
its personnel; 6) interest posting: Broker or Administrator
posts and reinvests dividends to the Trust's accounts; 7)
prospectus and shareholder reports: Broker or Administrator
maintains and distributes current copies of prospectuses and
shareholder reports; 8) advertisements: the Broker or
Administrator continuously advertises the availability of
its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator
continuously designs material to send to customers and
develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or
Administrator continuously provides information about the
product needs of customers.
3. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a monthly
fee computed at the annual rate of .75 of 1% of the average
aggregate net asset value of the shares of the Select Shares
of Federated Managed Income Fund held during the month. For
the month in which this 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 month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Trust, voluntarily declare to
be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees
of the Trust on a quarterly basis showing amounts expended
hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated ___________, 19__ between
MANAGED SERIES TRUST and Federated Securities Corp., MANAGED
SERIES TRUST executes and delivers this Exhibit on behalf of
the Fund, and with respect to the separate Class of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19 .
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit C
to the
Distributor's Contract
Managed Series Trust
Federated Managed Growth and Income Fund - Institutional
Service Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated _______________, 19__,
between MANAGED SERIES TRUST and Federated Securities Corp.,
MANAGED SERIES TRUST executes and delivers this Exhibit on
behalf of the Fund, and with respect to the separate Class
of Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19__.
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit D
to the
Distributor's Contract
Managed Series Trust
Federated Managed Growth and Income Fund - Select Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the
day of , 19 , between MANAGED SERIES TRUST and
Federated Securities Corp. with respect to Class of the
Funds set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders. In
addition, FSC is authorized to select a group of
administrators ("Administrators") to render administrative
support services to the Trust and its shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Trust share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Trust's accounts, and provides training and supervision of
its personnel; 6) interest posting: Broker or Administrator
posts and reinvests dividends to the Trust's accounts; 7)
prospectus and shareholder reports: Broker or Administrator
maintains and distributes current copies of prospectuses and
shareholder reports; 8) advertisements: the Broker or
Administrator continuously advertises the availability of
its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator
continuously designs material to send to customers and
develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or
Administrator continuously provides information about the
product needs of customers.
3. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a monthly
fee computed at the annual rate of .75 of 1% of the average
aggregate net asset value of the shares of the Select Shares
of Federated Managed Growth and Income Fund held during the
month. For the month in which this 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 month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Trust, voluntarily declare to
be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees
of the Trust on a quarterly basis showing amounts expended
hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated ___________, 19__ between
MANAGED SERIES TRUST and Federated Securities Corp., MANAGED
SERIES TRUST executes and delivers this Exhibit on behalf of
the Fund, and with respect to the separate Class of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19 .
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit E
to the
Distributor's Contract
Managed Series Trust
Federated Managed Growth Fund - Institutional Service Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated _______________, 19__,
between MANAGED SERIES TRUST and Federated Securities Corp.,
MANAGED SERIES TRUST executes and delivers this Exhibit on
behalf of the Fund, and with respect to the separate Class
of Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19__.
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit F
to the
Distributor's Contract
Managed Series Trust
Federated Managed Growth Fund - Select Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the
day of , 19 , between MANAGED SERIES TRUST and
Federated Securities Corp. with respect to Class of the
Funds set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders. In
addition, FSC is authorized to select a group of
administrators ("Administrators") to render administrative
support services to the Trust and its shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Trust share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Trust's accounts, and provides training and supervision of
its personnel; 6) interest posting: Broker or Administrator
posts and reinvests dividends to the Trust's accounts; 7)
prospectus and shareholder reports: Broker or Administrator
maintains and distributes current copies of prospectuses and
shareholder reports; 8) advertisements: the Broker or
Administrator continuously advertises the availability of
its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator
continuously designs material to send to customers and
develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or
Administrator continuously provides information about the
product needs of customers.
3. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a monthly
fee computed at the annual rate of .75 of 1% of the average
aggregate net asset value of the shares of the Select Shares
of Federated Managed Growth Fund held during the month. For
the month in which this 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 month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Trust, voluntarily declare to
be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees
of the Trust on a quarterly basis showing amounts expended
hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated ___________, 19__ between
MANAGED SERIES TRUST and Federated Securities Corp., MANAGED
SERIES TRUST executes and delivers this Exhibit on behalf of
the Fund, and with respect to the separate Class of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19 .
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit G
to the
Distributor's Contract
Managed Series Trust
Federated Managed Aggressive Growth Fund - Institutional
Service Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated _______________, 19__,
between MANAGED SERIES TRUST and Federated Securities Corp.,
MANAGED SERIES TRUST executes and delivers this Exhibit on
behalf of the Fund, and with respect to the separate Class
of Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19__.
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit H
to the
Distributor's Contract
Managed Series Trust
Federated Managed Aggressive Growth Fund - Select Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the
day of , 19 , between MANAGED SERIES TRUST and
Federated Securities Corp. with respect to Class of the
Funds set forth above.
1. The Trust hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders. In
addition, FSC is authorized to select a group of
administrators ("Administrators") to render administrative
support services to the Trust and its shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Trust share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Trust's accounts, and provides training and supervision of
its personnel; 6) interest posting: Broker or Administrator
posts and reinvests dividends to the Trust's accounts; 7)
prospectus and shareholder reports: Broker or Administrator
maintains and distributes current copies of prospectuses and
shareholder reports; 8) advertisements: the Broker or
Administrator continuously advertises the availability of
its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator
continuously designs material to send to customers and
develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or
Administrator continuously provides information about the
product needs of customers.
3. During the term of this Agreement, the Trust will
pay FSC for services pursuant to this Agreement, a monthly
fee computed at the annual rate of .75 of 1% of the average
aggregate net asset value of the shares of the Select Shares
of Federated Managed Aggressive Growth Fund held during the
month. For the month in which this 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 month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Trust, voluntarily declare to
be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees
of the Trust on a quarterly basis showing amounts expended
hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated ___________, 19__ between
MANAGED SERIES TRUST and Federated Securities Corp., MANAGED
SERIES TRUST executes and delivers this Exhibit on behalf of
the Fund, and with respect to the separate Class of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of ,
19 .
ATTEST: MANAGED SERIES TRUST
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
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
2.1 Holding Securities. The Custodian shall hold and
physically segregate 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.
2.2 Delivery 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 receipt 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 similar 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 name 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, consolidation, 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 surrender 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 securities 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 agreement 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 agreement 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 ("Transfer 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 receipt 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 (other 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.
2.5 Payments 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.
2.6 Availability 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.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which 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 securities 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 Fund, 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 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 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.
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased. 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.
2.10
Payments for Repurchases or Redemptions of Shares of
a Fund. From 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.
2.11
Appointment 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.
2.12
Deposit 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.
2.13
Segregated 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.
2.14
Joint Repurchase Agreements. Upon the receipt of
Proper Instructions, 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.
2.15
Ownership Certificates for Tax Purposes. The
Custodian shall execute 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.
2.16
Proxies. The Custodian shall, with respect to the
securities held 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.
2.17
Communications Relating to Fund Portfolio Securities.
The Custodian 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.
2.18
Proper 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.
2.19
Actions 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 handling 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 definitive 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 connection 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.
2.20
Evidence of Authority. The Custodian shall be
protected in acting 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.
2.21
Notice to Trust by Custodian Regarding Cash Movement.
The Custodian 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 Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the 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
Table
s c c
CONTRACT FEE
DATE INVESTMENT COMPANY
SCHEDULE
12/1/93 111 Corcoran Funds 2
12/1/93 111 Corcoran Bond Fund 2
12/1/93 111 Corcoran North Carolina Municipal Securities Fund 2
12/1/93 American Leaders Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Automated Cash Management Trust 1
12/1/93 Automated Government Money Trust 1
12/1/93 California Municipal Cash Trust 1
Has a separate
contract with
SSB - included for
fee information
purposes only Cambridge Series Trust 1
Cambridge Capital Growth Portfolio 1
Class A 1
Class B 1
Cambridge Government Income Portfolio 1
Class A 1
Class B 1
Cambridge Growth Portfolio 1
Class A 1
Class B 1
Cambridge Income and Growth Portfolio 1
Class A 1
Class B 1
Cambridge Municipal Income Portfolio 1
Class A 1
Class B 1
12/1/93 Cash Trust Series, Inc. 1
12/1/93 Government Cash Series 1
12/1/93 Municipal Cash Series 1
12/1/93 Prime Cash Series 1
12/1/93 Treasury Cash Series 1
12/1/93 Cash Trust Series II 1
12/1/93 Municipal Cash Series II 1
12/1/93 Treasury Cash Series II 1
12/1/93 DG Investor Series 2
12/1/93 DG Equity Fund 2
12/1/93 DG Government Income Fund 2
12/1/93 DG Limited Term Government Income Fund 2
12/1/93 DG Municipal Income Fund 2
12/1/93 DG U.S. Government Money Market Fund 2
12/1/93 Edward D. Jones & Co. Daily Passport Cash Trust 1
12/1/93 Federated ARMs Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Bond Fund 1
12/1/93 Federated Exchange Fund, Ltd. 1
12/1/93 Federated GNMA Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Government Trust 1
12/1/93 Automated Government Cash Reserves 1
12/1/93 Automated Treasury Cash Reserves 1
12/1/93 U.S. Treasury Cash Reserves 1
12/1/93 Federated Growth Trust 1
12/1/93 Federated High Yield Trust 1
12/1/93 Federated Income Securities Trust 1
12/1/93 Federated Short-Term Income Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Income Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Index Trust 1
12/1/93 Max-Cap Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Mid-Cap Fund 1
12/1/93 Mini-Cap Fund 1
12/1/93 Federated Intermediate Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Investment Funds 1
12/1/93 Growth Portfolio 1
12/1/93 High Quality Bond Portfolio 1
12/1/93 Pennsylvania Intermediate Municipal Income Portfolio 1
12/1/93 Value Equity Portfolio 1
12/1/93 Federated Master Trust 1
12/1/93 Federated Municipal Trust 1
12/1/93 Alabama Municipal Cash Trust 1
12/1/93 Connecticut Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Massachusetts Municipal Cash Trust 1
12/1/93 BayFund Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Minnesota Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 New Jersey Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Ohio Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Shares 1
12/1/93 Pennsylvania Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Virginia Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Term U.S. Government Trust 1
12/1/93 Federated Stock Trust 1
12/1/93 Federated Tax-Free Trust 1
12/1/93 Financial Reserves Fund 1
Has a separate
contract with
SSB - included for
fee information
purposes only First Union Funds
*Not effective or currently not being offered 1
First Union Balanced Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Fixed Income Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Florida Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Georgia Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Insured Tax-Free Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Managed Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Maryland Municipal Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union North Carolina Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union South Carolina Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Tax-Free Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union Tennessee Municipal Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Treasury Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union U.S. Government Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Utility Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Value Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Virginia Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
12/1/93 Fixed Income Securities, Inc. 1
12/1/93 Limited Term Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Limited Term Municipal Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Multi-State Municipal Income Fund 1
12/1/93 Limited Maturity Government Fund 1
12/1/93 Fortress Adjustable Rate U.S. Government Fund, Inc. 1
12/1/93 Fortress Municipal Income Fund, Inc. 1
12/1/93 Fortress Utility Fund, Inc. 1
12/1/93 FT Series, Inc. 1
12/1/93 International Equity Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 International Income Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fund for U.S. Government Securities, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Government Income Securities, Inc. 1
Has a separate
contract with
SSB - included for
fee information
purposes only Independence One Mutual Funds
*Fund not effective or currently on hold. 1
Independence One Equity Fund* 1
Investment Shares 1
Trust Shares 1
Independence One Michigan Municipal Cash Fund 1
Investment Shares 1
Trust Shares* 1
Independence One Prime Money Market Fund 1
Investment Shares 1
Trust Shares* 1
Independence One U.S. Government Securities Fund 1
Investment Shares 1
Trust Shares 1
Independence One U.S. Treasury Money Market
Fund 1
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable Rate Mortgage Fund 1
1/11/94 Insight Limited Term Income Fund 1
1/11/94 Insight Limited Term Municipal Fund 1
1/11/94 Insight U.S. Government Fund 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Ohio Intermediate Municipal Trust 1
12/1/93 Pennsylvania Intermediate Municipal Trust 1
12/1/93 Investment Series Fund, Inc. 1
12/1/93 Capital Growth Fund 1
12/1/93 Investment Shares 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Bond Fund 1
12/1/93 Investment Series Trust 1
12/1/93 High Quality Stock Fund 1
12/1/93 Municipal Securities Income Fund 1
12/1/93 U.S. Government Bond Fund 1
12/1/93 Liberty Equity Income Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Liberty High Income Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Municipal Securities Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Term Trust, Inc. - 1999 1
12/1/93 Liberty U.S. Government Money Market Trust 1
12/1/93 Liberty Utility Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liquid Cash Trust 1
12/1/93 Money Market Management, Inc. 1
12/1/93 Money Market Trust 1
12/1/93 Money Market Obligations Trust 1
12/1/93 Government Obligations Fund 1
12/1/93 Prime Obligations Fund 1
12/1/93 Tax-Free Obligations Fund 1
12/1/93 Treasury Obligations Fund 1
12/1/93 Municipal Securities Income Trust 1
12/1/93 California Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Florida Municipal Income Fund 1
12/1/93 Maryland Municipal Income Fund 1
12/1/93 Michigan Municipal Income Fund 1
12/1/93 New Jersey Municipal Income Fund 1
12/1/93 New York Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Ohio Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Trust Shares 1
12/1/93 Pennsylvania Municipal Income Fund 1
12/1/93 Investment Shares 1
12/1/93 Trust Shares 1
12/1/93 Income shares 1
12/1/93 Texas Municipal Income Fund 1
12/1/93 Virginia Municipal Income Fund 1
12/1/93 New York Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Portage Funds 2
12/1/93 Portage Government Money Market Fund 2
12/1/93 Investment Shares 2
12/1/93 Trust Shares 2
12/1/93 SouthTrust Vulcan Funds 2
12/1/93 Bond Fund 2
12/1/93 Stock Fund 2
12/1/93 Treasury Obligations Money Market Fund 2
12/1/93 Stock and Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Tax-Free Instruments Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 The Boulevard Funds 2
12/1/93 Boulevard Blue Chip Growth Fund 2
12/1/93 Boulevard Managed Income Fund 2
12/1/93 Boulevard Managed Municipal Fund 2
12/1/93 Boulevard Strategic Balanced Fund 2
12/1/93 The Planters Funds 2
12/1/93 Tennessee Tax-Free Bond Fund 2
Has a separate
contract with
SSB - included for
fee information
purposes only Tower Mutual Funds 1
Tower U.S. Government Income Fund 1
Tower Capital Appreciation Fund 1
Tower Cash Reserve Fund 1
Tower Louisiana Municipal Income Fund 1
Tower Total Return Bond Fund 1
Tower U.S. Treasury Money Market Fund 1
12/1/93 Trademark Funds 2
12/1/93 Trademark Equity Fund 2
12/1/93 Trademark Government Income Fund 2
12/1/93 Trademark Kentucky Municipal Bond Fund 2
12/1/93 Trademark Short-Intermediate Government Fund 2
12/1/93 Trust for Financial Institutions 1
12/1/93 Government Qualifying Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Short-Term Government Qualifying Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Government Money Market Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Trust for Government Cash Reserves 1
12/1/93 Trust for Short-Term U.S. Government Securities 1
12/1/93 Trust for U.S. Treasury Obligations 1
Has a separate
contract with
SSB - included for
fee information
purposes only Vision Fiduciary Funds, Inc. 1
Vision Fiduciary Money Market Fund 1
Has a separate
contract with
SSB - included for
fee information
purposes only Vision Group of Funds, Inc. 1
Vision Growth and Income Fund 1
Vision Money Market Fund 1
Vision New York Tax-Free Fund 1
Vision New York Tax-Free Money Market Fund 1
Vision Treasury Money Market Fund 1
Vision U.S. Government Securities Fund 1
Schedule 1
STATE STREET BANK
CUSTODY /
PORTFOLIO RECORD KEEPING
FEE SCHEDULE
Federated Investors
_ Federated Funds _
I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income.
Make cash disbursements and report cash transactions. Monitor
corporate actions.
ANNUAL FEES
ASSET
First $500 Million
1.0 Basis Point
Excess .5
Basis Point
Minimum fee per year
$15,000
Maximum fee per year
$90,000
Wire Fees
$2.70 per wire
Settlements:
Each DTC Commercial Paper
$9.00
Each DTC Transaction
$9.00
Each Federal Reserve Book Entry Transaction (Repo)
$4.50
Each Repo with Banks Other than State Street Bank
$7.50
Each Physical Transaction (NY/Boston, Private Placement)
$21.75
Each Option Written/Exercised/Expired
$18.75
Each Stock Loan Transaction
$12.00
Each Book Entry Muni (Sub-custody) Transaction
$15.00
Index Fund/ETD
Cost + 15%
II. Portfolio Record keeping / Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Provide selected
general ledger reports. Calculate net asset value daily.
Securities yield or market value quotations will be provided to
State Street by the fund or via State Street Bank automated pricing
services.
ANNUAL FEES
ASSET
First $250 Million 2.0
Basis Points
Next $250 Million 1.5
Basis Points
Next $250 Million 1.0
Basis Point
Excess .5 Basis Point
Minimum fee per year
$39,000
Maximum fee per year
$120,000
Additional class of shares per year
$12,000
III. Multicurrency Horizon Remote Service
July 1, 1993 - July 1, 1995 No
Charge
Post July 1, 1995
$5,000 per portfolio per year
$
500 per portfolio per year
for each additional
class
IV. Out-Of-Pocket Expenses
Pricing Fees
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
Travel and setup expenses related to Horizon Remote
Lease and multiplex switching lines related to Horizon Remote
V. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the
preparation of special reports will be subject to negotiation.
VI. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge
$5.00
VII. Balance Credit
A balance credit equal to 75% of the average balance in the custodian
account for the month billed times the 30-day T-Bill Rate on the
last Monday of the month billed will be applied against Section I
through V above.
VIII. Term of the Contract
The parties agree that this fee schedule shall become effective June 1,
1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.
By James J. Dolan By: Frank J. Sidoti, Jr.
President Vice President
January 24, 1994 December 15, 1993
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
Schedule A
Fund Accounting
Fee Schedule
I. Portfolio Record Keeping/Fund Accounting Services
Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger
and capital stock accounts. Prepare daily trial balance. Provide
selected general ledger reports. Calculate net asset value daily.
Securities yield or market value quotations will be provided to
State Street by the fund or via State Street Bank automated pricing
services.
ANNUAL FEES
ASSET
First $250 Million 2.0 Basis Points
Next $250 Million 1.5 Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $39,000
Additional class of shares per year $12,000
II. Special Services
Fees for activities of a non-recurring nature such as fund
consolidation or reorganization, extraordinary security shipments
and the preparation of special reports will be subject to
negotiation.
III. Term of the Contract
The parties agree that this fee schedule shall become effective June
1, 1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
Schedule A1
Fund Accounting
Fee Schedule
Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Schedule B
Out-of-Pocket Expenses
Fund Accounting
Out-of-pocket expenses include, but are not limited to, the
following:
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telephones
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific System Enhancements
- Access to the Shareholder Recordkeeping System
- Security Pricing Services
- Variable Rate Change Notification Services
- Paydown Factor Notification Services
Schedule C
Fees and Expenses
Shareholder Recordkeeping
I. Transfer Agency Services
Base Fee * (Annual fee per fund, class or other subdivision) $24,000
Account Fee* (Annual account charge)
(includes system access and funds control and reconcilement)
- Daily
dividend fund $16.00
- Monthly
dividend fund $10.00
- Quarterly
dividend fund $10.00
- Contingent
Deferred Sales Charge (Additionally) $5.00
(monthly and
quarterly funds only)
- Closed
Accounts* $1.20
(annual)
-
Termination Fee (One time charge) $20,000
II. Shareholder Services
Other Account Fees* (Services or features not covered above)
- Account
Activity Processing $3.50
(includes
account establishment, transaction and maintenance processing)
- Account
Servicing $4.50
(includes
shareholder servicing and correspondence)
* All fees
are annualized and will be prorated on a monthly basis for billing
purposes. Out-of-pocket expenses are not covered by these fees.
Schedule C1
Federated Investors
_ Federated Funds _
I. Annual Maintenance
Charge
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly
basis at the rate of 1/12 of the annual fee. A charge is made for
an account in the month that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
Non FundServe $16.65
Non Networked FundServe
$14.65
- CDSC/Declared Dividend
Non FundServe $13.75
Non Networked
FundServe $11.75
Networking Levels
1, 2, and 4 $11.75
Networking Level 3
$9.00
- Declared Dividend
Non FundServe
$8.75
Non Networked
FundServe $6.75
Networked
FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and
certification and complies to all known government regulations
regarding TIN processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per
month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual
account fees or $1000, whichever is greater.
- All funds will be subject to the minimum monthly fee of $1,000
except that the minimum will be waived for the initial six months or
until the fund's net assets exceed $50,000,000, whichever occurs
first.
- The "clone" funds will be subject to a monthly minimum fee of
$600.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage,
forms, telephone, microfilm, microfiche, and expenses incurred at
the specific direction of the fund. Postage for mass mailings is
due seven days in advance of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
Schedule C2
Federated Investors
_ Bank Proprietary Funds _
I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly
basis at the rate of 1/12 of the annual fee. A charge is made for
an account in the month that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
_ Non FundServe
$16.65
_ Non Networked
FundServe $14.65
- CDSC/Declared Dividend
_ Non FundServe
$13.75
_ Non Networked
FundServe $11.75
_ Networking Levels 1,
2, and 4 $11.75
_ Networking Level 3
$9.00
- Declared Dividend
_ Non FundServe
$8.75
_ Non Networked
FundServe $6.75
_ Networked FundServe
Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and
certification and complies to all known government regulations
regarding TIN processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per
month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual
account fees or $2000, whichever is greater.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage,
forms, telephone, microfilm, microfiche, and expenses incurred at
the specific direction of the fund. Postage for mass mailings is
due seven days in advance of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
SCHEDULE D
Out-of-Pocket Expenses Schedule
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific Enhancements
- Disaster Recovery
SCHEDULE E
Fee Schedule
I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and
sales. Report buy and sell fails. Determine and collect portfolio
income. Make cash disbursements and report cash transactions.
Monitor corporate actions.
ANNUAL FEES
ASSET
First $500 Million 1.0
Basis Point
Excess .5
Basis Point
Minimum fee per year
$15,000
Wire Fees $2.70
per wire
Settlements:
Each
DTC Commercial Paper $9.00
Each
DTC Transaction $9.00
Each
Federal Reserve Book Entry Transaction (Repo) $4.50
Each
Repo with Banks Other than State Street Bank $7.50
Each
Physical Transaction (NY/Boston, Private Placement)
$21.75
Each
Option Written/Exercised/Expired
$18.75
Each
Stock Load Transaction
$12.00
Each
Book Entry Muni (Sub-custody) Transaction
$15.00
Index
Fund/ETD Cost
+ 15%
II. Out-Of-Pocket Expenses
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
III. Special Services
Fees for activities of a non-recurring nature such as fund
consolidation or reorganization, extraordinary security shipments and
the preparation of special reports will be subject to negotiation.
IV. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
V. Balance Credit
A balance credit equal to 75% of the average balance in the custodian
account for the monthly billed times the 30-day T-Bill Rate on the
last Monday of the month billed will be applied against Section I
through IV above.
VI. Term of the Contract
The parties agree that this fee schedule shall become effective June
1, 1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
EXHIBIT 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CSP=Custody Services Procurement
CONTRACT SERVICES
RELEVANT
DATE INVESTMENT COMPANY PROVIDED SCHEDULES
12/1/93 111 Corcoran Fund
12/1/93 111 Corcoran Bond Fund FA, SR
A,B,C,D
12/1/93 111 Corcoran North Carolina
Municipal Securities Fund FA, SR A,B,C,D
12/1/93 American Leaders Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Automated Cash Management Trust FA,SR,CSP A,B,C,D,E
12/1/93 Automated Government Money Trust FA,SR,CSP A,B,C,D,E
01/07/94 BankSouth Select Funds SR,
C,D
01/07/94 BankSouth Select
Georgia Tax-Free Income Fund SR, C,D
01/07/94 BankSouth Select
Government Money Market Fund SR, C,D
01/07/94 BankSouth Select
Prime Money Market Fund SR, C,D
01/07/94 BankSouth Select Bond
Fund SR, C,D
01/07/94 BankSouth Select
Equity Fund SR, C,D
12/1/93 BayFunds FA A1,B
12/1/93 BayFunds Money Market Portfolio
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Trust Shares
FA A1,B
12/1/93 BayFunds Bond Portfolio
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Trust Shares
FA A1,B
12/1/93 BayFunds Equity Portfolio
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Trust Shares
FA A1,B
12/1/93 BayFunds Short-Term Yield
Portfolio FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Trust Shares
FA A1,B
12/1/93 BayFunds U.S. Treasury Money
Market Portfolio FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Trust Shares
FA A1,B
12/1/93 The Biltmore Funds FA A1,B
12/1/93 Biltmore Balanced Fund FA
A1,B
12/1/93 Biltmore Equity Fund FA
A1,B
12/1/93 Biltmore Fixed Income Fund
FA A1,B
12/1/93 Biltmore Equity Index Fund
FA A1,B
12/1/93 Biltmore Money Market Fund
FA A1,B
12/1/93 Institutional Shares
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Biltmore Prime Cash Management
Fund FA A1,B
12/1/93 Institutional Shares
FA A1,B
12/1/93 Biltmore Short-Term Fixed Income
Fund FA A1,B
12/1/93 Biltmore Special Values Fund
FA A1,B
12/1/93 Biltmore Tax-Free Money Market
Fund FA A1,B
12/1/93 Institutional Shares
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Biltmore U.S. Treasury Money
Market Fund FA A1,B
12/1/93 Institutional Shares
FA A1,B
12/1/93 Investment Shares
FA A1,B
12/1/93 Biltmore Quantitative Equity Fund FA A1,B
12/1/93 The Boulevard Funds FA,SR A1,B,C,D
12/1/93 Boulevard Blue Chip Growth Fund
FA,SR A1,B,C,D
12/1/93 Boulevard Managed Income Fund
FA,SR A1,B,C,D
12/1/93 Boulevard Managed Municipal Fund
FA,SR A1,B,C,D
12/1/93 Boulevard Strategic Balanced Fund
FA,SR A1,B,C,D
12/1/93 California Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash Trust Series, Inc.
12/1/93 Government Cash Series FA,SR,CSP
A,B,C,D,E
12/1/93 Municipal Cash Series FA,SR,CSP
A,B,C,D,E
12/1/93 Prime Cash Series FA,SR,CSP
A,B,C,D,E
12/1/93 Treasury Cash Series FA,SR,CSP
A,B,C,D,E
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II
FA,SR,CSP A,B,C,D,E
12/1/93 Treasury Cash Series II
FA,SR,CSP A,B,C,D,E
12/1/93 DG Investor Series
12/1/93 DG Equity Fund FA,SR A1,B,C,D
12/1/93 DG Government Income Fund
FA,SR A1,B,C,D
12/1/93 DG Limited Term Government Income
Fund FA,SR A1,B,C,D
12/1/93 DG Municipal Income Fund
FA,SR A1,B,C,D
12/1/93 DG U.S. Government Money Market
Fund FA,SR A1,B,C,D
12/1/93 Federated ARMs Fund
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Bond Fund FA,SR,CSP A,B,C,D,E
12/1/93 Federated Exchange Fund, Ltd. FA,SR,CSP A,B,C,D,E
12/1/93 Federated GNMA Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Government Trust
12/1/93 Automated Government Cash Reserves
FA,SR,CSP A,B,C,D,E
12/1/93 Automated Treasury Cash Reserves
FA,SR,CSP A,B,C,D,E
12/1/93 U.S. Treasury Cash Reserves
FA,SR,CSP A,B,C,D,E
12/1/93 Federated Growth Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated High Yield Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated Income Securities Trust
12/1/93 Federated Short-Term Income Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Intermediate Income Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Federated Income Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Index Trust
12/1/93 Max-Cap Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Mid-Cap Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Mini-Cap Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Intermediate Government Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Investment Funds
12/1/93 Growth Portfolio FA,SR,CSP
A,B,C,D,E
12/1/93 High Quality Bond Portfolio
FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Intermediate
Municipal Income Portfolio FA,SR,CSP A,B,C,D,E
12/1/93 Value Equity Portfolio FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Master Trust
12/1/93 Federated Municipal Trust
12/1/93 Alabama Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Connecticut Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Massachusetts Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 BayFund Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Minnesota Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 New Jersey Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Ohio Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Cash II Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Virginia Municipal Cash Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service
Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Federated Short-Intermediate Government Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Short-Intermediate Municipal Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Short-Term U.S. Government Trust FA,SR,CSP A,B,C,D,E
12/1/93 Stock and Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Federated Stock Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated Tax-Free Trust FA,SR,CSP A,B,C,D,E
12/1/93 Financial Reserves Fund FA A1,B
12/1/93 First Priority Funds
12/1/93 First Priority Equity Fund
FA,SR A1,B,C,D
12/1/93 Investment Shares
FA,SR A1,B,C,D
12/1/93 Trust Shares
FA,SR A1,B,C,D
12/1/93 First Priority Fixed Income Fund
FA,SR A1,B,C,D
12/1/93 Investment Shares
FA,SR A1,B,C,D
12/1/93 Trust Shares
FA,SR A1,B,C,D
12/1/93 First Priority Treasury Money
Market Fund FA,SR A1,B,C,D
12/1/93 Investment Shares
FA,SR A1,B,C,D
12/1/93 Trust Shares
FA,SR A1,B,C,D
12/1/93 Limited Maturity Government Fund
FA,SR A1,B,C,D
12/1/93 Fixed Income Securities, Inc.
12/1/93 Limited Term Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Limited Term Municipal Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Multi-State Municipal Income Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Limited Maturity Government Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Adjustable Rate U.S. Government Fund, Inc.
FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Municipal Income Fund, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Utility Fund, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 FT Series, Inc.
12/1/93 International Equity Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares
FA,SR,CSP A,B,C,D,E
12/1/93 International Income Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Fund for U.S. Government Securities, Inc.
12/1/93 Class A Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Government Income Securities, Inc. FA,SR,CSP A,B,C,D,E
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable
Rate Mortgage Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight Limited Term
Income Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight Limited Term
Municipal Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight U.S.
Government Fund FA,SR,CSP A,B,C1,D,E
12/1/93 Intermediate Municipal Trust
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Ohio Intermediate Municipal Trust
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Pennsylvania Intermediate
Municipal Trust FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Investment Series Fund, Inc.
12/1/93 Capital Growth Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Investment Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares
FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Bond Fund FA,SR,CSP
A,B,C,D,E
12/1/93 Investment Series Trust
12/1/93 High Quality Stock Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Municipal Securities Income Fund
FA,SR,CSP A,B,C,D,E
12/1/93 U.S. Government Bond Fund
FA,SR,CSP A,B,C,D,E
12/1/93 Edward D. Jones & Co. Daily Passport Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Equity Income Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Liberty High Income Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Liberty Municipal Securities Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Liberty Term Trust, Inc. - 1999 FA,SR,CSP A,B,C,D,E
12/1/93 Liberty U.S. Government Money Market Trust FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Utility Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP
A,B,C,D,E
12/1/93 Liquid Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Star Funds
12/1/93 Star Prime Obligations Fund
FA,SR A,B,C,D
12/1/93 Star Relative Value Fund
FA,SR A,B,C,D
12/1/93 Star Tax-Free Money Market Fund
FA,SR A,B,C,D
12/1/93 Star Treasury Fund FA,SR
A,B,C,D
12/1/93 Star U.S. Government Income Fund
FA,SR A,B,C,D
12/1/93 The Stellar Fund FA,SR A,B,C,D
12/1/93 Magna Funds
12/1/93 Magna Intermediate Government Fund
SR C,D
12/1/93 Mark Twain Funds
12/1/93 Mark Twain Equity Portfolio
FA,SR A,B,C,D
12/1/93 Mark Twain Fixed Income Portfolio
FA,SR A,B,C,D
12/1/93 Mark Twain Government Money Market
Portfolio FA,SR A,B,C,D
12/1/93 Investment Shares
FA,SR A,B,C,D
12/1/93 Trust Shares
FA,SR A,B,C,D
12/1/93 Mark Twain Municipal Income
Portfolio FA,SR A,B,C,D
12/1/93 Marshall Funds, Inc.
12/1/93 Marshall Government Income Fund
FA,SR A1,B,C,D
12/1/93 Marshall Intermediate Bond Fund
FA,SR A1,B,C,D
12/1/93 Marshall Money Market Fund
FA,SR A1,B,C,D
12/1/93 Investment Shares
FA,SR A1,B,C,
12/1/93 Trust Shares
FA,SR A1,B,C,D
12/1/93 Marshall Short-Term Income Fund
FA,SR A1,B,C,D
12/1/93 Marshall Stock Fund FA,SR
A1,B,C,D
12/1/93 Marshall Tax-Free Money Market
Fund FA,SR A1,B,C,D
12/1/93 Marshall Balanced Fund FA,SR
A1,B,C,D
12/1/93 Marshall Equity Income Fund
FA,SR A1,B,C,D
12/1/93 Marshall Mid-Cap Stock Fund
FA,SR A1,B,C,D
12/1/93 Marshall Value Equity Fund
FA,SR A1,B,C,D
12/1/93 Marshal Short-Intermediate
Tax-free Fund FA,SR A1,B,C,D
12/1/93 Money Market Management, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 Money Market Trust FA,SR,CSP A,B,C,D,E
12/1/93 Money Market Obligations Trust
12/1/93 Government Obligations Fund
FA,SR,CSP A1,B,C,D,E
12/1/93 Prime Obligations Fund FA,SR,CSP
A1,B,C,D,E
12/1/93 Tax-Free Obligations Fund
FA,SR,CSP A1,B,C,D,E
12/1/93 Treasury Obligations Fund
FA,SR,CSP A1,B,C,D,E
12/1/93 Municipal Securities Income Trust
12/1/93 California Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Florida Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Maryland Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Michigan Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New Jersey Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New York Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Ohio Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,D,E
12/1/93 Income shares FA,SR,CSP A,B,C,D,E
12/1/93 Texas Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Virginia Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New York Municipal Cash Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 The Planters Funds
12/1/93 Tennessee Tax-Free Bond Fund FA,SR A1,B,C,D
12/1/93 Portage Funds
12/1/93 Portage Government Money Market Fund SR C,D
12/1/93 Investment Shares SR C,D
12/1/93 Trust Shares SR C,D
12/1/93 RIMCO Monument Funds
12/1/93 RIMCO Monument Bond Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument Prime Money Market Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument Stock Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument U.S. Treasury Money Market Fund FA,SR A,B,C,D
12/1/93 Signet Select Funds
12/1/93 Maryland Municipal Bond Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Treasury Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 U.S. Government Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Value Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Virginia Municipal Bond Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Funds
12/1/93 The Shawmut Fixed Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Growth Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Growth and Income Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Intermediate Government Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Limited Term Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Prime Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Small Capitalization Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Connecticut Municipal Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Connecticut Intermediate Municipal Income Fund
FA,SR A,B,C,D
12/1/93 The Shawmut Massachusetts Municipal Money Market Fund FA,SR A,B,C,D
12/1/93 The Shawmut Massachusetts Intermediate Municipal Income Fund
FA,SR A,B,C,D
12/1/93 The Starburst Funds
12/1/93 The Starburst Government Income Fund FA,SR A,B,C,D
12/1/93 The Starburst Government Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Starburst Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Starburst Municipal Income Fund FA,SR A,B,C,D
12/1/93 The Starburst Funds II
12/1/93 The Starburst Quality Income Fund FA,SR A,B,C,D
12/1/93 Tax-Free Instruments Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trademark Funds
12/1/93 Trademark Equity Fund FA,SR A,B,C,D
12/1/93 Trademark Government Income Fund FA,SR A,B,C,D
12/1/93 Trademark Kentucky Municipal Bond Fund FA,SR A,B,C,D
12/1/93 Trademark Short-Intermediate Government Fund FA,SR A,B,C,D
12/1/93 Trust for Financial Institutions
12/1/93 Government Qualifying Liquidity Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Short-Term Government Qualifying Liquidity Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Government Money Market Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust for Government Cash Reserves FA,SR,CSP A,B,C,D,E
12/1/93 Trust for Short-Term U.S. Government Securities FA,SR,CSP A,B,C,D,E
12/1/93 Trust for U.S. Treasury Obligations FA,SR,CSP A,B,C,D,E
12/1/93 Vulcan Funds
12/1/93 Vulcan Bond Fund FA,SR A1,B,C,D
12/1/93 Vulcan Stock Fund FA,SR A1,B,C,D
12/1/93 Vulcan Treasury Obligations Money Market Fund FA,SR A1,B,C,D
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 __ day of _________, 19__, 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 19 .
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
President
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Administrative Services, Inc.
("FAS") on behalf of the investment companies listed in Exhibit A hereto
(the "Funds"), for whom FAS administers Shareholder Services Plans
("Plans") 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. FAS 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 FAS, 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 FAS 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 Fund 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. This Agreement supersedes any prior service agreements
between the parties for the Fund.
9. This Agreement may be amended by FAS from time to time by
the following procedure. FAS 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 FAS within such thirty days.
10. The Provider acknowledges and agrees that FAS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plans. The Provider agrees not to claim that FAS
is liable for any responsibilities or amounts due by the Funds
hereunder.
11. This Agreement shall be construed in accordance with the
Laws of the Commonwealth of Pennsylvania.
______________________________
[Provider]
_________________________________
Address
_________________________________
City State Zip Code
Dated:_______________________ By:______________________________
Authorized Signature
__________________________________
Title
__________________________________
Print Name of Authorized Signature
FEDERATED ADMINISTRATIVE
SERVICES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:_________________________________
, Vice President
EXHIBIT A to Shareholder Services Agreement with
Managed Series Trust
Funds covered by this Agreement:
Federated Managed Income Fund
Institutional Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Shares
Select Shares
Federated Managed Growth Fund
Institutional Shares
Select Shares
Federated Managed Agressive Growth Fund
Institutional Shares
Select Shares
Shareholder Service Fees
1. During the term of this Agreement, the Funds will pay
Provider a quarterly fee. This fee will be computed at the annual rate
of .25% 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
the Funds shall from time to time determine and communicate in writing
to the Provider.
2. For the quarterly period in which the Shareholder Services
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 10 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
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
February 11, 1994
The Trustees of
Managed Series Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Managed Series Trust ("Trust") proposes to offer and sell
four separate series of Shares of Beneficial Interest
representing interests in separate portfolios of securities known
as Federated Managed Income Fund, Federated Managed Growth and
Income Fund, Federated Managed Growth Fund and Federated Managed
Aggressive Growth Fund, each having two classes of shares, (a)
Institutional Service Shares and (b) Select Shares (all such
shares of beneficial interest being herein referred to as
"Shares") in the manner and on the terms set forth in its
Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. (File
No. 33-51247.)
As counsel we have participated in the organization of the
Trust, its registration under the Investment Company Act of 1940
and the preparation and filing of its Registration Statement
under the Securities Act of 1933. We have examined and are
familiar with the provisions of the written Declaration of Trust
dated November 15, 1993, as amended, ("Declaration of Trust"),
the Bylaws of the Trust and such other documents and records
deemed relevant. We have also reviewed questions of law and
consulted with counsel thereon as deemed necessary or appropriate
by us for the purposes of this opinion.
Based upon the foregoing, it is our opinion that:
1. The Trust is duly organized and validly existing
pursuant to the Declaration of Trust.
2. The Shares which are currently being registered by the
amended Registration Statement referred to above may be legally
and validly issued from time to time in accordance with the
Declaration of Trust upon receipt of consideration sufficient to
comply with the provisions of Article III, Section 3, of the
Declaration of Trust and subject to compliance with the
Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and applicable state laws regulating the sale
of securities. Such Shares, when so issued, will be fully paid
and non-assessable.
We consent to your filing this opinion as an exhibit to the
amended Registration Statement referred to above and to any
application or registration statement filed under the securities
laws of any of the States of the United States. We further
consent to the reference to our firm under the caption Legal
Counsel in the prospectus filed as a part of such amended
Registration Statement, applications and registration statements.
Very truly yours,
Houston, Houston & Donnelly
By: Thomas J. Donnelly
TJD:heh
Exhibit 13 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FEDERATED MANAGEMENT
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
January 18, 1994
Managed Series Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
Federated Management agrees to purchase 10,000 shares
of the Institutional Service Shares of Federated Managed
Income Fund (a portfolio of Managed Series Trust) at the
cost of $10.00 each. These Institutional Service Shares are
purchased for investment purposes, and Federated Management
has no present intention of redeeming these Institutional
Service Shares.
Very truly yours,
/s/ Gary J. Madich
Gary J. Madich
Senior Vice President
/etp
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 ____ day of
___________, 19__, 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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
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 ____ day of
________, 19__.
MANAGED SERIES TRUST
By:
President
Exhibit 15(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
RULE 12b-1 AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Administrator") and Federated Securities Corp. ("FSC") for the
mutual funds (referred to individually as the "Fund" and collectively as
the "Funds") for which FSC serves as Distributor of shares of beneficial
interest or capital stock ("Shares") and which have adopted a Rule 12b-1
Plan ("Plan") and approved this form of agreement pursuant to Rule 12b-1
under the Investment Company Act of 1940. In consideration of the mutual
covenants hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. FSC hereby appoints Administrator to render or cause to be rendered
sales and administrative support services to the Funds and their
shareholders.
2. The services to be provided under Paragraph 1 may include, but are
not limited to, the following:
(a) communicating account openings through computer terminals located
on the Administrator's premises ("computer terminals"), through a
toll-free telephone number or otherwise;
(b) communicating account closings via the computer terminals, through
a toll-free telephone number or otherwise;
(c) entering purchase transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(d) entering redemption transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(e) electronically transferring and receiving funds for Fund Share
purchases and redemptions, and confirming and reconciling all such
transactions;
(f) reviewing the activity in Fund accounts;
(g) providing training and supervision of its personnel;
(h) maintaining and distributing current copies of prospectuses and
shareholder reports;
(i) advertising the availability of its services and products;
(j) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making
such materials accessible to customers and potential customers;
and
(k) responding to customers' and potential customers' questions about
the Funds.
The services listed above are illustrative. The Administrator is not
required to perform each service and may at any time perform either more
or fewer services than described above.
3. During the term of this Agreement, FSC will pay the Administrator
fees for each Fund as set forth in a written schedule delivered to the
Administrator pursuant to this Agreement. FSC's fee schedule for
Administrator may be changed by FSC sending a new fee schedule to
Administrator pursuant to Paragraph 12 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 the Rule 12b-1 Agreement is in effect during the quarter.
4. The Administrator will not perform or provide any duties which
would cause it to be a fiduciary under Section 4975 of the Internal
Revenue Code, as amended. For purposes of that Section, the Administrator
understands that any person who exercises any discretionary authority or
discretionary control with respect to any individual retirement account or
its assets, or who renders investment advice for a fee, or has any
authority or responsibility to do so, or has any discretionary authority
or discretionary responsibility in the administration of such an account,
is a fiduciary.
5. The Administrator understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving administrative 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.
6. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited
by management of the Fund or Funds, unless a court of competent
jurisdiction shall have determined that the conduct of a majority of the
Board of Directors or Trustees of the Fund or Funds constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of their
duties. This paragraph 6 will survive the term of this Agreement.
7. With respect to each Fund, 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 Directors or Trustees of the Fund, including a majority of
the members of the Board of Directors or Trustees 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 Directors or Trustees") cast in person at a
meeting called for that purpose.
8. Notwithstanding paragraph 7, 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 Directors or Trustees 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 or upon the
termination of the "Administrative Support and Distributor's
Contract" or "Distributor's Contract" between the Fund and FSC;
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.
9. The termination of this Agreement with respect to any one Fund will
not cause the Agreement's termination with respect to any other Fund.
10. The Administrator 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 FSC 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.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by FSC from time to time by the
following procedure. FSC will mail a copy of the amendment to the
Administrator's address, as shown below. If the Administrator does not
object to the amendment within thirty (30) days after its receipt, the
amendment will become part of the Agreement. The Administrator's
objection must be in writing and be received by FSC within such thirty
days.
13. This Agreement shall be construed in accordance with the Laws of
the Commonwealth of Pennsylvania.
________________________________
[Administrator]
_____________________________________
Address
_____________________________________
City State Zip Code
Dated:_______________________ By:__________________________________
Authorized Signature
__________________________________
Title
__________________________________
Print Name of Authorized Signature
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:_________________________________
Richard B. Fisher, President
MANAGED SERIES TRUST
_______________________
EXHIBIT A to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
Federated Managed Income Fund -- Select Shares
Federated Managed Growth Fund -- Select Shares
Federated Managed Growth and Income
Fund -- Select Shares
Federated Managed Aggressive Growth
Fund -- Select Shares
Administrative Fees
1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .75% of the average net asset value of Shares held during
the quarter in accounts for which the Administrator provides services
under this Agreement, so long as the average net asset value of Shares in
each Fund during the quarter equals or exceeds such minimum amount as FSC
shall from time to time determine and communicate in writing to the
Administrator.
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.
