Federated Managed Income Fund
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Lifecycle Investing
From Federated Investors
Institutional Service Shares
Federated Managed Income Fund
is part of Managed Series Trust,
a lifecycle investing program
from Federated Investors
Other funds available in Managed
Series Trust are Fund, Federated
Managed Growth and Income
Fund, Federated Managed Growth Fund, and Federated
Managed Aggressive Growth Fund
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Federated Securities Corp.
Distributor
A Subsidiary of
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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Asset Allocation 3
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Investment Risks 5
Foreign Bonds 6
Equity Asset Categories 6
Large Company Stocks 6
Utility Stocks 6
Small Company Stocks 6
Foreign Stocks 6
Equity Reserves 7
Acceptable Investments 7
U.S. Treasury and Other U.S.
Government Securities 7
Mortgage-Backed Securities 7
Collateralized Mortgage Obligations
("CMOs") 7
Real Estate Mortgage Investment
Conduits ("REMICS") 8
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 9
Equity Securities 9
Foreign Securities 10
Investment Risks 10
Equity Reserves 10
Repurchase Agreements 10
Convertible Securities 10
Investing in Securities of Other
Investment Companies 11
Restricted and Illiquid Securities 11
When-Issued and Delayed Delivery
Transactions 11
Lending of Portfolio Securities 11
Foreign Currency Transactions 12
Currency Risks 12
Forward Foreign Currency Exchange
Contracts 12
Options 13
Futures and Options on Futures 13
Risks 14
Portfolio Turnover 14
Investment Limitations 14
TRUST INFORMATION 15
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Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Institutional Service Shares 17
Administration of the Fund 18
Administrative Services 18
Shareholder Services Plan 18
Other Payments to
Financial Institutions 18
Custodian 18
Transfer Agent and Dividend
Disbursing Agent 18
Independent Public Accountants 18
Brokerage Transactions 19
Expenses of the Fund and Institutional
Service Shares 19
NET ASSET VALUE 19
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INVESTING IN INSTITUTIONAL SERVICE SHARES 20
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Share Purchases 20
Through a Financial Institution 20
By Wire 20
By Mail 20
Minimum Investment Required 20
What Shares Cost 21
Subaccounting Services 21
Systematic Investment Program 21
Certificates and Confirmations 21
Dividends 21
Capital Gains 22
REDEEMING INSTITUTIONAL SERVICE SHARES 22
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Through a Financial Institution 22
Telephone Redemption 22
Written Requests 22
Signatures 23
Receiving Payment 23
Systematic Withdrawal Program 23
Accounts with Low Balances 23
SHAREHOLDER INFORMATION 24
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Voting Rights 24
Massachusetts Partnership Law 24
TAX INFORMATION 24
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Federal Income Tax 24
Pennsylvania Corporate and
Personal Property Taxes 25
PERFORMANCE INFORMATION 25
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OTHER CLASSES OF SHARES 25
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Financial Highlights--Select Shares 27
FINANCIAL STATEMENTS 28
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 47
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APPENDIX 48
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ADDRESSES 51
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SUMMARY OF FUND EXPENSES
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<TABLE>
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INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)......................................................................... 0.00%
12b-1 Fee................................................................................................. None
Total Other Expenses (after expense reimbursement)........................................................ 0.75%
Shareholder Services Fee (after waiver) (2)................................................ 0.00%
Total Institutional Service Shares Operating Expenses............................................ 0.75%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver 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 services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the table above
are based on expenses expected during the fiscal year ending November 30,
1995. The Total Institutional Service Shares Operating Expenses were 0.67%
for the fiscal year ended November 30, 1994 and would have been 1.68% absent
the voluntary waiver of the management fee and the voluntary reimbursement
of certain other operating expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of 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
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You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $8 $24
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
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(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 47.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
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NET ASSET VALUE, BEGINNING OF PERIOD $10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.31
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Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
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Total from investment operations 0.06
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.30)
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NET ASSET VALUE, END OF PERIOD $ 9.76
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TOTAL RETURN** 0.55%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.67%(a)
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Net investment income 6.02%(a)
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Expense waiver/reimbursement (b) 1.01%(a)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted)
$34,692
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Portfolio turnover rate 153%
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</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to
November 30, 1994. For the period from the start of business, January 18,
1994 to May 24, 1994, the net investment income was distributed to the Trust's
adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
GENERAL INFORMATION
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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
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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 equities. 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 equities. The
Fund's ability to invest a portion of its assets in equities offers the
opportunity for higher return than other income-
oriented funds. The equities asset categories are large company stocks, utility
stocks, small company stocks, foreign stocks, and equity 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>
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ASSET CATEGORY RANGE
BONDS 70-90%
U.S. Treasury Securities 0-90%
Mortgage-Backed Securities 0-45%
Investment-Grade Corporate Bonds 0-45%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%
EQUITIES 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Equity Reserves 0-12.5%
</TABLE>
The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, U.S.
Treasury securities are judged to be unusually attractive relative to other
asset categories, the allocation for U.S. Treasury securities may be moved to
its upper limit. At other times, when U.S. Treasury securities appear to be
overvalued, the commitment may be moved down to a lesser allocation. There is no
assurance, however, that the adviser's attempts to pursue this strategy will
result in a benefit to the Fund.
Each asset category within the Fund will be a managed portfolio. The Fund will
seek superior investment performance through security selection in addition to
determining the percentage of its assets to allocate to each of the asset
categories.
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 prices of fixed income securities fluctuate
inversely to the direction of interest rates. 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. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.
HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to ten percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.
INVESTMENT RISKS. Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than
higher-rated securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.
FOREIGN BONDS. Foreign bonds are high-quality debt securities of countries
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 countries other than the United
States and subject to the Fund's credit limitations for foreign bonds. The
Fund may invest up to ten percent of its total assets in foreign bonds.
EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
equities will be allocated among the following asset categories within the
ranges specified:
LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 30 percent of its total assets in large
company stocks.
UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 15 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.
SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to three percent of its total assets in
small company stocks.
FOREIGN STOCKS. Foreign stocks are equity securities of established
companies in economically developed countries other than the United States.
These securities may be either dollar-denominated or denominated in foreign
currencies. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of
the asset category ranges. The Fund may invest up to three percent of its
total assets in foreign stocks.
EQUITY RESERVES. When the adviser believes that a temporary defensive
position is available, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments such as commercial paper
rated A-1 by Standard and Poor's Ratings Group, Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. The Fund
may invest up to 12.5 percent of its total assets in equity reserves.
ACCEPTABLE INVESTMENTS
U.S. TREASURY AND OTHER U.S. GOVERNMENT SECURITIES. The U.S. Treasury and
other U.S. government securities in which the Fund invests are either
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The U.S. government securities in which the Fund may
invest are limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of an 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 or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the
entire principal amount is returned. This is caused by the need to
reinvest at lower interest rates both distributions of principal
generally and significant prepayments which become more likely as
mortgage interest rates decline. Since comparatively high interest
rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of
declining interest rates than other
non-callable, fixed-income government securities of comparable stated
maturities. However, mortgage-backed securities may experience less
pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest rates
fall, counter to changes in value experienced by most fixed-income
securities. The Fund's adviser intends to use this characteristic of
interest-only SMBSs to reduce the effects of interest rate changes on
the value of the Fund's portfolio, while continuing to pursue the
Fund's investment objective.
CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:
rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");
unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or
unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.
The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.
EQUITY SECURITIES. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks have
neither fixed maturity dates nor fixed schedules of promised payments.
Utility stocks are common stocks of utility companies, including water
companies, companies that produce, transmit, or distribute gas and electric
energy and those companies that provide communications facilities, such as
telephone and telegraph companies. Foreign stocks are equity securities of
foreign issuers.
FOREIGN SECURITIES. The foreign bonds in which the Fund invests are rated
within the four highest ratings for bonds by Moody's (Aaa, Aa, A or Baa) or
by Standard & Poor's (AAA, AA, A or BBB) or are unrated if determined to be
of equivalent quality by the Fund's adviser.
INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.
EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities.
The investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different investment
objectives. The adviser may treat convertible securities as large company
stocks, small company stocks, or high yield bonds for purposes of the asset
category ranges, depending upon current market conditions, including the
relationship of the then-current price to the conversion price. The
convertible securities in which the Fund invests may be rated "high yield"
or of comparable quality at the time of purchase.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100 percent of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at
a desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
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. The Fund will not
invest more than 3% of its total assets in forward foreign currency exchange
contracts.
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. Interest rate
futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract and the buyer agrees to
take delivery of the instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The Fund may utilize stock index futures to
handle cash flows into and out of the Fund and to potentially reduce
transactional costs.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed
price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exeeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
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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 $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since
the Fund's inception. In allocating the Fund's assets, Mr. Ritter evaluates
the market environment and economic outlook, utilizing the services of the
investment adviser's economist and strategist. Mr. Ritter joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1992. From 1988 until 1991, Mr. Ritter acted as an Assistant
Vice President. Mr. Ritter is a Chartered Financial Analyst and received
his M.B.A. in Finance from the University of Chicago and his M.S. in
Economics from Carnegie Mellon University.
The portfolio managers for each of the individual asset categories are as
follows:
Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.
Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the investment adviser from 1989 until 1991, and from 1986 until
1989 he acted as Project Manager in the Product Development Department. Mr.
Balestrino is a Chartered Financial Analyst and received his M.A. in Urban
and Regional Planning from the University of Pittsburgh.
Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 and has been
a Vice President of the Fund's investment adviser since January, 1994.
Prior to this, Mr. Bauer served as an Assistant Vice President of the
Fund's investment adviser. Mr. Bauer was an Assistant Vice President of the
International Banking
Division at Pittsburgh National Bank from 1982 until 1989. Mr. Bauer is a
Chartered Financial Analyst and received his M.B.A. in Finance from
Pennsylvania State University.
Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category. He has been one of the Fund's portfolio
managers since its inception. Mr. Anderson joined Federated Investors in
1972 and is presently a Senior Vice President of the Fund's investment
adviser. Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Wisconsin.
Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from
the University of Wisconsin.
James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie Mellon University.
Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Shares. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments up to 0.25 of 1% of
the average daily net asset value of the Institutional Service Shares to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts ("shareholder services"). The Trust has entered into a Shareholder
Services Agreement with Federated Shareholder Services, a subsidiary of
Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Trust and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Services Plan, financial institutions could be compensated by the
distributor, who could be reimbursed by the adviser, or affiliates thereof, for
providing administrative support services to holders of Shares. These payments
would be made directly by the distributor and will not be made from the assets
of the Fund.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem 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
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
- --------------------------------------------------------------------------------
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.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Income Fund-- Institutional Service Shares; Fund Number (this number can
be found on the account statement or by contacting the Fund); Group Number or
Wire Order Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Income Fund--Institutional Service Shares to Federated Services Company,
c/o State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Unless shareholders request cash payments by writing the
Fund, dividends are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution, by telephone
request or by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern Time). All proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name and class of shares
name, his account number, and the Share or dollar
amount requested. If Share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agents have received
payment for Shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Shares,
and the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually use up, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $25,000. A shareholder may apply for participation in this
program through Federated Securities Corp.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. As of January 11, 1995, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 111,385.0560 Select Shares (32.617%) of Federated Managed
Income Fund, and therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
Shares are sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Service
Shares and Select Shares. Because Select Shares are subject to 12b-1 fees, the
total return and yield for Institutional Service Shares, for the same period,
will exceed that of Select Shares.
From time to time, the Fund may advertise the performance of Institutional
Service Shares using certain financial publications and/or compare the
performance of Institutional Service Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Select Shares are sold primarily to retail and private banking customers of
financial institutions. Select Shares are sold at net asset value. Investments
in Select Shares are subject to a minimum initial investment of $1,500.
Select Shares are distributed pursuant to a 12b-1 Plan adopted by the Trust
whereby the distributor is paid a fee of .75 of 1% of the Select Shares' average
daily net assets. Select Shares are also subject to a Services Plan fee of .25
of 1%.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
The amount of dividends payable to Institutional Service Shares will exceed that
of Select Shares by the difference between Class Expenses and distribution and
shareholder service expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 47.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------- -----------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income 0.28
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency
transactions, and futures contracts (0.25)
- ------------------------------------------------------------------------------------------- -------
Total from investment operations 0.03
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.26)
- ------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.77
- ------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.26%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 1.42%(a)
- -------------------------------------------------------------------------------------------
Net investment income 5.24%(a)
- -------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a)
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted)
$3,198
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 153%
- -------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to
November 30, 1994. For the period from the start of business, January 27,
1994 to May 24, 1994, the net investment income was distributed to the Trust's
adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
FEDERATED MANAGED INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--12.0%
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--5.9%
----------------------------------------------------------------------------------
BASIC INDUSTRY--0.4%
----------------------------------------------------------------------------------
500 Eastman Chemical Co. $ 23,562
----------------------------------------------------------------------------------
900 Lubrizol Corp. 28,350
----------------------------------------------------------------------------------
1,300 Phelps Dodge Corp. 74,425
----------------------------------------------------------------------------------
2,000 Praxair, Inc. 40,500
---------------------------------------------------------------------------------- -------------
Total 166,837
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--0.5%
----------------------------------------------------------------------------------
800 Chrysler Corp. 38,700
----------------------------------------------------------------------------------
1,000 Eastman Kodak Co. 45,625
----------------------------------------------------------------------------------
1,500 Ford Motor Co. 40,688
----------------------------------------------------------------------------------
2,500 Mattel, Inc. 66,875
---------------------------------------------------------------------------------- -------------
Total 191,888
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--0.5%
----------------------------------------------------------------------------------
600 Avon Products, Inc. 37,125
----------------------------------------------------------------------------------
1,000 Philip Morris Cos., Inc. 59,750
----------------------------------------------------------------------------------
1,300 Reebok International, Ltd. 49,888
----------------------------------------------------------------------------------
4,500 RJR Nabisco Holdings, Conv. Pfd., Series C 30,375
---------------------------------------------------------------------------------- -------------
Total 177,138
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.3%
----------------------------------------------------------------------------------
1,800 American Stores Co. 47,475
----------------------------------------------------------------------------------
1,300 Sears, Roebuck & Co. 61,425
---------------------------------------------------------------------------------- -------------
Total 108,900
---------------------------------------------------------------------------------- -------------
ENERGY--0.7%
----------------------------------------------------------------------------------
1,700 Baker Hughes, Inc. 30,600
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
ENERGY--CONTINUED
----------------------------------------------------------------------------------
1,300 Chevron Corp. $ 56,712
----------------------------------------------------------------------------------
700 Mapco, Inc. 35,088
----------------------------------------------------------------------------------
900 Texaco, Inc. 55,913
----------------------------------------------------------------------------------
2,200 USX Marathon Group 39,600
----------------------------------------------------------------------------------
600 (a)Western Atlas, Inc. 26,175
---------------------------------------------------------------------------------- -------------
Total 244,088
---------------------------------------------------------------------------------- -------------
FINANCE--1.0%
----------------------------------------------------------------------------------
900 AMLI Residential Properties Trust, REIT 16,537
----------------------------------------------------------------------------------
700 Bankers Trust of New York Corp. 41,475
----------------------------------------------------------------------------------
1,200 Citicorp 49,950
----------------------------------------------------------------------------------
800 Dean Witter, Discover & Co. 28,000
----------------------------------------------------------------------------------
500 Federal National Mortgage Association 35,562
----------------------------------------------------------------------------------
1,242 Mellon Bank Corp. 41,141
----------------------------------------------------------------------------------
1,500 PNC Financial Corp. 31,125
----------------------------------------------------------------------------------
600 Providian Corp. 18,150
----------------------------------------------------------------------------------
1,500 Ryder Systems, Inc. 32,438
----------------------------------------------------------------------------------
800 Transamerica Corp. 37,900
----------------------------------------------------------------------------------
1,700 Travelers, Inc. 55,888
---------------------------------------------------------------------------------- -------------
Total 388,166
---------------------------------------------------------------------------------- -------------
HEALTHCARE--0.5%
----------------------------------------------------------------------------------
900 American Home Products Corp. 58,612
----------------------------------------------------------------------------------
800 Becton, Dickinson & Co. 37,800
----------------------------------------------------------------------------------
800 Bristol-Myers Squibb Co. 46,200
----------------------------------------------------------------------------------
1,100 U.S. Healthcare, Inc. 49,225
---------------------------------------------------------------------------------- -------------
Total 191,837
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--0.7%
----------------------------------------------------------------------------------
500 Caterpillar, Inc. $ 27,000
----------------------------------------------------------------------------------
300 Deere & Co. 19,275
----------------------------------------------------------------------------------
900 (a)FMC Corp. 52,425
----------------------------------------------------------------------------------
800 General Electric Co. 36,800
----------------------------------------------------------------------------------
800 (a)Litton Industries, Inc. 27,300
----------------------------------------------------------------------------------
400 Loews Corp. 34,550
----------------------------------------------------------------------------------
1,200 Textron, Inc. 56,400
---------------------------------------------------------------------------------- -------------
Total 253,750
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--0.8%
----------------------------------------------------------------------------------
1,800 General Motors Corp., Class E 66,150
----------------------------------------------------------------------------------
700 Hewlett-Packard Co. 68,600
----------------------------------------------------------------------------------
300 International Business Machines Corp. 21,225
----------------------------------------------------------------------------------
1,300 Martin-Marietta Corp. 56,388
----------------------------------------------------------------------------------
900 Raytheon Co. 56,588
----------------------------------------------------------------------------------
1,400 Rockwell International Corp. 47,425
---------------------------------------------------------------------------------- -------------
Total 316,376
---------------------------------------------------------------------------------- -------------
UTILITIES--0.5%+
----------------------------------------------------------------------------------
1,200 AT&T Corp. 58,950
----------------------------------------------------------------------------------
300 British Telecommunications PLC, ADR 17,812
----------------------------------------------------------------------------------
700 Duke Power Co. 28,525
----------------------------------------------------------------------------------
700 Enron Corp. 18,900
----------------------------------------------------------------------------------
1,600 MCI Communications Corp. 31,200
----------------------------------------------------------------------------------
400 Telefonos De Mexico, Class L ADR 21,200
---------------------------------------------------------------------------------- -------------
Total 176,587
---------------------------------------------------------------------------------- -------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $2,294,830) 2,215,567
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--6.1%+
----------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.3%
----------------------------------------------------------------------------------
2,200 Baltimore Gas & Electric Co. $ 49,775
----------------------------------------------------------------------------------
4,064 Cinergy Corp. 90,424
----------------------------------------------------------------------------------
2,300 CMS Energy Corp. 51,175
----------------------------------------------------------------------------------
2,600 DPL, Inc. 52,975
----------------------------------------------------------------------------------
1,700 DQE, Inc. 51,425
----------------------------------------------------------------------------------
1,300 Duke Power Co. 52,975
----------------------------------------------------------------------------------
1,750 Florida Progress Corp. 53,156
----------------------------------------------------------------------------------
1,700 FPL Group, Inc. 60,137
----------------------------------------------------------------------------------
2,000 General Public Utilities Corp. 51,500
----------------------------------------------------------------------------------
1,900 NIPSCO Industries, Inc. 55,575
----------------------------------------------------------------------------------
2,900 Pacificorp 53,650
----------------------------------------------------------------------------------
2,000 Peco Energy Co. 48,250
----------------------------------------------------------------------------------
2,800 Pinnacle West Capital Corp. 54,250
----------------------------------------------------------------------------------
2,700 Southern Co. 56,025
----------------------------------------------------------------------------------
1,900 Utilicorp United, Inc. 48,925
----------------------------------------------------------------------------------
1,900 Western Resources, Inc. 53,438
---------------------------------------------------------------------------------- -------------
Total 883,655
---------------------------------------------------------------------------------- -------------
NATURAL GAS--0.6%
----------------------------------------------------------------------------------
1,000 Consolidated Natural Gas Co. 35,000
----------------------------------------------------------------------------------
1,200 Enron Corp. 32,400
----------------------------------------------------------------------------------
2,200 MCN Corp. 39,875
----------------------------------------------------------------------------------
1,700 Pacific Enterprises 36,338
----------------------------------------------------------------------------------
1,200 Sonat, Inc. 33,750
----------------------------------------------------------------------------------
1,900 UGI Corp. 35,863
---------------------------------------------------------------------------------- -------------
Total 213,226
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.2%
----------------------------------------------------------------------------------
3,400 Ameritech Corp. $ 134,300
----------------------------------------------------------------------------------
3,000 AT&T Corp. 147,375
----------------------------------------------------------------------------------
2,600 Bell Atlantic Corp. 130,325
----------------------------------------------------------------------------------
2,600 BellSouth Corp. 134,875
----------------------------------------------------------------------------------
4,500 GTE Corp. 137,813
----------------------------------------------------------------------------------
3,500 NYNEX Corp. 131,688
----------------------------------------------------------------------------------
4,000 Southern New England Telecommunications Corp. 132,000
----------------------------------------------------------------------------------
3,300 Southwestern Bell Corp. 136,538
----------------------------------------------------------------------------------
3,800 U.S. West, Inc. 133,950
---------------------------------------------------------------------------------- -------------
Total 1,218,864
---------------------------------------------------------------------------------- -------------
TOTAL UTILITY (IDENTIFIED COST, $2,348,515) 2,315,745
---------------------------------------------------------------------------------- -------------
TOTAL STOCKS (IDENTIFIED COST, $4,643,345) 4,531,312
---------------------------------------------------------------------------------- -------------
PRINCIPAL
AMOUNT
- ---------------
BONDS--86.5%
- ---------------------------------------------------------------------------------------------------
TREASURY--42.8%
----------------------------------------------------------------------------------
$ 16,600,000 U.S. Treasury Note, 6.25%, 1/31/97 (IDENTIFIED COST, $16,317,281) 16,219,528
---------------------------------------------------------------------------------- -------------
MORTAGE-BACKED SECURITIES--23.1%
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--23.1%
----------------------------------------------------------------------------------
495,184 Federal Home Loan Mortgage Association, Pool 393, 9.00%, 7/1/2020 504,151
----------------------------------------------------------------------------------
264,034 Federal Home Loan Mortgage Association, Pool D54720, 7.00%,
7/1/2024 238,039
----------------------------------------------------------------------------------
98,304 Federal Home Loan Mortgage Association, Pool D54761, 8.50%,
7/1/2024 96,705
----------------------------------------------------------------------------------
498,332 Federal Home Loan Mortgage Association, Pool D55936, 8.50%,
8/1/2024 490,229
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
MORTAGE-BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
----------------------------------------------------------------------------------
$ 500,601 Federal Home Loan Mortgage Corporation, Pool C80177, 7.50%,
5/1/2024 $ 466,961
----------------------------------------------------------------------------------
966,184 Federal Home Loan Mortgage Corporation, Pool E58069, 7.00%,
4/1/2009 907,894
----------------------------------------------------------------------------------
523,611 Federal National Mortgage Association, Pool 250083, 7.00%, 7/1/2024 473,862
----------------------------------------------------------------------------------
992,547 Federal National Mortgage Association, Pool 250197, 9.50%, 10/1/2024 1,023,862
----------------------------------------------------------------------------------
246,076 Federal National Mortgage Association, Pool 278507, 7.50%, 6/1/2009 236,383
----------------------------------------------------------------------------------
505,100 Federal National Mortgage Association, Pool 303073, 8.00%, 11/1/2024 484,098
----------------------------------------------------------------------------------
241,410 Government National Mortgage Association, Pool 379445, 7.50%,
5/15/2024 222,546
----------------------------------------------------------------------------------
1,385,000 Government National Mortgage Association, Pool 380656, 8.00%,
11/15/2024 1,317,897
----------------------------------------------------------------------------------
2,344,452 Government National Mortgage Association, Pool 407068, 8.50%,
10/15/2024 2,301,924
---------------------------------------------------------------------------------- -------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $8,996,125) 8,764,551
---------------------------------------------------------------------------------- -------------
HIGH YIELD--2.4%
----------------------------------------------------------------------------------
BROADCAST RADIO & T.V.--0.3%
----------------------------------------------------------------------------------
125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 125,938
---------------------------------------------------------------------------------- -------------
BUSINESS EQUIPMENT & SERVICES--0.4%
----------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 141,750
---------------------------------------------------------------------------------- -------------
CABLE T.V.--0.3%
----------------------------------------------------------------------------------
125,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 112,500
---------------------------------------------------------------------------------- -------------
CHEMICALS & PLASTICS--0.3%
----------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 120,625
---------------------------------------------------------------------------------- -------------
FOOD SERVICES--0.3%
----------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 114,688
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
HIGH YIELD--CONTINUED
----------------------------------------------------------------------------------
FOREST PRODUCTS--0.3%
----------------------------------------------------------------------------------
$ 125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 115,000
---------------------------------------------------------------------------------- -------------
STEEL--0.3%
----------------------------------------------------------------------------------
125,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 125,313
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--0.2%
----------------------------------------------------------------------------------
150,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 64,875
---------------------------------------------------------------------------------- -------------
TOTAL HIGH YIELD (IDENTIFIED COST, $985,889) 920,689
---------------------------------------------------------------------------------- -------------
INVESTMENT-GRADE--10.1%
----------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.8%
----------------------------------------------------------------------------------
300,000 Grumman Corp., Deb., 10.375%, 1/1/99 309,099
---------------------------------------------------------------------------------- -------------
CONGLOMERATES--0.7%
----------------------------------------------------------------------------------
250,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 265,000
---------------------------------------------------------------------------------- -------------
FINANCE-AUTOMOTIVE--0.6%
----------------------------------------------------------------------------------
250,000 GMAC, Medium Term Note, 7.25%, 4/30/99 239,310
---------------------------------------------------------------------------------- -------------
FINANCE-RETAIL--0.5%
----------------------------------------------------------------------------------
250,000 Household Finance Corp., Deb., 6.45%, 2/1/2009 204,645
---------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--0.5%
----------------------------------------------------------------------------------
200,000 Merrill Lynch & Co., Inc., Medium Term Note, 7.25%, 6/14/2004 194,574
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.6%
----------------------------------------------------------------------------------
225,000 Hook-Superx, Sr. Note, 10.125%, 6/1/2002 230,906
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.8%
----------------------------------------------------------------------------------
300,000 Georgia-Pacific Corp., Deb., 10.125%, 5/15/2000 304,509
---------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCY--0.8%
----------------------------------------------------------------------------------
300,000 Tennessee Valley Authority, 7.318%, 5/31/99 290,463
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
INVESTMENT-GRADE--CONTINUED
----------------------------------------------------------------------------------
INSURANCE--0.5%
----------------------------------------------------------------------------------
$ 200,000 Sunamerica, Inc., Medium Term Note, 6.58%, 1/15/2002 $ 178,574
---------------------------------------------------------------------------------- -------------
PRINTING & PUBLISHING--0.6%
----------------------------------------------------------------------------------
250,000 News America Holdings, Inc., Sr. Note, 7.50%, 3/1/2000 235,450
---------------------------------------------------------------------------------- -------------
SOVEREIGN GOVERNMENT--1.5%
----------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2004 272,304
----------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Gov't. Guarantee, 9.25%, 5/1/95 151,781
----------------------------------------------------------------------------------
150,000 Quebec Hydro, Deb., 7.375%, 2/1/2003 139,890
---------------------------------------------------------------------------------- -------------
Total 563,975
---------------------------------------------------------------------------------- -------------
TOBACCO--0.7%
----------------------------------------------------------------------------------
250,000 Philip Morris, Deb., 8.625%, 3/1/99 252,120
---------------------------------------------------------------------------------- -------------
UTILITIES--1.5%
----------------------------------------------------------------------------------
300,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 269,667
----------------------------------------------------------------------------------
300,000 Gulf States Utilities, FMB, 6.75%, 10/1/98 283,752
---------------------------------------------------------------------------------- -------------
Total 553,419
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENT-GRADE (IDENTIFIED COST, $3,922,440) 3,822,044
---------------------------------------------------------------------------------- -------------
OTHER CORPORATE--0.1%
----------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.1%
----------------------------------------------------------------------------------
30,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $40,725) 40,814
---------------------------------------------------------------------------------- -------------
FOREIGN
CURRENCY
PAR AMOUNT
----------------------------------------------------------------------------------
FOREIGN--8.0%
----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.2%
----------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,080
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
BELGIUM FRANC--0.3%
----------------------------------------------------------------------------------
3,100,000 Belgian Government, Foreign Government Guarantee, 10.00%, 4/6/96 $ 100,245
---------------------------------------------------------------------------------- -------------
CANADIAN DOLLAR--0.5%
----------------------------------------------------------------------------------
250,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 177,736
---------------------------------------------------------------------------------- -------------
DEUTSCHE MARK--1.6%
----------------------------------------------------------------------------------
300,000 Bundesobligation, 8.875%, 1/22/96 197,129
----------------------------------------------------------------------------------
350,000 Bundesobligationen, Deb., 7.25%, 10/20/97 226,085
----------------------------------------------------------------------------------
175,000 Treuhandanstalt, 7.75%, 10/1/2002 113,065
---------------------------------------------------------------------------------- -------------
Total 536,279
---------------------------------------------------------------------------------- -------------
FRENCH FRANC--0.8%
----------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 164,090
----------------------------------------------------------------------------------
800,000 France O.A.T., 9.80%, 1/30/96 154,036
----------------------------------------------------------------------------------
300,000 KFW International Finance, Inc., 7.00%, 5/12/2000 54,061
---------------------------------------------------------------------------------- -------------
Total 372,187
---------------------------------------------------------------------------------- -------------
ITALIAN LIRA--0.4%
----------------------------------------------------------------------------------
260,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 162,874
---------------------------------------------------------------------------------- -------------
JAPANESE YEN--2.4%
----------------------------------------------------------------------------------
35,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 401,254
----------------------------------------------------------------------------------
48,000,000 KFW International Finance, Gtd. Note, 6.00%, 11/29/99 521,342
---------------------------------------------------------------------------------- -------------
Total 922,596
---------------------------------------------------------------------------------- -------------
NETHERLANDS GUILDER--0.5%
----------------------------------------------------------------------------------
325,000 Netherlands Government, 6.00%, 4/15/95 184,949
---------------------------------------------------------------------------------- -------------
SPANISH PESETA--0.3%
----------------------------------------------------------------------------------
18,000,000 Spain (Government), 8.30%, 12/15/98 126,133
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
UNITED KINGDOM POUND--1.0%
----------------------------------------------------------------------------------
225,000 UK Conversion, 9.00%, 3/3/2000 $ 360,811
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN (IDENTIFIED COST, $3,028,163) 3,025,890
---------------------------------------------------------------------------------- -------------
TOTAL BONDS (IDENTIFIED COST, $33,290,623) 32,793,516
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $37,933,968) $ 37,324,828+
---------------------------------------------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Co.
REIT -- Real Estate Investment Trust
(a) Non-income producing.
(b) Restricted Securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, this security amounted to
$272,304, which represents 0.7% of net assets.
The cost for federal income tax purposes amounts to $37,957,552. The net
unrealized depreciation on a federal tax cost basis amounts to $632,724, and is
comprised of $147,142 appreciation and $779,866 depreciation at November 30,
1994.
The Fund's overall exposure to utility stocks is 6.6%.
Note: The categories of investments are shown as a percentage of net assets
($37,889,913) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $37,933,968 and tax cost, $37,957,552) $ 37,324,828
- -----------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost, $42,716) 42,509
- -----------------------------------------------------------------------------------------------------
Dividends and interest receivable 649,134
- -----------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 42,448
- -----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,644
- -----------------------------------------------------------------------------------------------------
Deferred expenses 45,934
- ----------------------------------------------------------------------------------------------------- ------------
Total assets 38,113,497
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable to Bank $ 72,977
- ------------------------------------------------------------------------------------------
Payable for foreign currency purchased 42,557
- ------------------------------------------------------------------------------------------
Payable for investments purchased 18,878
- ------------------------------------------------------------------------------------------
Tax withholding liability 603
- ------------------------------------------------------------------------------------------
Accrued expenses 88,569
- ------------------------------------------------------------------------------------------ ---------
Total liabilities 223,584
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 3,880,252 shares of beneficial interest outstanding $ 37,889,913
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 38,782,799
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation
of assets and liabilities in foreign currency, and futures contracts (609,463)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency
transactions, and futures contracts (329,392)
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 45,969
- ----------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 37,889,913
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- -----------------------------------------------------------------------------------------------------
Institutional Service Shares ($34,692,299 / 3,552,816 shares of beneficial interest outstanding) $9.76
- ----------------------------------------------------------------------------------------------------- ------------
Select Shares ($3,197,614 / 327,436 shares of beneficial interest outstanding) $9.77
- ----------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $1,490 and dollar roll interest expense of $18,217) $1,027,728
- -------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $118) 97,698
- ------------------------------------------------------------------------------------------------------- ---------
Total investment income 1,125,426
- -------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------------
Investment advisory fee $ 126,272
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 41,192
- --------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 69,732
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,929
- --------------------------------------------------------------------------------------------
Legal fees 1,242
- --------------------------------------------------------------------------------------------
Fund share registration costs 10,309
- --------------------------------------------------------------------------------------------
Printing and postage 1,347
- --------------------------------------------------------------------------------------------
Insurance premiums 5,265
- --------------------------------------------------------------------------------------------
Taxes 526
- --------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 4,407
- --------------------------------------------------------------------------------------------
Distribution services fee 13,223
- --------------------------------------------------------------------------------------------
Miscellaneous 8,353
- -------------------------------------------------------------------------------------------- ---------
Total expenses 300,797
- --------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 126,272
- ---------------------------------------------------------------------------------
Waiver of distribution services fee 4,407
- ---------------------------------------------------------------------------------
Reimbursement of other operating expenses 44,331 175,010
- --------------------------------------------------------------------------------- --------- ---------
Net expenses 125,787
- ------------------------------------------------------------------------------------------------------- ---------
Net investment income 999,639
- ------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) (311,738)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities in foreign currency, and futures contracts (609,463)
- ------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts (921,201)
- ------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 78,438
- ------------------------------------------------------------------------------------------------------- ---------
</TABLE>
*For the period from January 18, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------
Net investment income $ 999,639
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures
contracts ($305,808 net loss, as computed for federal tax purposes) (311,738)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures contracts (609,463)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from operations 78,438
- ---------------------------------------------------------------------------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------
Institutional Service Shares (883,551)
- ----------------------------------------------------------------------------------------
Select Shares (87,664)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from distributions to shareholders (971,215)
- ---------------------------------------------------------------------------------------- ------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 42,977,477
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 228,430
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (4,523,217)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets from Fund share transactions 38,682,690
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets 37,789,913
- ----------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------
Beginning of period 100,000
- ---------------------------------------------------------------------------------------- ------------------------
End of period (including undistributed net investment income of $45,969) $ 37,889,913
- ---------------------------------------------------------------------------------------- ------------------------
</TABLE>
* For the period from January 18, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein are only those of Federated Managed Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The Fund offers
two classes of shares, Institutional Service Shares and Select Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities, bonds, corporate bonds and other fixed income securities are
generally valued at the price provided by an independent pricing service.
Short-term securities with remaining maturities of sixty days or less may
be stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $305,808, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($305,808).
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and
the original futures contract value is reflected in the "daily variation
margin" account. Daily variation margin adjustments, arising from this
"marking to market" process, are recorded by the Fund as unrealized gains
or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended November 30, 1994, the Fund had a realized
gain of $36,351 on futures contracts.
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994, the foreign portion of the portfolio was diversified
with the following industries:
<TABLE>
<S> <C>
Agency 2.0%
Sovereign 6.2
State/Provincial 0.2
Supranational 1.1
</TABLE>
J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
K. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee. Additional information on each
restricted security held at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Freeport Terminal (Malta) 7/19/94 $284,196
</TABLE>
L. RECLASSIFICATION--During the period ended November 30, 1994, the Fund
adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax differences have been reclassified. These differences are due to
differing treatments for foreign currency and futures transactions. Amounts
as of November 30, 1994 have been reclassified to reflect an increase in
paid-in capital of $109, an increase in undistributed net investment income
of $17,545, and a decrease in accumulated net realized gain (loss) of
$17,654. Net investment income, net realized gains, and net assets were not
affected by this change.
M. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED NOVEMBER 30,
1994*
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ------------------------------------------------------------------------------- ------------ -------------
Shares sold 3,801,238 $ 37,969,931
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 21,807 216,633
- -------------------------------------------------------------------------------
Shares redeemed (280,229) (2,787,738)
- ------------------------------------------------------------------------------- ------------ -------------
Net change resulting from Institutional Service
share transactions 3,542,816 $ 35,398,826
- ------------------------------------------------------------------------------- ------------ -------------
</TABLE>
*For the period from January 18, 1994 (start of business) to November 30, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED NOVEMBER 30,
1994**
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ------------------------------------------------------------------------------- ------------ -------------
Shares sold 501,463 $ 5,007,546
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,189 11,797
- -------------------------------------------------------------------------------
Shares redeemed (175,216) (1,735,479)
- ------------------------------------------------------------------------------- ------------ -------------
Net change resulting from Select share transactions 327,436 3,283,864
- ------------------------------------------------------------------------------- ------------ -------------
Total net change resulting from Fund share transactions 3,870,252 $ 38,682,690
- ------------------------------------------------------------------------------- ------------ -------------
</TABLE>
**For the period from January 27, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive its fee and reimburse certain operating expenses of
the Fund. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors on an annualized basis. The administrative fee received
during the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of each class of shares for the period. This fee is to obtain certain
personal services for shareholders and to maintain the shareholder accounts. For
the period ended November 30, 1994, Institutional Service Shares did not incur a
shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($37,447) and start-up
administrative service expenses ($39,068) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following March 11,
1994 (date the Fund first became effective). For the period ended November 30,
1994, the Fund paid $2,288 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 85,408,559
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 46,927,382
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
MANAGED SERIES TRUST
(Federated Managed Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio of
investments, as of November 30, 1994, and the related statement of operations
and changes in net assets, and the financial highlights (see pages 2 and 27 of
the prospectus) for the period from January 18, 1994 (start of business) to
November 30, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust)
as of November 30, 1994, and the results of its operations, the changes in its
net assets, and its financial highlights for the period from January 18, 1994
(start of business) to November 30, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 17, 1995
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC--Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Managed Income Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED
INCOME FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Diversified Portfolio of
Managed Series Trust, an Open-End
Management Investment Company
Prospectus dated January 31, 1995
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
56166K107
3122013A-SS (1/95)
[Logo] [Logo]
Federated Managed Growth Federated Managed
and Income Fund Growth Fund
[Logo]
Lifecycle Investing
MANAGED SERIES TRUST
From Federated Investors
[Logo] [Logo]
Federated Managed Federated Managed
Income Fund Aggressive Growth Fund
Federated Managed Income Fund
[Logo]
Lifecycle Investing
From Federated Investors
Select Shares
Federated Managed Income Fund
is part of Managed Series Trust,
a lifecycle investing program
from Federated Investors
Other funds available in Managed
Series Trust are Fund, Federated
Managed Growth and Income
Fund, Federated Managed Growth Fund, and Federated
Managed Aggressive Growth Fund
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of
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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Asset Allocation 3
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Investment Risks 5
Foreign Bonds 6
Equity Asset Categories 6
Large Company Stocks 6
Utility Stocks 6
Small Company Stocks 6
Foreign Stocks 6
Equity Reserves 7
Acceptable Investments 7
U.S. Treasury and Other
U.S. Government Securities 7
Mortgage-Backed Securities 7
Collateralized Mortgage Obligations
("CMOs") 7
Real Estate Mortgage Investment
Conduits ("REMICS") 8
Characteristics of Mortgage-
Backed Securities 8
Corporate Bonds 9
Equity Securities 9
Foreign Securities 10
Investment Risks 10
Equity Reserves 10
Repurchase Agreements 10
Convertible Securities 10
Investing in Securities of
Other Investment Companies 11
Restricted and Illiquid Securities 11
When-Issued and Delayed
Delivery Transactions 11
Lending of Portfolio Securities 11
Foreign Currency Transactions 12
Currency Risks 12
Forward Foreign Currency
Exchange Contracts 12
Options 13
Futures and Options on Futures 13
Risks 14
Portfolio Turnover 14
Investment Limitations 14
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Select Shares 17
Distribution and Shareholder Services Plans 17
Other Payments to Financial Institutions 18
Administration of the Fund 18
Administrative Services 18
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Select Shares 19
NET ASSET VALUE 20
- ------------------------------------------------------
INVESTING IN SELECT SHARES 20
- ------------------------------------------------------
Share Purchases 20
Through a Financial Institution 20
By Wire 20
By Mail 21
Minimum Investment Required 21
What Shares Cost 21
Subaccounting Services 21
Systematic Investment Program 21
Certificates and Confirmations 22
Dividends 22
Capital Gains 22
REDEEMING SELECT SHARES 22
- ------------------------------------------------------
Through a Financial Institution 22
Telephone Redemption 22
Written Requests 23
Signatures 23
Receiving Payment 23
Systematic Withdrawal Program 23
Accounts with Low Balances 24
SHAREHOLDER INFORMATION 24
- ------------------------------------------------------
Voting Rights 24
Massachusetts Partnership Law 24
TAX INFORMATION 25
- ------------------------------------------------------
Federal Income Tax 25
Pennsylvania Corporate and
Personal Property Taxes 25
PERFORMANCE INFORMATION 25
- ------------------------------------------------------
OTHER CLASSES OF SHARES 26
- ------------------------------------------------------
Financial Highlights--
Institutional Service Shares 27
FINANCIAL STATEMENTS 28
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 47
- ------------------------------------------------------
APPENDIX 48
- ------------------------------------------------------
ADDRESSES 51
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL SELECT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)......................................................................... 0.00%
12b-1 Fee (after waiver) (2).............................................................................. 0.50%
Total Other Expenses (after expense reimbursement)........................................................ 1.00%
Shareholder Services Fee................................................................... 0.25%
Total Select Shares Operating Expenses........................................................... 1.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver 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 12b-1 fee is 0.75%.
(3) The Total Select Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending November 30, 1995. The Total
Select Shares Operating Expenses were 1.42% for the fiscal year ended
November 30, 1994 and would have been 2.68% absent the voluntary waiver of
the management fee and the voluntary reimbursement of certain other
operating expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of 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 charges permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $15 $47
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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."
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 47.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.28
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments, foreign currency
transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations 0.03
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.26)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.77
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.26%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.42%(a)
- ----------------------------------------------------------------------------------------
Net investment income 5.24%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 3,198
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 153%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to
November 30, 1994. For the period from the start of business, January 27,
1994 to May 24, 1994, the net investment income was distributed to the Trust's
adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
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 equities. 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 equities. 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 equities. The
Fund's ability to invest a portion of its assets in equities offers the
opportunity for higher return than other income-
oriented funds. The equities asset categories are large company stocks, utility
stocks, small company stocks, foreign stocks, and equity 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 0-10%
Foreign Bonds 0-10%
EQUITIES 10-30%
Large Company Stocks 0-30%
Utility Stocks 0-15%
Small Company Stocks 0-3%
Foreign Stocks 0-3%
Equity Reserves 0-12.5%
</TABLE>
The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, U.S.
Treasury securities are judged to be unusually attractive relative to other
asset categories, the allocation for U.S. Treasury securities may be moved to
its upper limit. At other times, when U.S. Treasury securities appear to be
overvalued, the commitment may be moved down to a lesser allocation. There is no
assurance, however, that the adviser's attempts to pursue this strategy will
result in a benefit to the Fund.
Each asset category within the Fund will be a managed portfolio. The Fund will
seek superior investment performance through security selection in addition to
determining the percentage of its assets to allocate to each of the asset
categories.
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 prices of fixed income securities fluctuate
inversely to the direction of interest rates. 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. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.
HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to ten percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.
INVESTMENT RISKS. Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than
higher-rated securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.
FOREIGN BONDS. Foreign bonds are high-quality debt securities of countries
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 countries other than the United
States and subject to the Fund's credit limitations for foreign bonds. The
Fund may invest up to ten percent of its total assets in foreign bonds.
EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
equities will be allocated among the following asset categories within the
ranges specified:
LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 30 percent of its total assets in large
company stocks.
UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 15 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.
SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price x number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to three percent of its total assets in
small company stocks.
FOREIGN STOCKS. Foreign stocks are equity securities of established
companies in economically developed countries other than the United States.
These securities may be either dollar-denominated or denominated in foreign
currencies. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of
the asset category ranges. The Fund may invest up to three percent of its
total assets in foreign stocks.
EQUITY RESERVES. When the adviser believes that a temporary defensive
position is available, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments such as commercial paper
rated A-1 by Standard and Poor's Ratings Group, Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. The Fund
may invest up to 12.5 percent of its total assets in equity reserves.
ACCEPTABLE INVESTMENTS
U.S. TREASURY AND OTHER U.S. GOVERNMENT SECURITIES. The U.S. Treasury and
other U.S. government securities in which the Fund invests are either
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The U.S. government securities in which the Fund may
invest are limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of an 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 or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the
entire principal amount is returned. This is caused by the need to
reinvest at lower interest rates both distributions of principal
generally and significant prepayments which become more likely as
mortgage interest rates decline. Since comparatively high interest
rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of
declining interest rates than other
non-callable, fixed-income government securities of comparable stated
maturities. However, mortgage-backed securities may experience less
pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest rates
fall, counter to changes in value experienced by most fixed-income
securities. The Fund's adviser intends to use this characteristic of
interest-only SMBSs to reduce the effects of interest rate changes on
the value of the Fund's portfolio, while continuing to pursue the
Fund's investment objective.
CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:
rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");
unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or
unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.
The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.
EQUITY SECURITIES. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks have
neither fixed maturity dates nor fixed schedules of promised payments.
Utility stocks are common stocks of utility companies, including water
companies, companies that produce, transmit, or distribute gas and electric
energy and those companies that provide communications facilities, such as
telephone and telegraph companies. Foreign stocks are equity securities of
foreign issuers.
FOREIGN SECURITIES. The foreign bonds in which the Fund invests are rated
within the four highest ratings for bonds by Moody's (Aaa, Aa, A or Baa) or
by Standard & Poor's (AAA, AA, A or BBB) or are unrated if determined to be
of equivalent quality by the Fund's adviser.
INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.
EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities.
The investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different investment
objectives. The adviser may treat convertible securities as large company
stocks, small company stocks, or high yield bonds for purposes of the asset
category ranges, depending upon current market conditions, including the
relationship of the then-current price to the conversion price. The
convertible securities in which the Fund invests may be rated "high yield"
or of comparable quality at the time of purchase.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100 percent of the value of the securities loaned.
There is a risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
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. The Fund will not
invest more than 3% of its total assets in forward foreign currency exchange
contracts.
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. Interest rate
futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract, and the buyer agrees to
take delivery of the instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The Fund may utilize stock index futures to
handle cash flows into and out of the Fund and to potentially reduce
transactional costs.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed
price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to.75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since
the Fund's inception. In allocating the Fund's assets, Mr. Ritter evaluates
the market environment and economic outlook, utilizing the services of the
investment adviser's economist and strategist. Mr. Ritter joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1992. From 1988 until 1991, Mr. Ritter acted as an Assistant
Vice President. Mr. Ritter is a Chartered Financial Analyst and received
his M.B.A. in Finance from the University of Chicago and his M.S. in
Economics from Carnegie Mellon University.
The portfolio managers for each of the individual asset categories are as
follows:
Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.
Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the investment adviser from 1989 until 1991, and from 1986 until
1989 he acted as Project Manager in the Product Development Department. Mr.
Balestrino is a Chartered Financial Analyst and received his M.A. in Urban
and Regional Planning from the University of Pittsburgh.
Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 and has been
a Vice President of the Fund's investment adviser since January, 1994.
Prior to this, Mr. Bauer served as an Assistant Vice President of the
Fund's investment adviser. Mr. Bauer was an Assistant Vice President of the
International Banking
Division at Pittsburgh National Bank from 1982 until 1989. Mr. Bauer is a
Chartered Financial Analyst and received his M.B.A. in Finance from
Pennsylvania State University.
Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category. He has been one of the Fund's portfolio
managers since its inception. Mr. Anderson joined Federated Investors in
1972 and is presently a Senior Vice President of the Fund's investment
adviser. Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Wisconsin.
Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from
the University of Wisconsin.
James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie Mellon University.
Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.
DISTRIBUTION OF 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 AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the
distributor an amount, computed at an annual rate of 0.75 of 1% of the average
daily net asset value of the Select Shares, to finance any activity which is
principally intended to result in the sale of Shares subject to the Distribution
Plan. The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Trust has adopted a Shareholder Services Plan (the "Services
Plan") under which the Fund may make payments up to 0.25 of 1% of the average
daily net asset value of the Select Shares to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Distribution and Services Plans, financial institutions may be
compensated by the distributor, who may be reimbursed by the adviser, or
affiliates thereof, for providing administrative support services to holders of
Shares. These payments will be made directly by the distributor and will not be
made from the assets of the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND 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 reserve the right to allocate
certain other expenses to holders of Shares
as they deem 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
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.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Managed
Income Fund-- Select Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Wire Order Number;
Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Income Fund--Select Shares to Federated Services Company, c/o State
Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602.
Orders by mail are considered received after payment by check is converted by
State Street Bank into federal funds. This is normally the next business day
after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
the quarter.
DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Unless shareholders request cash payments by writing the
Fund, dividends are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SELECT SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution, by telephone
request or by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). All proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name and class of shares
name, his account number, and the Share or dollar amount requested. If Share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agents have received
payment for Shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Shares,
and the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually use up, the shareholder's
investment in the
Fund. For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program through
Federated Securities Corp.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,500. This requirement
does not apply, however, if the balance falls below $1,500 because of changes in
the Fund's net asset value. Before Shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. As of January 11, 1995, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 111,385.0560 Select Shares (32.617%) of Federated Managed
Income Fund, and therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust
itself cannot meet its obligations to indemnify shareholders and pay judgments
against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
Shares are sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Select Shares and
Institutional Service Shares. Because Select Shares are subject to 12b-1 fees,
the total return and yield for Institutional Service Shares, for the same
period, will exceed that of Select Shares.
From time to time, the Fund may advertise the performance of Select Shares using
certain financial publications and/or compare the performance of Select Shares
to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Service Shares are sold to institutions and individuals and to
accounts for which financial institutions act in a fiduciary or agency capacity.
Institutional Service Shares are sold at net asset value. Investments in
Institutional Service Shares are subject to a minimum initial investment of
$25,000. Institutional Service Shares are distributed without a 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
The amount of dividends payable to Institutional Service Shares will generally
exceed that of Select Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 47.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.31
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations 0.06
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.30)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.76
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.55%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.67%(a)
- ----------------------------------------------------------------------------------------
Net investment income 6.02%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.01%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,692
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 153%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to
November 30, 1994. For the period from the start of business, January 18,
1994 to May 24, 1994, the net investment income was distributed to the Trust's
adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
FEDERATED MANAGED INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--12.0%
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--5.9%
----------------------------------------------------------------------------------
BASIC INDUSTRY--0.4%
----------------------------------------------------------------------------------
500 Eastman Chemical Co. $ 23,562
----------------------------------------------------------------------------------
900 Lubrizol Corp. 28,350
----------------------------------------------------------------------------------
1,300 Phelps Dodge Corp. 74,425
----------------------------------------------------------------------------------
2,000 Praxair, Inc. 40,500
---------------------------------------------------------------------------------- -------------
Total 166,837
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--0.5%
----------------------------------------------------------------------------------
800 Chrysler Corp. 38,700
----------------------------------------------------------------------------------
1,000 Eastman Kodak Co. 45,625
----------------------------------------------------------------------------------
1,500 Ford Motor Co. 40,688
----------------------------------------------------------------------------------
2,500 Mattel, Inc. 66,875
---------------------------------------------------------------------------------- -------------
Total 191,888
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--0.5%
----------------------------------------------------------------------------------
600 Avon Products, Inc. 37,125
----------------------------------------------------------------------------------
1,000 Philip Morris Cos., Inc. 59,750
----------------------------------------------------------------------------------
1,300 Reebok International, Ltd. 49,888
----------------------------------------------------------------------------------
4,500 RJR Nabisco Holdings, Conv. Pfd., Series C 30,375
---------------------------------------------------------------------------------- -------------
Total 177,138
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.3%
----------------------------------------------------------------------------------
1,800 American Stores Co. 47,475
----------------------------------------------------------------------------------
1,300 Sears, Roebuck & Co. 61,425
---------------------------------------------------------------------------------- -------------
Total 108,900
---------------------------------------------------------------------------------- -------------
ENERGY--0.7%
----------------------------------------------------------------------------------
1,700 Baker Hughes, Inc. 30,600
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
ENERGY--CONTINUED
----------------------------------------------------------------------------------
1,300 Chevron Corp. $ 56,712
----------------------------------------------------------------------------------
700 Mapco, Inc. 35,088
----------------------------------------------------------------------------------
900 Texaco, Inc. 55,913
----------------------------------------------------------------------------------
2,200 USX Marathon Group 39,600
----------------------------------------------------------------------------------
600 (a)Western Atlas, Inc. 26,175
---------------------------------------------------------------------------------- -------------
Total 244,088
---------------------------------------------------------------------------------- -------------
FINANCE--1.0%
----------------------------------------------------------------------------------
900 AMLI Residential Properties Trust, REIT 16,537
----------------------------------------------------------------------------------
700 Bankers Trust of New York Corp. 41,475
----------------------------------------------------------------------------------
1,200 Citicorp 49,950
----------------------------------------------------------------------------------
800 Dean Witter, Discover & Co. 28,000
----------------------------------------------------------------------------------
500 Federal National Mortgage Association 35,562
----------------------------------------------------------------------------------
1,242 Mellon Bank Corp. 41,141
----------------------------------------------------------------------------------
1,500 PNC Financial Corp. 31,125
----------------------------------------------------------------------------------
600 Providian Corp. 18,150
----------------------------------------------------------------------------------
1,500 Ryder Systems, Inc. 32,438
----------------------------------------------------------------------------------
800 Transamerica Corp. 37,900
----------------------------------------------------------------------------------
1,700 Travelers, Inc. 55,888
---------------------------------------------------------------------------------- -------------
Total 388,166
---------------------------------------------------------------------------------- -------------
HEALTHCARE--0.5%
----------------------------------------------------------------------------------
900 American Home Products Corp. 58,612
----------------------------------------------------------------------------------
800 Becton, Dickinson & Co. 37,800
----------------------------------------------------------------------------------
800 Bristol-Myers Squibb Co. 46,200
----------------------------------------------------------------------------------
1,100 U.S. Healthcare, Inc. 49,225
---------------------------------------------------------------------------------- -------------
Total 191,837
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--0.7%
----------------------------------------------------------------------------------
500 Caterpillar, Inc. $ 27,000
----------------------------------------------------------------------------------
300 Deere & Co. 19,275
----------------------------------------------------------------------------------
900 (a)FMC Corp. 52,425
----------------------------------------------------------------------------------
800 General Electric Co. 36,800
----------------------------------------------------------------------------------
800 (a)Litton Industries, Inc. 27,300
----------------------------------------------------------------------------------
400 Loews Corp. 34,550
----------------------------------------------------------------------------------
1,200 Textron, Inc. 56,400
---------------------------------------------------------------------------------- -------------
Total 253,750
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--0.8%
----------------------------------------------------------------------------------
1,800 General Motors Corp., Class E 66,150
----------------------------------------------------------------------------------
700 Hewlett-Packard Co. 68,600
----------------------------------------------------------------------------------
300 International Business Machines Corp. 21,225
----------------------------------------------------------------------------------
1,300 Martin-Marietta Corp. 56,388
----------------------------------------------------------------------------------
900 Raytheon Co. 56,588
----------------------------------------------------------------------------------
1,400 Rockwell International Corp. 47,425
---------------------------------------------------------------------------------- -------------
Total 316,376
---------------------------------------------------------------------------------- -------------
UTILITIES--0.5%+
----------------------------------------------------------------------------------
1,200 AT&T Corp. 58,950
----------------------------------------------------------------------------------
300 British Telecommunications PLC, ADR 17,812
----------------------------------------------------------------------------------
700 Duke Power Co. 28,525
----------------------------------------------------------------------------------
700 Enron Corp. 18,900
----------------------------------------------------------------------------------
1,600 MCI Communications Corp. 31,200
----------------------------------------------------------------------------------
400 Telefonos De Mexico, Class L ADR 21,200
---------------------------------------------------------------------------------- -------------
Total 176,587
---------------------------------------------------------------------------------- -------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $2,294,830) 2,215,567
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--6.1%+
----------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.3%
----------------------------------------------------------------------------------
2,200 Baltimore Gas & Electric Co. $ 49,775
----------------------------------------------------------------------------------
4,064 Cinergy Corp. 90,424
----------------------------------------------------------------------------------
2,300 CMS Energy Corp. 51,175
----------------------------------------------------------------------------------
2,600 DPL, Inc. 52,975
----------------------------------------------------------------------------------
1,700 DQE, Inc. 51,425
----------------------------------------------------------------------------------
1,300 Duke Power Co. 52,975
----------------------------------------------------------------------------------
1,750 Florida Progress Corp. 53,156
----------------------------------------------------------------------------------
1,700 FPL Group, Inc. 60,137
----------------------------------------------------------------------------------
2,000 General Public Utilities Corp. 51,500
----------------------------------------------------------------------------------
1,900 NIPSCO Industries, Inc. 55,575
----------------------------------------------------------------------------------
2,900 Pacificorp 53,650
----------------------------------------------------------------------------------
2,000 Peco Energy Co. 48,250
----------------------------------------------------------------------------------
2,800 Pinnacle West Capital Corp. 54,250
----------------------------------------------------------------------------------
2,700 Southern Co. 56,025
----------------------------------------------------------------------------------
1,900 Utilicorp United, Inc. 48,925
----------------------------------------------------------------------------------
1,900 Western Resources, Inc. 53,438
---------------------------------------------------------------------------------- -------------
Total 883,655
---------------------------------------------------------------------------------- -------------
NATURAL GAS--0.6%
----------------------------------------------------------------------------------
1,000 Consolidated Natural Gas Co. 35,000
----------------------------------------------------------------------------------
1,200 Enron Corp. 32,400
----------------------------------------------------------------------------------
2,200 MCN Corp. 39,875
----------------------------------------------------------------------------------
1,700 Pacific Enterprises 36,338
----------------------------------------------------------------------------------
1,200 Sonat, Inc. 33,750
----------------------------------------------------------------------------------
1,900 UGI Corp. 35,863
---------------------------------------------------------------------------------- -------------
Total 213,226
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.2%
----------------------------------------------------------------------------------
3,400 Ameritech Corp. $ 134,300
----------------------------------------------------------------------------------
3,000 AT&T Corp. 147,375
----------------------------------------------------------------------------------
2,600 Bell Atlantic Corp. 130,325
----------------------------------------------------------------------------------
2,600 BellSouth Corp. 134,875
----------------------------------------------------------------------------------
4,500 GTE Corp. 137,813
----------------------------------------------------------------------------------
3,500 NYNEX Corp. 131,688
----------------------------------------------------------------------------------
4,000 Southern New England Telecommunications Corp. 132,000
----------------------------------------------------------------------------------
3,300 Southwestern Bell Corp. 136,538
----------------------------------------------------------------------------------
3,800 U.S. West, Inc. 133,950
---------------------------------------------------------------------------------- -------------
Total 1,218,864
---------------------------------------------------------------------------------- -------------
TOTAL UTILITY (IDENTIFIED COST, $2,348,515) 2,315,745
---------------------------------------------------------------------------------- -------------
TOTAL STOCKS (IDENTIFIED COST, $4,643,345) 4,531,312
---------------------------------------------------------------------------------- -------------
PRINCIPAL
AMOUNT
- -------------- ----------------------------------------------------------------------------------
BONDS--86.5%
- --------------------------------------------------------------------------------------------------
TREASURY--42.8%
----------------------------------------------------------------------------------
$ 16,600,000 U.S. Treasury Note, 6.25%, 1/31/97 (IDENTIFIED COST, $16,317,281) 16,219,528
---------------------------------------------------------------------------------- -------------
MORTAGE-BACKED SECURITIES--23.1%
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--23.1%
----------------------------------------------------------------------------------
495,184 Federal Home Loan Mortgage Association, Pool 393, 9.00%, 7/1/2020 504,151
----------------------------------------------------------------------------------
264,034 Federal Home Loan Mortgage Association, Pool D54720, 7.00%,
7/1/2024 238,039
----------------------------------------------------------------------------------
98,304 Federal Home Loan Mortgage Association, Pool D54761, 8.50%,
7/1/2024 96,705
----------------------------------------------------------------------------------
498,332 Federal Home Loan Mortgage Association, Pool D55936, 8.50%,
8/1/2024 490,229
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
MORTAGE-BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
----------------------------------------------------------------------------------
$ 500,601 Federal Home Loan Mortgage Corporation, Pool C80177, 7.50%,
5/1/2024 $ 466,961
----------------------------------------------------------------------------------
966,184 Federal Home Loan Mortgage Corporation, Pool E58069, 7.00%,
4/1/2009 907,894
----------------------------------------------------------------------------------
523,611 Federal National Mortgage Association, Pool 250083, 7.00%, 7/1/2024 473,862
----------------------------------------------------------------------------------
992,547 Federal National Mortgage Association, Pool 250197, 9.50%, 10/1/2024 1,023,862
----------------------------------------------------------------------------------
246,076 Federal National Mortgage Association, Pool 278507, 7.50%, 6/1/2009 236,383
----------------------------------------------------------------------------------
505,100 Federal National Mortgage Association, Pool 303073, 8.00%, 11/1/2024 484,098
----------------------------------------------------------------------------------
241,410 Government National Mortgage Association, Pool 379445, 7.50%,
5/15/2024 222,546
----------------------------------------------------------------------------------
1,385,000 Government National Mortgage Association, Pool 380656, 8.00%,
11/15/2024 1,317,897
----------------------------------------------------------------------------------
2,344,452 Government National Mortgage Association, Pool 407068, 8.50%,
10/15/2024 2,301,924
---------------------------------------------------------------------------------- -------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $8,996,125) 8,764,551
---------------------------------------------------------------------------------- -------------
HIGH YIELD--2.4%
----------------------------------------------------------------------------------
BROADCAST RADIO & T.V.--0.3%
----------------------------------------------------------------------------------
125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 125,938
---------------------------------------------------------------------------------- -------------
BUSINESS EQUIPMENT & SERVICES--0.4%
----------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 141,750
---------------------------------------------------------------------------------- -------------
CABLE T.V.--0.3%
----------------------------------------------------------------------------------
125,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 112,500
---------------------------------------------------------------------------------- -------------
CHEMICALS & PLASTICS--0.3%
----------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 120,625
---------------------------------------------------------------------------------- -------------
FOOD SERVICES--0.3%
----------------------------------------------------------------------------------
125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 114,688
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
HIGH YIELD--CONTINUED
----------------------------------------------------------------------------------
FOREST PRODUCTS--0.3%
----------------------------------------------------------------------------------
$ 125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 115,000
---------------------------------------------------------------------------------- -------------
STEEL--0.3%
----------------------------------------------------------------------------------
125,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 125,313
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--0.2%
----------------------------------------------------------------------------------
150,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 64,875
---------------------------------------------------------------------------------- -------------
TOTAL HIGH YIELD (IDENTIFIED COST, $985,889) 920,689
---------------------------------------------------------------------------------- -------------
INVESTMENT-GRADE--10.1%
----------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.8%
----------------------------------------------------------------------------------
300,000 Grumman Corp., Deb., 10.375%, 1/1/99 309,099
---------------------------------------------------------------------------------- -------------
CONGLOMERATES--0.7%
----------------------------------------------------------------------------------
250,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 265,000
---------------------------------------------------------------------------------- -------------
FINANCE-AUTOMOTIVE--0.6%
----------------------------------------------------------------------------------
250,000 GMAC, Medium Term Note, 7.25%, 4/30/99 239,310
---------------------------------------------------------------------------------- -------------
FINANCE-RETAIL--0.5%
----------------------------------------------------------------------------------
250,000 Household Finance Corp., Deb., 6.45%, 2/1/2009 204,645
---------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--0.5%
----------------------------------------------------------------------------------
200,000 Merrill Lynch & Co., Inc., Medium Term Note, 7.25%, 6/14/2004 194,574
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.6%
----------------------------------------------------------------------------------
225,000 Hook-Superx, Sr. Note, 10.125%, 6/1/2002 230,906
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.8%
----------------------------------------------------------------------------------
300,000 Georgia-Pacific Corp., Deb., 10.125%, 5/15/2000 304,509
---------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCY--0.8%
----------------------------------------------------------------------------------
300,000 Tennessee Valley Authority, 7.318%, 5/31/99 290,463
---------------------------------------------------------------------------------- -------------
INSURANCE--0.5%
----------------------------------------------------------------------------------
200,000 Sunamerica, Inc., Medium Term Note, 6.58%, 1/15/2002 178,574
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- -------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
INVESTMENT-GRADE--CONTINUED
----------------------------------------------------------------------------------
PRINTING & PUBLISHING--0.6%
----------------------------------------------------------------------------------
$ 250,000 News America Holdings, Inc., Sr. Note, 7.50%, 3/1/2000 $ 235,450
---------------------------------------------------------------------------------- -------------
SOVEREIGN GOVERNMENT--1.5%
----------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2004 272,304
----------------------------------------------------------------------------------
150,000 Ontario Hydro, Local Gov't. Guarantee, 9.25%, 5/1/95 151,781
----------------------------------------------------------------------------------
150,000 Quebec Hydro, Deb., 7.375%, 2/1/2003 139,890
---------------------------------------------------------------------------------- -------------
Total 563,975
---------------------------------------------------------------------------------- -------------
TOBACCO--0.7%
----------------------------------------------------------------------------------
250,000 Philip Morris, Deb., 8.625%, 3/1/99 252,120
---------------------------------------------------------------------------------- -------------
UTILITIES--1.5%
----------------------------------------------------------------------------------
300,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 269,667
----------------------------------------------------------------------------------
300,000 Gulf States Utilities, FMB, 6.75%, 10/1/98 283,752
---------------------------------------------------------------------------------- -------------
Total 553,419
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENT-GRADE (IDENTIFIED COST, $3,922,440) 3,822,044
---------------------------------------------------------------------------------- -------------
OTHER CORPORATE--0.1%
----------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.1%
----------------------------------------------------------------------------------
30,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $40,725) 40,814
---------------------------------------------------------------------------------- -------------
FOREIGN
CURRENCY
PAR AMOUNT
- --------------- ----------------------------------------------------------------------------------
FOREIGN--8.0%
----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.2%
----------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,080
---------------------------------------------------------------------------------- -------------
BELGIUM FRANC--0.3%
----------------------------------------------------------------------------------
3,100,000 Belgian Government, Foreign Government Guarantee, 10.00%, 4/6/96 100,245
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
ONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
CANADIAN DOLLAR--0.5%
----------------------------------------------------------------------------------
250,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 $ 177,736
---------------------------------------------------------------------------------- -------------
DEUTSCHE MARK--1.6%
----------------------------------------------------------------------------------
300,000 Bundesobligation, 8.875%, 1/22/96 197,129
----------------------------------------------------------------------------------
350,000 Bundesobligationen, Deb., 7.25%, 10/20/97 226,085
----------------------------------------------------------------------------------
175,000 Treuhandanstalt, 7.75%, 10/1/2002 113,065
---------------------------------------------------------------------------------- -------------
Total 536,279
---------------------------------------------------------------------------------- -------------
FRENCH FRANC--0.8%
----------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 164,090
----------------------------------------------------------------------------------
800,000 France O.A.T., 9.80%, 1/30/96 154,036
----------------------------------------------------------------------------------
300,000 KFW International Finance, Inc., 7.00%, 5/12/2000 54,061
---------------------------------------------------------------------------------- -------------
Total 372,187
---------------------------------------------------------------------------------- -------------
ITALIAN LIRA--0.4%
----------------------------------------------------------------------------------
260,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 162,874
---------------------------------------------------------------------------------- -------------
JAPANESE YEN--2.4%
----------------------------------------------------------------------------------
35,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 401,254
----------------------------------------------------------------------------------
48,000,000 KFW International Finance, Gtd. Note, 6.00%, 11/29/99 521,342
---------------------------------------------------------------------------------- -------------
Total 922,596
---------------------------------------------------------------------------------- -------------
NETHERLANDS GUILDER--0.5%
----------------------------------------------------------------------------------
325,000 Netherlands Government, 6.00%, 4/15/95 184,949
---------------------------------------------------------------------------------- -------------
SPANISH PESETA--0.3%
----------------------------------------------------------------------------------
18,000,000 Spain (Government), 8.30%, 12/15/98 126,133
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
ONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
UNITED KINGDOM POUND--1.0%
----------------------------------------------------------------------------------
225,000 UK Conversion, 9.00%, 3/3/2000 $ 360,811
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN (IDENTIFIED COST, $3,028,163) 3,025,890
---------------------------------------------------------------------------------- -------------
TOTAL BONDS (IDENTIFIED COST, $33,290,623) 32,793,516
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $37,933,968) $ 37,324,828+
---------------------------------------------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Co.
REIT -- Real Estate Investment Trust
(a) Non-income producing.
(b) Restricted Securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, this security amounted to
$272,304, which represents 0.7% of net assets.
The cost for federal income tax purposes amounts to $37,957,552. The net
unrealized depreciation on a federal tax cost basis amounts to $632,724, and is
comprised of $147,142 appreciation and $779,866 depreciation at November 30,
1994.
The Fund's overall exposure to utility stocks is 6.6%.
Note: The categories of investments are shown as a percentage of net assets
($37,889,913) at
November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $37,933,968 and tax cost, $37,957,552) $ 37,324,828
- -----------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost, $42,716) 42,509
- -----------------------------------------------------------------------------------------------------
Dividends and interest receivable 649,134
- -----------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 42,448
- -----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 8,644
- -----------------------------------------------------------------------------------------------------
Deferred expenses 45,934
- ----------------------------------------------------------------------------------------------------- ------------
Total assets 38,113,497
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable to Bank $ 72,977
- ------------------------------------------------------------------------------------------
Payable for foreign currency purchased 42,557
- ------------------------------------------------------------------------------------------
Payable for investments purchased 18,878
- ------------------------------------------------------------------------------------------
Tax withholding liability 603
- ------------------------------------------------------------------------------------------
Accrued expenses 88,569
- ------------------------------------------------------------------------------------------ ---------
Total liabilities 223,584
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 3,880,252 shares of beneficial interest outstanding $ 37,889,913
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 38,782,799
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation
of assets and liabilities in foreign currency, and futures contracts (609,463)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency
transactions, and futures contracts (329,392)
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 45,969
- ----------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 37,889,913
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- -----------------------------------------------------------------------------------------------------
Institutional Service Shares ($34,692,299 / 3,552,816 shares of beneficial interest outstanding) $9.76
- ----------------------------------------------------------------------------------------------------- ------------
Select Shares ($3,197,614 / 327,436 shares of beneficial interest outstanding) $9.77
- ----------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $1,490 and dollar roll interest expense of $18,217) $1,027,728
- -------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $118) 97,698
- ------------------------------------------------------------------------------------------------------- ---------
Total investment income 1,125,426
- -------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------------
Investment advisory fee $ 126,272
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 41,192
- --------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 69,732
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,929
- --------------------------------------------------------------------------------------------
Legal fees 1,242
- --------------------------------------------------------------------------------------------
Fund share registration costs 10,309
- --------------------------------------------------------------------------------------------
Printing and postage 1,347
- --------------------------------------------------------------------------------------------
Insurance premiums 5,265
- --------------------------------------------------------------------------------------------
Taxes 526
- --------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 4,407
- --------------------------------------------------------------------------------------------
Distribution services fee 13,223
- --------------------------------------------------------------------------------------------
Miscellaneous 8,353
- -------------------------------------------------------------------------------------------- ---------
Total expenses 300,797
- --------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 126,272
- ---------------------------------------------------------------------------------
Waiver of distribution services fee 4,407
- ---------------------------------------------------------------------------------
Reimbursement of other operating expenses 44,331 175,010
- --------------------------------------------------------------------------------- --------- ---------
Net expenses 125,787
- ------------------------------------------------------------------------------------------------------- ---------
Net investment income 999,639
- ------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) (311,738)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities in foreign currency, and futures
contracts (609,463)
- ------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts (921,201)
- ------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 78,438
- ------------------------------------------------------------------------------------------------------- ---------
</TABLE>
*For the period from January 18, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------
Net investment income $ 999,639
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures
contracts ($305,808 net loss, as computed for federal tax purposes) (311,738)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures
contracts (609,463)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from operations 78,438
- ---------------------------------------------------------------------------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------
Institutional Service Shares (883,551)
- ----------------------------------------------------------------------------------------
Select Shares (87,664)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from distributions to shareholders (971,215)
- ---------------------------------------------------------------------------------------- ------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 42,977,477
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 228,430
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (4,523,217)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets from Fund share transactions 38,682,690
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets 37,789,913
- ----------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------
Beginning of period 100,000
- ---------------------------------------------------------------------------------------- ------------------------
End of period (including undistributed net investment income of $45,969) $ 37,889,913
- ---------------------------------------------------------------------------------------- ------------------------
</TABLE>
* For the period from January 18, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein are only those of Federated Managed Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The Fund offers
two classes of shares, Institutional Service Shares and Select Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities, bonds, corporate bonds and other fixed income securities are
generally valued at the price provided by an independent pricing service.
Short-term securities with remaining maturities of sixty days or less may
be stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $305,808, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($305,808).
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and
the original futures contract value is reflected in the "daily variation
margin" account. Daily variation margin adjustments, arising from this
"marking to market" process, are recorded by the Fund as unrealized gains
or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended November 30, 1994 the Fund had a realized
gain of $36,351 on futures contracts.
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994, the foreign portion of the portfolio was diversified
with the following industries:
<TABLE>
<S> <C>
Agency 2.0%
Sovereign 6.2
State/Provincial 0.2
Supranational 1.1
</TABLE>
J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
K. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee. Additional information on each
restricted security held at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Freeport Terminal (Malta) 7/19/94 $284,196
</TABLE>
L. RECLASSIFICATION--During the period ended November 30, 1994, the Fund
adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax differences have been reclassified. These differences are due to
differing treatments for foreign currency and futures transactions. Amounts
as of November 30, 1994 have been reclassified to reflect an increase in
paid-in capital of $109, an increase in undistributed net investment income
of $17,545, and a decrease in accumulated net realized gain (loss) of
$17,654. Net investment income, net realized gains, and net assets were not
affected by this change.
M. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
FEDERATED MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED NOVEMBER 30,
<S> <C> <C>
1994*
<CAPTION>
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
<S> <C> <C>
- ------------------------------------------------------------------------------- ------------ -------------
Shares sold 3,801,238 $ 37,969,931
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 21,807 216,633
- -------------------------------------------------------------------------------
Shares redeemed (280,229) (2,787,738)
- ------------------------------------------------------------------------------- ------------ -------------
Net change resulting from Institutional Service
share transactions 3,542,816 $ 35,398,826
- ------------------------------------------------------------------------------- ------------ -------------
</TABLE>
*For the period from January 18, 1994 (start of business) to November 30, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED NOVEMBER 30,
<S> <C> <C>
1994**
<CAPTION>
SELECT SHARES SHARES DOLLARS
<S> <C> <C>
- ------------------------------------------------------------------------------- ------------ -------------
Shares sold 501,463 $ 5,007,546
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,189 11,797
- -------------------------------------------------------------------------------
Shares redeemed (175,216) (1,735,479)
- ------------------------------------------------------------------------------- ------------ -------------
Net change resulting from Select share transactions 327,436 3,283,864
- ------------------------------------------------------------------------------- ------------ -------------
Total net change resulting from Fund share transactions 3,870,252 $ 38,682,690
- ------------------------------------------------------------------------------- ------------ -------------
</TABLE>
**For the period from January 27, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive its fee and reimburse certain other operating
expenses of the Fund. The Adviser can modify or terminate this voluntary waiver
and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors on an annualized basis. The administrative fee received
during the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of the average net
assets of each class of shares for the period. This fee is to obtain certain
personal services for shareholders and to maintain the shareholder accounts. For
the period ended November 30, 1994, Institutional Service Shares did not incur a
shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($37,447) and start-up
administrative service expenses ($39,068) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following March 11,
1994 (date the Fund first became effective). For the period ended November 30,
1994, the Fund paid $2,288 and $2,388, respectively, pursuant to this agreement.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 85,408,559
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 46,927,382
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
MANAGED SERIES TRUST
(Federated Managed Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio of
investments, as of November 30, 1994, and the related statement of operations
and changes in net assets, and the financial highlights (see pages 2 and 27 of
the prospectus) for the period from January 18, 1994 (start of business) to
November 30, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust)
as of November 30, 1994, and the results of its operations, the changes in its
net assets, and its financial highlights for the period from January 18, 1994
(start of business) to November 30, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 17, 1995
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC--Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Managed Income Fund
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
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 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 January 31, 1995
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
56166K206
3122012A-SEL (1/95)
[Logo] [Logo]
Federated Managed Growth Federated Managed
and Income Fund Growth Fund
[Logo]
Lifecycle Investing
MANAGED SERIES TRUST
From Federated Investors
[Logo] [Logo]
Federated Managed Federated Managed
Income Fund Aggressive Growth Fund
Federated Managed Growth and Income Fund
[Logo]
Lifecycle Investing
From Federated Investors
Institutional Service
Shares
Federated Managed Growth and Income Fund
is part of Managed Series Trust,
a lifecycle investing program
from Federated Investors
Other funds available in Managed
Series Trust are Federated Managed Income
Fund, Federated Managed Growth Fund, and
Federated Managed Aggressive Growth Fund
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Asset Allocation 3
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Investment Risks 5
Foreign Bonds 6
Equity Asset Categories 6
Large Company Stocks 6
Utility Stocks 6
Small Company Stocks 6
Investment Risks 6
Foreign Stocks 7
Equity Reserves 7
Acceptable Investments 7
U.S. Treasury and Other U.S. Government
Securities 7
Mortgage-Backed Securities 7
Collateralized Mortgage Obligations
("CMOs") 8
Real Estate Mortgage Investment
Conduits ("REMICs") 8
Characteristics of Mortgage-
Backed Securities 8
Corporate Bonds 9
Equity Securities 9
Foreign Securities 10
Investment Risks 10
Equity Reserves 10
Repurchase Agreements 10
Convertible Sercurities 10
Investing in Securities of
Other Investment Companies 11
Restricted and Illiquid Securities 11
When-Issued and Delayed
Delivery Transactions 11
Lending of Portfolio Securities 11
Foreign Currency Transactions 12
Currency Risks 12
Forward Foreign Currency
Exchange Contracts 12
Options 13
Futures and Options on Futures 13
Risks 14
Portfolio Turnover 14
Investment Limitations 14
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Institutional Service Shares 18
Administration of the Fund 18
Administrative Services 18
Shareholder Services Plan 18
Other Payments to Financial Institutions 18
Custodian 18
Transfer Agent and Dividend
Disbursing Agent 18
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Institutional
Service Shares 19
NET ASSET VALUE 19
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 20
- ------------------------------------------------------
Share Purchases 20
Through a Financial Institution 20
By Wire 20
By Mail 20
Minimum Investment Required 20
What Shares Cost 21
Subaccounting Services 21
Systematic Investment Program 21
Certificates and Confirmations 21
Dividends 21
Capital Gains 22
REDEEMING INSTITUTIONAL SERVICE SHARES 22
- ------------------------------------------------------
Through a Financial Institution 22
Telephone Redemption 22
Written Requests 22
Signatures 23
Receiving Payment 23
Systematic Withdrawal Program 23
Accounts with Low Balances 23
SHAREHOLDER INFORMATION 24
- ------------------------------------------------------
Voting Rights 24
Massachusetts Partnership Law 24
TAX INFORMATION 24
- ------------------------------------------------------
Federal Income Tax 24
Pennsylvania Corporate and
Personal Property Taxes 25
PERFORMANCE INFORMATION 25
- ------------------------------------------------------
OTHER CLASSES OF SHARES 25
- ------------------------------------------------------
Financial Highlights--Select Shares 27
FINANCIAL STATEMENTS 28
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 56
- ------------------------------------------------------
APPENDIX 57
- ------------------------------------------------------
ADDRESSES
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)......................................................................... 0.28%
12b-1 Fee................................................................................................. None
Total Other Expenses...................................................................................... 0.72%
Shareholder Services Fee (after waiver) (2)................................................ 0.00%
Total Institutional Service Shares Operating Expenses (3)........................................ 1.00%
</TABLE>
- ------------
(1) The management fee has been reduced to reflect the 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 services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the table above
are based on expenses expected during the fiscal year ending November 30,
1995. The Total Institutional Service Shares Operating Expenses were 0.88%
for the fiscal year ended November 30, 1994 and would have been 1.47% absent
the voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $10 $32
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund 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."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 56.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.25
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations 0.00
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.15)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.85
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.02%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.88%(a)
- ----------------------------------------------------------------------------------------
Net investment income 5.07%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.59%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $43,793
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 132%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
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 equities. 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 equities. The
equities asset categories are large company stocks, utility stocks, small
company stocks, foreign stocks and equity 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 0-7.5%
Foreign Bonds 0-7.5%
EQUITIES 30-50%
Large Company Stocks 0-50%
Utility Stocks 0-20%
Small Company Stocks 0-7.5%
Foreign Stocks 0-7.5%
Equity Reserves 0-15%
</TABLE>
The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, large
company stocks are judged to be unusually attractive relative to other asset
categories, the allocation for large company stocks may be moved to its upper
limit. At other times, when large company stocks appear to be overvalued, the
commitment may be moved down to a lesser allocation. There is no assurance,
however, that the adviser's attempts to pursue this strategy will result in a
benefit to the Fund.
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 prices of fixed income securities fluctuate
inversely to the direction of interest rates. 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. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.
HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to 7.5 percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.
INVESTMENT RISKS. Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than
higher-rated securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.
FOREIGN BONDS. Foreign bonds are high-quality debt securities of countries
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 countries other than the United
States and subject to the Fund's credit limitations for foreign bonds. The
Fund may invest up to 7.5 percent of its total assets in foreign bonds.
EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
equities will be allocated among the following asset categories within the
ranges specified:
LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 50 percent of its total assets in large
company stocks.
UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 20 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.
SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to 7.5 percent of its total assets in small
company stocks.
INVESTMENT RISKS. Stocks in the small capitalization sector of the
United States equity market have historically been more volatile in
price than larger capitalization stocks, such as those included in the
Standard & Poor's 500 Index. This is because, among other things, small
companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to have
a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting greater volatility, the
stocks of small companies may, to some degree, fluctuate independently
of the stocks of large companies; that is, small company stocks may
decline in price as large company stocks rise in price 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. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of the asset category ranges. The Fund may invest up to
7.5 percent of its total assets in foreign stocks.
EQUITY RESERVES. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments such as commercial paper
rated A-1 by Standard and Poor's Ratings Group, Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. The Fund
may invest up to 15 percent of its total assets in equity reserves.
ACCEPTABLE INVESTMENTS
U.S. TREASURY AND OTHER U.S. GOVERNMENT SECURITIES. The U.S. Treasury and
other U.S. government securities in which the Fund invests are either
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The U.S. government securities in which the Fund may
invest are limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of an 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 or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity,
when the entire principal amount is returned. This is caused by the
need to reinvest at lower interest rates both distributions of
principal generally and significant prepayments which become more
likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed
securities may have less potential for capital appreciation during
periods of declining interest rates than other non-callable,
fixed-income government securities of comparable stated maturities.
However, mortgage-backed securities may experience less pronounced
declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest rates
fall, counter to changes in value experienced by most fixed-income
securities. The Fund's adviser intends to use this characteristic of
interest-only SMBSs to reduce the effects of interest rate changes on
the value of the Fund's portfolio, while continuing to pursue the
Fund's investment objective.
CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:
rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");
unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or
unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.
The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.
EQUITY SECURITIES. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks have
neither fixed maturity dates nor fixed
schedules of promised payments. Utility stocks are common stocks of utility
companies, including water companies, companies that produce, transmit, or
distribute gas and electric energy and those companies that provide
communications facilities, such as telephone and telegraph companies.
Foreign stocks are equity securities of foreign issuers.
FOREIGN SECURITIES. The foreign bonds in which the Fund invests are rated
within the four highest ratings for bonds by Moody's (Aaa, Aa, A or Baa) or
by Standard & Poor's (AAA, AA, A or BBB) or are unrated if determined to be
of equivalent quality by the Fund's adviser.
INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.
EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common
stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and
warrants or a combination of the features of several of these securities.
The investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different investment
objectives. The adviser may treat convertible securities as large company
stocks, small company stocks, or high yield bonds for purposes of the asset
category ranges, depending upon current market conditions, including the
relationship of the then-current price to the conversion price. The
convertible securities in which the Fund invests may be rated "high yield"
or of comparable quality at the time of purchase.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in
the form of cash or U.S. government securities equal to at least 100 percent of
the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
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. The Fund will not
invest more than 7.5% of its total assets in forward foreign currency exchange
contracts.
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. Interest rate
futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract, and the buyer agrees to
take delivery of the instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The Fund may utilize stock index futures to
handle cash flows into and out of the Fund and to potentially reduce
transactional costs.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through
these same client institutions, individual shareholders also have access to
this same level of investment expertise.
Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since the Fund's inception. In
allocating the Fund's assets, Mr. Ritter evaluates the market environment
and economic outlook, utilizing the services of the investment adviser's
economist and strategist. Mr.Ritter joined Federated Investors in 1983 and
has been a Vice President of the Fund's investment adviser since 1992. From
1988 until 1991, Mr. Ritter acted as an Assistant Vice President. Mr.
Ritter is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Chicago and his M.S. in Economics from Carnegie
Mellon University.
The portfolio managers for each of the individual asset categories are as
follows:
Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.
Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the investment adviser from 1989 until 1991, and from 1986 until
1989 he acted as Project Manager in the Product Development Department. Mr.
Balestrino is a Chartered Financial Analyst and received his M.A. in Urban
and Regional Planning from the University of Pittsburgh.
Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 and has been
a Vice President of the Fund's investment adviser since January, 1994.
Prior to this, Mr. Bauer served as an Assistant Vice President of the
Fund's investment adviser. Mr. Bauer was an Assistant Vice President of the
International Banking Division at Pittsburgh National Bank from 1982 until
1989. Mr. Bauer is a Chartered Financial Analyst and received his M.B.A. in
Finance from Pennsylvania State University.
Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category. He has been one of the Fund's portfolio
managers since its inception. Mr. Anderson joined Federated Investors in
1972 and is presently a Senior Vice President of the Fund's investment
adviser. Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Wisconsin.
Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from
the University of Wisconsin.
James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in finance from Carnegie Mellon University.
Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Shares. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments up to 0.25 of 1% of
the average daily net asset value of the Institutional Service Shares to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts ("shareholder services"). The Trust has entered into a Shareholder
Services Agreement with Federated Shareholder Services, a subsidiary of
Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Trust and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Services Plan, financial institutions could be compensated by the
distributor, who could be reimbursed by the adviser, or affiliates thereof, for
providing administrative support services to holders of Shares. These payments
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.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem 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
Services Plan, if any; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; registration fees paid to the Securities and Exchange
Commission and registration fees paid to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Shares; legal fees relating solely to Shares; and Trustees' fees incurred as
a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Institutional Service Shares may exceed that of Select Shares due to the
variance in daily net income
realized by each class. Such variance will reflect only accrued net income to
which the shareholders of a particular class are entitled.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased through a financial institution which has a
sales agreement with the distributor or by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish an account will be taken over the telephone. The
Fund reserves the right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Growth and Income Fund--Institutional Service Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Wire Order Number; Nominee or Institution Name; and ABA Number
011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Growth and Income Fund--Institutional Service Shares to Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8602,
Boston, Massachusetts 02266-8602. Orders by mail are considered received after
payment by check is converted by State Street Bank into federal funds. This is
normally the next business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
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. As of January 11, 1995, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 111,762.445 Select Shares (28.572%) of Federated Managed
Growth and Income Fund, and therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
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 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 generally
exceed that of Select Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Accountants on page 56.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.21
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations (0.04)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.83
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** (0.40%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.64%(a)
- ----------------------------------------------------------------------------------------
Net investment income 4.33%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.84%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,697
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 132%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
FEDERATED MANAGED GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCK--27.7%*
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--13.0%
----------------------------------------------------------------------------------
BASIC INDUSTRY--1.0%
----------------------------------------------------------------------------------
1,600 Eastman Chemical Co. $ 75,400
----------------------------------------------------------------------------------
2,600 Lubrizol Corp. 81,900
----------------------------------------------------------------------------------
3,500 Phelps Dodge Corp. 200,375
----------------------------------------------------------------------------------
5,500 Praxair, Inc. 111,375
---------------------------------------------------------------------------------- -------------
Total 469,050
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--1.1%
----------------------------------------------------------------------------------
2,000 Chrysler Corp. 96,750
----------------------------------------------------------------------------------
2,800 Eastman Kodak Co. 127,750
----------------------------------------------------------------------------------
4,000 Ford Motor Co. 108,500
----------------------------------------------------------------------------------
7,100 Mattel, Inc. 189,925
---------------------------------------------------------------------------------- -------------
Total 522,925
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.0%
----------------------------------------------------------------------------------
1,700 Avon Products, Inc. 105,187
----------------------------------------------------------------------------------
2,800 Philip Morris Cos., Inc. 167,300
----------------------------------------------------------------------------------
3,500 Reebok International, Ltd. 134,313
----------------------------------------------------------------------------------
12,500 RJR Nabisco Holdings, Conv. Pfd., Series C 84,375
---------------------------------------------------------------------------------- -------------
Total 491,175
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.7%
----------------------------------------------------------------------------------
5,000 American Stores Co. 131,875
----------------------------------------------------------------------------------
3,700 Sears, Roebuck & Co. 174,825
---------------------------------------------------------------------------------- -------------
Total 306,700
---------------------------------------------------------------------------------- -------------
ENERGY--1.4%
----------------------------------------------------------------------------------
4,600 Baker Hughes, Inc. 82,800
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
ENERGY--CONTINUED
----------------------------------------------------------------------------------
3,700 Chevron Corp. $ 161,412
----------------------------------------------------------------------------------
2,000 Mapco, Inc. 100,250
----------------------------------------------------------------------------------
2,500 Texaco, Inc. 155,313
----------------------------------------------------------------------------------
6,000 USX Marathon Group 108,000
----------------------------------------------------------------------------------
1,600 (a)Western Atlas, Inc. 69,800
---------------------------------------------------------------------------------- -------------
Total 677,575
---------------------------------------------------------------------------------- -------------
FINANCE--2.3%
----------------------------------------------------------------------------------
2,000 AMLI Residential Properties Trust, REIT 36,750
----------------------------------------------------------------------------------
1,800 Bankers Trust of New York Corp. 106,650
----------------------------------------------------------------------------------
3,400 Citicorp 141,525
----------------------------------------------------------------------------------
2,300 Dean Witter, Discover & Co. 80,500
----------------------------------------------------------------------------------
1,300 Federal National Mortgage Association 92,463
----------------------------------------------------------------------------------
3,648 Mellon Bank Corp. 120,840
----------------------------------------------------------------------------------
4,200 PNC Financial Corp. 87,150
----------------------------------------------------------------------------------
1,700 Providian Corp. 51,425
----------------------------------------------------------------------------------
4,200 Ryder Systems, Inc. 90,825
----------------------------------------------------------------------------------
2,300 Transamerica Corp. 108,963
----------------------------------------------------------------------------------
4,700 Travelers, Inc. 154,513
---------------------------------------------------------------------------------- -------------
Total 1,071,604
---------------------------------------------------------------------------------- -------------
HEALTHCARE--1.1%
----------------------------------------------------------------------------------
2,600 American Home Products Corp. 169,325
----------------------------------------------------------------------------------
2,300 Becton, Dickinson & Co. 108,675
----------------------------------------------------------------------------------
2,300 Bristol-Myers Squibb Co. 132,825
----------------------------------------------------------------------------------
3,000 U.S. Healthcare, Inc. 134,250
---------------------------------------------------------------------------------- -------------
Total 545,075
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--1.5%
----------------------------------------------------------------------------------
1,500 Caterpillar, Inc. $ 81,000
----------------------------------------------------------------------------------
900 Deere & Co. 57,825
----------------------------------------------------------------------------------
2,600 (a)FMC Corp. 151,450
----------------------------------------------------------------------------------
2,100 General Electric Co. 96,600
----------------------------------------------------------------------------------
2,100 (a)Litton Industries, Inc. 71,663
----------------------------------------------------------------------------------
1,100 Loews Corp. 95,013
----------------------------------------------------------------------------------
3,200 Textron, Inc. 150,400
---------------------------------------------------------------------------------- -------------
Total 703,951
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--1.8%
----------------------------------------------------------------------------------
4,800 General Motors Corp., Class E 176,400
----------------------------------------------------------------------------------
1,900 Hewlett-Packard Co. 186,200
----------------------------------------------------------------------------------
1,000 International Business Machines Corp. 70,750
----------------------------------------------------------------------------------
3,400 Martin-Marietta Corp. 147,475
----------------------------------------------------------------------------------
2,600 Raytheon Co. 163,475
----------------------------------------------------------------------------------
3,900 Rockwell International Corp. 132,113
---------------------------------------------------------------------------------- -------------
Total 876,413
---------------------------------------------------------------------------------- -------------
UTILITIES--1.1%+
----------------------------------------------------------------------------------
3,500 AT&T Corp. 171,938
----------------------------------------------------------------------------------
800 British Telecommunications PLC, ADR 47,500
----------------------------------------------------------------------------------
1,900 Duke Power Co. 77,425
----------------------------------------------------------------------------------
1,900 Enron Corp. 51,300
----------------------------------------------------------------------------------
4,400 MCI Communications Corp. 85,800
----------------------------------------------------------------------------------
2,100 Telefonos De Mexico, Class L ADR 111,300
---------------------------------------------------------------------------------- -------------
Total 545,263
---------------------------------------------------------------------------------- -------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $6,436,440) 6,209,731
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--2.1%**
----------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
----------------------------------------------------------------------------------
400 (a)Acme Metals, Inc. $ 6,500
----------------------------------------------------------------------------------
600 (a)Magma Copper Co. 9,675
----------------------------------------------------------------------------------
300 Texas Industries, Inc. 9,938
---------------------------------------------------------------------------------- -------------
Total 26,113
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--0.1%
----------------------------------------------------------------------------------
630 Anthony Industries, Inc. 10,395
----------------------------------------------------------------------------------
500 Arctco, Inc. 10,000
----------------------------------------------------------------------------------
300 (a)Champion Enterprises, Inc. 8,512
----------------------------------------------------------------------------------
200 Polaris Industries Partners, L.P. 8,875
----------------------------------------------------------------------------------
300 (a)Scientific Games Holding Corp. 12,825
----------------------------------------------------------------------------------
600 SPX Corp. 9,300
----------------------------------------------------------------------------------
300 Toro Co. 8,400
---------------------------------------------------------------------------------- -------------
Total 68,307
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--0.1%
----------------------------------------------------------------------------------
400 (a)Cyrk International, Inc. 14,800
----------------------------------------------------------------------------------
400 Haggar Corp. 8,600
----------------------------------------------------------------------------------
400 Hudson Foods, Inc., Class A 9,050
---------------------------------------------------------------------------------- -------------
Total 32,450
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.3%
----------------------------------------------------------------------------------
400 (a)APS Holding Corp., Class A 10,125
----------------------------------------------------------------------------------
300 (a)Carmike Cinemas, Inc. 6,750
----------------------------------------------------------------------------------
300 (a)Devon Group, Inc. 7,650
----------------------------------------------------------------------------------
300 Fair Isaac & Co., Inc. 12,637
----------------------------------------------------------------------------------
500 La Quinta Inns, Inc. 10,625
----------------------------------------------------------------------------------
300 (a)Landstar System, Inc. 7,650
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
CONSUMER SERVICES--CONTINUED
----------------------------------------------------------------------------------
400 Media General, Inc., Class A $ 11,650
----------------------------------------------------------------------------------
1,200 (a)Prime Hospitality Corp. 9,000
----------------------------------------------------------------------------------
600 (a)Revco D. S., Inc. 13,500
----------------------------------------------------------------------------------
400 Strawbridge & Clothier, Class A 9,200
----------------------------------------------------------------------------------
600 (a)Super Rite Foods Holdings Corp. 6,900
----------------------------------------------------------------------------------
800 (a)The Good Guys, Inc. 9,600
----------------------------------------------------------------------------------
1,000 (a)Vitalink Pharmacy Services, Inc. 11,500
---------------------------------------------------------------------------------- -------------
Total 126,787
---------------------------------------------------------------------------------- -------------
ENERGY--0.1%
----------------------------------------------------------------------------------
600 (a)Dekalb Energy Co., Class B 9,000
----------------------------------------------------------------------------------
300 Diamond Shamrock, Inc. 7,725
----------------------------------------------------------------------------------
1,500 (a)Numac Energy, Inc. 8,813
----------------------------------------------------------------------------------
700 Southwest Gas Corp. 10,675
----------------------------------------------------------------------------------
800 (a)Tide West Oil Co. 8,800
----------------------------------------------------------------------------------
2,100 (a)Wainoco Oil Corp. 10,238
---------------------------------------------------------------------------------- -------------
Total 55,251
---------------------------------------------------------------------------------- -------------
FINANCIAL--0.5%
----------------------------------------------------------------------------------
600 (a)Acceptance Insurance Cos., Inc. 8,625
----------------------------------------------------------------------------------
600 Allied Capital Commercial 9,975
----------------------------------------------------------------------------------
400 Allied Group, Inc. 10,200
----------------------------------------------------------------------------------
400 Centura Banks, Inc. 8,600
----------------------------------------------------------------------------------
900 City National Corp. 8,550
----------------------------------------------------------------------------------
500 Comdisco, Inc. 10,687
----------------------------------------------------------------------------------
500 Commerce Bancorp, Inc. 9,000
----------------------------------------------------------------------------------
400 Fremont General Corp. 9,250
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
FINANCIAL--CONTINUED
----------------------------------------------------------------------------------
300 GFC Financial Corp. $ 8,850
----------------------------------------------------------------------------------
1,200 Hibernia Corp., Class A 9,450
----------------------------------------------------------------------------------
800 Hilb Rogal & Hamilton Co. 9,000
----------------------------------------------------------------------------------
500 Money Stores, Inc. 8,875
----------------------------------------------------------------------------------
400 (a)Mutual Assurance 11,200
----------------------------------------------------------------------------------
600 North Fork Bancorp, Inc. 8,400
----------------------------------------------------------------------------------
300 PHH Corp. 10,538
----------------------------------------------------------------------------------
300 Protective Life Corp. 13,050
----------------------------------------------------------------------------------
300 Provident Bancorp, Inc. 9,075
----------------------------------------------------------------------------------
400 Southern National Corp. 7,350
----------------------------------------------------------------------------------
300 TCF Financial Corp. 11,063
----------------------------------------------------------------------------------
500 Uslico Corp. 10,000
----------------------------------------------------------------------------------
500 Washington National Corp. 10,000
----------------------------------------------------------------------------------
600 Webb (Del) Corp. 9,900
----------------------------------------------------------------------------------
300 WestAmerica Bancorporation 9,150
---------------------------------------------------------------------------------- -------------
Total 220,788
---------------------------------------------------------------------------------- -------------
HEALTHCARE--0.2%
----------------------------------------------------------------------------------
500 (a)Advantage Health Corp. 14,750
----------------------------------------------------------------------------------
400 (a)Bio Rad Laboratories, Inc., Class A 11,100
----------------------------------------------------------------------------------
400 (a)Genesis Health Ventures, Inc. 11,300
----------------------------------------------------------------------------------
500 ICN Pharmaceuticals 11,188
----------------------------------------------------------------------------------
400 (a)Sierra Health Services, Inc. 12,300
----------------------------------------------------------------------------------
400 (a)Universal Health Services, Inc., Class B 10,000
----------------------------------------------------------------------------------
400 West, Inc. 10,450
---------------------------------------------------------------------------------- -------------
Total 81,088
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--0.3%
----------------------------------------------------------------------------------
200 AGCO Corp. $ 9,125
----------------------------------------------------------------------------------
300 Blount, Inc., Class A 13,425
----------------------------------------------------------------------------------
400 Borden Chemicals & Plastics, L.P. 8,750
----------------------------------------------------------------------------------
400 Borg-Warner Automotive 9,400
----------------------------------------------------------------------------------
600 Brush Wellman, Inc. 9,075
----------------------------------------------------------------------------------
300 Butler Manufacturing Co. 10,200
----------------------------------------------------------------------------------
500 Castle (A.M.) & Co. 6,500
----------------------------------------------------------------------------------
550 Commercial Intertech Corp. 8,800
----------------------------------------------------------------------------------
500 (a)Galey & Lord, Inc. 8,000
----------------------------------------------------------------------------------
300 Pittway Corp., Class A 11,588
----------------------------------------------------------------------------------
600 (a)Smith International, Inc. 8,100
----------------------------------------------------------------------------------
1,000 Terra Industries, Inc. 10,875
----------------------------------------------------------------------------------
500 (a)Western Waste Industries 7,625
----------------------------------------------------------------------------------
400 (a)Wolverine Tube, Inc. 9,600
---------------------------------------------------------------------------------- -------------
Total 131,063
---------------------------------------------------------------------------------- -------------
RETAIL TRADE--0.0%
----------------------------------------------------------------------------------
500 Bradlees, Inc. 6,875
----------------------------------------------------------------------------------
300 (a)Eckerd Corp. 8,512
----------------------------------------------------------------------------------
500 Wolohan Lumber Co. 7,750
---------------------------------------------------------------------------------- -------------
Total 23,137
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--0.3%
----------------------------------------------------------------------------------
550 (a)Bell Industries, Inc. 12,100
----------------------------------------------------------------------------------
400 (a)Electronics for Imaging, Inc. 9,400
----------------------------------------------------------------------------------
500 Energen Corp. 10,000
----------------------------------------------------------------------------------
600 (a)Frame Technology Corp. 9,000
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
----------------------------------------------------------------------------------
500 (a)International Rectifier Corp. $ 10,875
----------------------------------------------------------------------------------
500 (a)Kemet Corp. 10,813
----------------------------------------------------------------------------------
600 Methode Electronics, Inc., Class A 8,400
----------------------------------------------------------------------------------
600 Pioneer Standard Electronics, Inc. 9,600
----------------------------------------------------------------------------------
500 (a)SCI Systems, Inc. 9,250
----------------------------------------------------------------------------------
500 (a)Silicon Valley Group, Inc. 10,063
----------------------------------------------------------------------------------
400 (a)Tech-Sym Corp. 8,750
----------------------------------------------------------------------------------
300 Tektronix, Inc. 11,213
----------------------------------------------------------------------------------
400 (a)Tencor Instruments 17,750
----------------------------------------------------------------------------------
300 Watkins Johnson Co. 9,900
----------------------------------------------------------------------------------
600 (a)Western Digital Corp. 11,100
---------------------------------------------------------------------------------- -------------
Total 158,214
---------------------------------------------------------------------------------- -------------
TRANSPORATION--0.0%
----------------------------------------------------------------------------------
600 Alaska Air Group, Inc. 9,825
----------------------------------------------------------------------------------
300 (a)Wisconsin Central Transportation Corp. 12,450
---------------------------------------------------------------------------------- -------------
Total 22,275
---------------------------------------------------------------------------------- -------------
UTILITIES--0.1%+
----------------------------------------------------------------------------------
300 Buckeye Partners 10,012
----------------------------------------------------------------------------------
400 CIPSCO, Inc. 10,700
----------------------------------------------------------------------------------
400 Teppco Partners, L.P. 10,600
---------------------------------------------------------------------------------- -------------
Total 31,312
---------------------------------------------------------------------------------- -------------
TOTAL SMALL COMPANY (IDENTIFIED COST, $1,010,255) 976,785
---------------------------------------------------------------------------------- -------------
UTILITY--9.7%+
----------------------------------------------------------------------------------
UTILITIES--9.7%
----------------------------------------------------------------------------------
7,000 Ameritech Corp. 276,500
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
6,400 AT&T Corp. $ 314,400
----------------------------------------------------------------------------------
4,100 Baltimore Gas & Electric Co. 92,762
----------------------------------------------------------------------------------
5,400 Bell Atlantic Corp. 270,675
----------------------------------------------------------------------------------
5,100 BellSouth Corp. 264,562
----------------------------------------------------------------------------------
8,421 Cinergy Corp. 187,367
----------------------------------------------------------------------------------
4,700 CMS Energy Corp. 104,575
----------------------------------------------------------------------------------
2,100 Consolidated Natural Gas Co. 73,500
----------------------------------------------------------------------------------
5,000 DPL, Inc. 101,875
----------------------------------------------------------------------------------
3,400 DQE, Inc. 102,850
----------------------------------------------------------------------------------
2,500 Duke Power Co. 101,875
----------------------------------------------------------------------------------
2,400 Enron Corp. 64,800
----------------------------------------------------------------------------------
3,400 Florida Progress Corp. 103,275
----------------------------------------------------------------------------------
3,200 FPL Group, Inc. 113,200
----------------------------------------------------------------------------------
8,800 GTE Corp. 269,500
----------------------------------------------------------------------------------
4,100 General Public Utilities Corp. 105,575
----------------------------------------------------------------------------------
4,000 MCN Corp. 72,500
----------------------------------------------------------------------------------
3,800 NIPSCO Industries, Inc. 111,150
----------------------------------------------------------------------------------
6,700 NYNEX Corp. 252,088
----------------------------------------------------------------------------------
3,300 Pacific Enterprises 70,538
----------------------------------------------------------------------------------
6,500 Pacificorp 120,250
----------------------------------------------------------------------------------
3,900 Peco Energy Co. 94,088
----------------------------------------------------------------------------------
5,400 Pinnacle West Capital Corp. 104,625
----------------------------------------------------------------------------------
2,700 Sonat, Inc. 75,938
----------------------------------------------------------------------------------
5,000 Southern Co. 103,750
----------------------------------------------------------------------------------
7,900 Southern New England Telecommunications Corp. 260,700
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
6,800 Southwestern Bell Corp. $ 281,350
----------------------------------------------------------------------------------
3,500 UGI Corp. 66,063
----------------------------------------------------------------------------------
7,400 U.S. West, Inc. 260,850
----------------------------------------------------------------------------------
3,500 Utilicorp United, Inc. 90,125
----------------------------------------------------------------------------------
3,500 Western Resources, Inc. 98,438
---------------------------------------------------------------------------------- -------------
TOTAL UTILITIES (IDENTIFIED COST, $4,675,517) 4,609,744
---------------------------------------------------------------------------------- -------------
FOREIGN EQUITY--2.5%
----------------------------------------------------------------------------------
AUSTRALIA--0.1%
----------------------------------------------------------------------------------
1,000 Broken Hill Proprietary Co. 14,356
----------------------------------------------------------------------------------
6,400 Publishing & Broadcasting 18,051
---------------------------------------------------------------------------------- -------------
Total 32,407
---------------------------------------------------------------------------------- -------------
BELGIUM--0.0%
----------------------------------------------------------------------------------
300 Delhaize-Le Lion 12,054
---------------------------------------------------------------------------------- -------------
FINLAND--0.0%
----------------------------------------------------------------------------------
200 Kone Corp. 'B' 21,215
---------------------------------------------------------------------------------- -------------
FRANCE--0.1%
----------------------------------------------------------------------------------
400 Elf Aquitaine 27,361
---------------------------------------------------------------------------------- -------------
GERMANY--0.1%
----------------------------------------------------------------------------------
50 Daimler Benz AG 23,631
---------------------------------------------------------------------------------- -------------
HONG KONG--0.1%
----------------------------------------------------------------------------------
5,400 Cheung Kong Holdings 22,483
----------------------------------------------------------------------------------
1,800 HSBC Holdings PLC 19,900
---------------------------------------------------------------------------------- -------------
Total 42,383
---------------------------------------------------------------------------------- -------------
ITALY--0.0%
----------------------------------------------------------------------------------
500 Assicurazioni Generali 11,541
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
JAPAN--1.3%
----------------------------------------------------------------------------------
2,000 Asahi Bank, Ltd. $ 23,036
----------------------------------------------------------------------------------
1,000 Bank of Tokyo, Ltd., Tokyo 14,953
----------------------------------------------------------------------------------
1,000 Dai-Ichi Kangyo Bank, Ltd., Tokyo 17,782
----------------------------------------------------------------------------------
3,000 Fuji Bank, Ltd., Tokyo 61,834
----------------------------------------------------------------------------------
2,000 Hitachi, Ltd. 19,742
----------------------------------------------------------------------------------
2,000 Industrial Bank of Japan, Ltd., Tokyo 55,570
----------------------------------------------------------------------------------
1,000 Ito Yokado Co. 53,044
----------------------------------------------------------------------------------
4,000 Kawasaki Heavy Industries 18,348
----------------------------------------------------------------------------------
3,000 Kirin Brewery Co., Ltd 31,826
----------------------------------------------------------------------------------
1,000 Matsushita Electric Industrial Co. 15,458
----------------------------------------------------------------------------------
1,000 Mitsubishi Bank 22,329
----------------------------------------------------------------------------------
2,000 Mitsubishi Corp. 26,673
----------------------------------------------------------------------------------
4,000 Mitsubishi Heavy Industries 29,664
----------------------------------------------------------------------------------
1,000 Mitsubishi Trust & Banking 14,145
----------------------------------------------------------------------------------
3,000 Mitsukoshi, Ltd. 28,674
----------------------------------------------------------------------------------
1,000 Nomura Securities, Co., Ltd. 19,601
----------------------------------------------------------------------------------
1,000 Sakura Bank, Ltd., Tokyo 13,236
----------------------------------------------------------------------------------
1,000 Sumitomo Bank, Ltd., Osaka 17,883
----------------------------------------------------------------------------------
6,000 Sumitomo Heavy Industries 22,976
----------------------------------------------------------------------------------
2,000 Takeda Chemical Industries 24,855
----------------------------------------------------------------------------------
3,000 Tokio Marine & Fire 34,554
----------------------------------------------------------------------------------
1,000 Tokyo Electric Power 28,290
----------------------------------------------------------------------------------
1,000 Toshiba Corp. 6,992
----------------------------------------------------------------------------------
1,000 Toyota Motor Corp. 21,319
---------------------------------------------------------------------------------- -------------
Total 622,784
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
MALAYSIA--0.0%
----------------------------------------------------------------------------------
5,000 Tenaga Nasional Berhad $ 21,521
---------------------------------------------------------------------------------- -------------
NETHERLANDS--0.1%
----------------------------------------------------------------------------------
500 Philips Electronics 15,122
----------------------------------------------------------------------------------
200 Royal Dutch Petroleum Co. 21,725
----------------------------------------------------------------------------------
200 Unilever NV-Cert 22,331
---------------------------------------------------------------------------------- -------------
Total 59,178
---------------------------------------------------------------------------------- -------------
SINGAPORE--0.0%
----------------------------------------------------------------------------------
10,000 Singapore Telecommunications, Ltd. 19,939
---------------------------------------------------------------------------------- -------------
SPAIN--0.1%
----------------------------------------------------------------------------------
500 Empresa Nac de Electridad 22,621
---------------------------------------------------------------------------------- -------------
SWEDEN--0.0%
----------------------------------------------------------------------------------
400 Ericsson LM B-F 22,024
---------------------------------------------------------------------------------- -------------
SWITZERLAND--0.1%
----------------------------------------------------------------------------------
50 Sandoz AG 25,668
---------------------------------------------------------------------------------- -------------
UNITED KINGDOM--0.5%
----------------------------------------------------------------------------------
7,000 British Petroleum PLC 46,586
----------------------------------------------------------------------------------
7,000 Coats Viyella PLC 22,581
----------------------------------------------------------------------------------
3,000 Eastern Electricity PLC 37,700
----------------------------------------------------------------------------------
3,000 Midlands Electricity PLC 36,267
----------------------------------------------------------------------------------
2,000 RMC Group PLC 31,271
----------------------------------------------------------------------------------
4,000 Williams Holdings PLC 22,017
----------------------------------------------------------------------------------
2,000 Wolseley PLC 23,959
---------------------------------------------------------------------------------- -------------
Total 220,381
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $1,218,459) 1,184,708
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CLOSED-END REGISTERED INVESTMENT COMPANIES--0.4%
----------------------------------------------------------------------------------
5,400 France Growth Fund, Inc. $ 53,325
----------------------------------------------------------------------------------
5,700 Germany Fund, Inc. 64,838
----------------------------------------------------------------------------------
1,500 Italy Fund, Inc. 12,188
----------------------------------------------------------------------------------
2,000 Swiss Helvetia Fund, Inc. 37,250
---------------------------------------------------------------------------------- -------------
TOTAL CLOSED-END REGISTERED INVESTMENT COMPANIES
(IDENTIFIED COST, $181,577) 167,601
---------------------------------------------------------------------------------- -------------
TOTAL STOCKS (IDENTIFIED COST, $13,522,248) 13,148,569
---------------------------------------------------------------------------------- -------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
BONDS--64.1%
- ---------------------------------------------------------------------------------------------------
TREASURY--30.3%
----------------------------------------------------------------------------------
$ 1,000,000 United States Treasury Note, 6.875%, 7/31/99 965,340
----------------------------------------------------------------------------------
13,600,000 United States Treasury Note, 7.50%, 10/31/99 13,442,240
---------------------------------------------------------------------------------- -------------
TOTAL TREASURY (IDENTIFIED COST, $14,494,313) 14,407,580
---------------------------------------------------------------------------------- -------------
MORTAGE BACKED SECURITIES--17.3%
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--17.3%
----------------------------------------------------------------------------------
264,034 Federal Home Loan Mortgage Corporation, Pool D54720, 7.00%,
7/1/2024 238,039
----------------------------------------------------------------------------------
402,580 Federal Home Loan Mortgage Corporation, Pool D54761, 8.50%,
7/1/2024 396,034
----------------------------------------------------------------------------------
397,536 Federal Home Loan Mortgage Corporation, Pool C80177, 7.50%,
5/1/2024 370,822
----------------------------------------------------------------------------------
403,417 Federal Home Loan Mortgage Corporation, Pool E20105, 7.00%,
4/1/2009 379,079
----------------------------------------------------------------------------------
769,043 Federal Home Loan Mortgage Corporation, Pool E58069, 7.00%,
4/1/2009 722,647
----------------------------------------------------------------------------------
522,638 Federal National Mortgage Association, Pool 250083, 7.00%, 7/1/2024 472,982
----------------------------------------------------------------------------------
$ 1,276,132 Federal National Mortgage Association, Pool 250197, 9.50%, 10/1/2024 $ 1,316,394
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
MORTAGE BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
----------------------------------------------------------------------------------
246,076 Federal National Mortgage Association, Pool 278507, 7.50%, 6/1/2009 236,383
----------------------------------------------------------------------------------
515,100 Federal National Mortgage Association, Pool 303073, 8.00%, 11/1/2024 493,682
----------------------------------------------------------------------------------
241,536 Government National Mortgage Association, Pool 379445, 7.50%,
5/15/2024 222,662
----------------------------------------------------------------------------------
1,105,000 Government National Mortgage Association, Pool 380656, 8.00%,
11/15/2024 1,051,463
----------------------------------------------------------------------------------
1,834,775 Government National Mortgage Association, Pool 386246, 8.50%,
10/15/2024 1,801,492
----------------------------------------------------------------------------------
499,664 Government National Mortgage Association, Pool 393201, 8.50%,
9/15/2024 490,600
---------------------------------------------------------------------------------- -------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $8,418,098) 8,192,279
---------------------------------------------------------------------------------- -------------
HIGH YIELD--2.3%
----------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.3%
----------------------------------------------------------------------------------
125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 125,938
---------------------------------------------------------------------------------- -------------
BUSINESS EQUIPMENT & SERVICES--0.3%
----------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 141,750
---------------------------------------------------------------------------------- -------------
CABLE T.V.--0.2%
----------------------------------------------------------------------------------
125,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 112,500
---------------------------------------------------------------------------------- -------------
CHEMICALS & PLASTICS--0.4%
----------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 120,625
----------------------------------------------------------------------------------
100,000 G-I Holdings, Sr. Disc. Note, 10/1/98 60,750
---------------------------------------------------------------------------------- -------------
Total 181,375
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.2%
----------------------------------------------------------------------------------
125,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 108,438
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
HIGH YIELD--CONTINUED
----------------------------------------------------------------------------------
FOOD SERVICES--0.2%
----------------------------------------------------------------------------------
$ 125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 $ 114,688
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.3%
----------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 115,000
---------------------------------------------------------------------------------- -------------
RETAILERS--0.3%
----------------------------------------------------------------------------------
125,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 124,375
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--0.1%
----------------------------------------------------------------------------------
125,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 54,063
---------------------------------------------------------------------------------- -------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,143,427) 1,078,127
---------------------------------------------------------------------------------- -------------
INVESTMENT GRADE--7.2%
----------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.7%
----------------------------------------------------------------------------------
325,000 Grumman Corp., Deb., 10.375%, 1/1/99 334,857
---------------------------------------------------------------------------------- -------------
BANKING--0.6%
----------------------------------------------------------------------------------
300,000 Chase Manhattan Corp., Medium Term Note, 9.00%, 2/24/99 307,059
---------------------------------------------------------------------------------- -------------
CONGLOMERATES--0.6%
----------------------------------------------------------------------------------
250,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 265,000
---------------------------------------------------------------------------------- -------------
FINANCE-AUTOMOTIVE--0.3%
----------------------------------------------------------------------------------
150,000 GMAC, Medium Term Note, 7.25%, 4/30/99 143,586
---------------------------------------------------------------------------------- -------------
FINANCE-RETAIL--0.3%
----------------------------------------------------------------------------------
150,000 Household Finance Corp., Deb., 6.45%, 2/1/2009 122,787
---------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--0.6%
----------------------------------------------------------------------------------
300,000 Merrill Lynch & Co., Inc., Medium Term Note, 7.25%, 6/14/2004 291,861
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.4%
----------------------------------------------------------------------------------
200,000 Hook-Superx, Sr. Note, 10.125%, 6/1/2002 205,250
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.4%
----------------------------------------------------------------------------------
200,000 Georgia-Pacific Corp., Deb., 10.125%, 5/15/2000 203,006
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
INVESTMENT GRADE--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--0.4%
----------------------------------------------------------------------------------
$ 200,000 Tennessee Valley Authority, 7.318%, 5/31/99 $ 193,642
---------------------------------------------------------------------------------- -------------
INSURANCE--0.5%
----------------------------------------------------------------------------------
250,000 Sunamerica, Inc., Medium Term Note, 6.58%, 1/15/2002 223,218
---------------------------------------------------------------------------------- -------------
PRINTING & PUBLISHING--0.5%
----------------------------------------------------------------------------------
250,000 News America Holdings, Sr. Note, 7.50%, 3/1/2000 235,450
---------------------------------------------------------------------------------- -------------
SOVEREIGN GOVERNMENT--1.1%
----------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2004 272,304
----------------------------------------------------------------------------------
141,000 Ontario Hydro, Local Gov't. Guarantee, 9.25%, 5/1/95 142,674
----------------------------------------------------------------------------------
100,000 Quebec Hydro, Deb., 7.375%, 2/1/2003 93,260
---------------------------------------------------------------------------------- -------------
Total 508,238
---------------------------------------------------------------------------------- -------------
UTILITIES--0.8%
----------------------------------------------------------------------------------
200,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 179,778
----------------------------------------------------------------------------------
200,000 Gulf States Utilities, FMB, 6.75%, 10/1/98 189,168
---------------------------------------------------------------------------------- -------------
Total 368,946
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENT GRADE (IDENTIFIED COST, $3,495,243) 3,402,900
---------------------------------------------------------------------------------- -------------
OTHER CORPORATE--0.2%
----------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.2%
----------------------------------------------------------------------------------
80,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $108,600) 108,838
---------------------------------------------------------------------------------- -------------
FOREIGN
CURRENCY
PAR AMOUNT
- ---------------
----------------------------------------------------------------------------------
FOREIGN--6.8%
----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.2%
----------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,080
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
ONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
BELGIAN FRANC--0.2%
----------------------------------------------------------------------------------
3,200,000 Belgian Govt., Foreign Gov't. Guarantee, 10.00%, 4/6/96 $ 103,479
---------------------------------------------------------------------------------- -------------
CANADIAN DOLLAR--0.4%
----------------------------------------------------------------------------------
250,000 Ontario Hydro, 9.00%, 6/24/2002 177,736
---------------------------------------------------------------------------------- -------------
DEUTSCHE MARK--1.1%
----------------------------------------------------------------------------------
325,000 Bundesobligation, 8.875%, 1/22/96 213,557
----------------------------------------------------------------------------------
300,000 Bundesobligationen, Deb., 7.25%, 10/20/97 193,787
----------------------------------------------------------------------------------
200,000 Treuhandanstalt, 7.75%, 10/1/2002 129,217
---------------------------------------------------------------------------------- -------------
Total 536,561
---------------------------------------------------------------------------------- -------------
FRENCH FRANC--0.8%
----------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 164,090
----------------------------------------------------------------------------------
800,000 France O.A.T., 9.80%, 1/30/96 154,036
----------------------------------------------------------------------------------
400,000 KFW International Finance, 7.00%, 5/12/2000 72,082
---------------------------------------------------------------------------------- -------------
Total 390,208
---------------------------------------------------------------------------------- -------------
ITALIAN LIRA--0.4%
----------------------------------------------------------------------------------
305,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 191,052
---------------------------------------------------------------------------------- -------------
JAPANESE YEN--2.2%
----------------------------------------------------------------------------------
30,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 343,932
----------------------------------------------------------------------------------
63,000,000 KFW International Finance, Gtd. Note, 6.00%, 11/29/99 684,262
---------------------------------------------------------------------------------- -------------
Total 1,028,194
---------------------------------------------------------------------------------- -------------
NETHERLANDS GUILDER--0.4%
----------------------------------------------------------------------------------
350,000 Netherlands Government, 6.00%, 4/15/95 199,176
---------------------------------------------------------------------------------- -------------
SPANISH PESETA--0.3%
----------------------------------------------------------------------------------
18,000,000 Spain (Government), 8.30%, 12/15/98 126,133
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
ONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
UNITED KINGDOM POUND--0.8%
----------------------------------------------------------------------------------
250,000 UK Conversion, 9.00%, 3/3/2000 $ 400,901
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN (IDENTIFIED COST, $3,234,960) 3,235,520
---------------------------------------------------------------------------------- -------------
TOTAL BONDS (IDENTIFIED COST, $30,894,641) 30,425,244
---------------------------------------------------------------------------------- -------------
PRINCIPAL
AMOUNT
- --------------- ----------------------------------------------------------------------------------
CASH EQUIVALENTS--7.5%**
- ---------------------------------------------------------------------------------------------------
$ 750,000 U.S. Treasury Bill, 1/26/95 (IDENTIFIED COST, $744,383) 744,053
----------------------------------------------------------------------------------
2,810,000 ***J.P. Morgan Securities, Inc., 5.77%, dated 11/28/94, due 12/5/94
(at amortized cost) 2,810,000
---------------------------------------------------------------------------------- -------------
TOTAL CASH EQUIVALENTS 3,554,053
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $47,971,272) $ 47,127,866+
---------------------------------------------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
REIT -- Real Estate Investment Trust
(a) Non-income producing.
(b) Restricted Securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, this security amounted to
$272,304 which represents .6% of net assets.
The cost for federal income tax purposes amounts to $48,026,745. The net
unrealized depreciation on a federal tax cost basis amounts to $898,879, and
is comprised of $377,654 appreciation and $1,276,533 depreciation at November
30, 1994.
The Fund's overall exposure to utility stocks is 10.9%
* The Fund's overall exposure to stocks is 30.2%, after adjustment for the use
of S&P 500 and
S&P Midcap futures contracts.
** The Fund holds cash equivalents as collateral for the four S&P 500 futures
contracts it bought with a market value of $909,475. Consequently, the
Fund's exposure to large cap stocks is 15.0%
of the Fund. The Fund holds cash equivalents as collateral for the three S&P
Midcap futures contracts it bought with a market value of $254,600.
Consequently, the Fund's exposure to small cap stocks is 2.6% of the Fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($47,490,278) at
November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $47,971,272 and tax cost, $48,026,745) $ 47,127,866
- ----------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost, $51,847) 51,602
- ----------------------------------------------------------------------------------------------------
Cash 33,668
- ----------------------------------------------------------------------------------------------------
Dividend and interest receivable 438,216
- ----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 74,484
- ----------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 13,407
- ----------------------------------------------------------------------------------------------------
Deferred expenses 51,521
- ---------------------------------------------------------------------------------------------------- ------------
Total assets 47,790,764
- ---------------------------------------------------------------------------------------------------- ------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------------
Payable for investments purchased $ 152,574
- -----------------------------------------------------------------------------------------
Payable for Fund shares redeemed 32,778
- -----------------------------------------------------------------------------------------
Payable for foreign currency purchased 13,429
- -----------------------------------------------------------------------------------------
Payable for futures variation margin 5,200
- -----------------------------------------------------------------------------------------
Tax withholding liability 1,043
- -----------------------------------------------------------------------------------------
Accrued expenses 95,462
- ----------------------------------------------------------------------------------------- ---------
Total liabilities 300,486
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 4,823,116 shares of beneficial interest outstanding $ 47,490,278
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------
Paid-in capital $ 48,339,334
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation
of assets and liabilities in foreign currency, and futures contracts (856,361)
- ----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency
transactions, and futures contracts (447,919)
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income 455,224
- ---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 47,490,278
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------------------
Institutional Service Shares ($43,792,915 / 4,447,084 shares of beneficial interest outstanding) $9.85
- ---------------------------------------------------------------------------------------------------- ------------
Select Shares ($3,697,363 / 376,032 shares of beneficial interest outstanding) $9.83
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $1,629 and dollar roll interest expense of $14,256) $1,021,238
- -------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $1,229) 207,757
- ------------------------------------------------------------------------------------------------------- ----------
Total investment income 1,228,995
- ------------------------------------------------------------------------------------------------------- ----------
EXPENSES:
- -------------------------------------------------------------------------------------------------------
Investment advisory fee $ 154,964
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 42,041
- --------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 59,331
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 23,851
- --------------------------------------------------------------------------------------------
Legal fees 2,000
- --------------------------------------------------------------------------------------------
Fund share registration costs 8,385
- --------------------------------------------------------------------------------------------
Printing and postage 3,138
- --------------------------------------------------------------------------------------------
Insurance premiums 5,158
- --------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 3,647
- --------------------------------------------------------------------------------------------
Distribution services fee 10,942
- --------------------------------------------------------------------------------------------
Miscellaneous 3,511
- -------------------------------------------------------------------------------------------- ---------
Total expenses 316,968
- --------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 121,127
- ---------------------------------------------------------------------------------
Waiver of distribution services fee 3,647 124,774
- --------------------------------------------------------------------------------- --------- ---------
Net expenses 192,194
- ------------------------------------------------------------------------------------------------------- ----------
Net investment income 1,036,801
- ------------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) (416,902)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities in foreign currency, and futures contracts (856,361)
- ------------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts (1,273,263)
- ------------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ (236,462)
- ------------------------------------------------------------------------------------------------------- ----------
</TABLE>
*For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
- ---------------------------------------------------------------------------------------- ------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------
Net investment income $ 1,036,801
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures
contracts ($405,899 net loss, as computed for federal tax purposes) (416,902)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures contracts (856,361)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from operations (236,462)
- ---------------------------------------------------------------------------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------
Institutional Service Shares (576,693)
- ----------------------------------------------------------------------------------------
Select Shares (35,879)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from distributions to shareholders (612,572)
- ---------------------------------------------------------------------------------------- ------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 52,456,535
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 257,127
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (4,374,350)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets from Fund share transactions 48,339,312
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets 47,490,278
- ----------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------- ------------------------
End of period (including undistributed net investment income of $455,224) $ 47,490,278
- ---------------------------------------------------------------------------------------- ------------------------
</TABLE>
* For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein are only those of Federated Managed Growth and Income
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities, bonds, corporate bonds and other fixed income securities are
generally valued at the price provided by an independent pricing service.
Short-term securities with remaining maturities of sixty days or less may
be stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $405,899, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($405,899).
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and
the original futures contract value is reflected in the "daily variation
margin" account. Daily variation margin adjustments, arising from this
"marking to market" process, are recorded by the Fund as unrealized gains
or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended November 30, 1994, the Fund had a realized
gain of $149,143 on futures contracts.
At November 30, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION CONTRACTS APPRECIATION
DATE TO DELIVER/RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
December 1994 3 S&P 500 Index Futures Long $ (9,704)
December 1994 1 S&P Midcap Index Future Long (4,250)
March 1995 1 S&P 500 Index Future Long 400
March 1995 2 S&P Midcap Index Futures Long 850
-----------------
Net Unrealized Appreciation (Depreciation)
on Futures Contracts $ (12,704)
-----------------
</TABLE>
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994, the foreign portion of the portfolio was diversified
with the following industries:
<TABLE>
<S> <C>
Agency 2.0%
Automotive 0.1
Banking 0.4
Beverage & Tobacco 0.1
Building & Development 0.2
Chemical 0.1
Diversified 0.1
Electronics & Electric 0.2
Energy 0.2
Insurance 0.1%
Machinery & Equipment 0.2
Pharmaceutical 0.1
Retailers 0.2
Sovereign 5.0
State/Provincial 0.2
Supranational 0.7
Telecomm. & Cellular 0.1
Utilities 0.3
</TABLE>
]J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
K. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee. Additional information on each restricted security held
at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Freeport Terminal (Malta) 6/16/94 $284,100
</TABLE>
L. RECLASSIFICATION--During the period ended November 30, 1994, the Fund
adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax differences have been reclassified. These differences are
due to differing treatments for foreign currency and futures transactions.
Amounts as of
November 30, 1994, have been reclassified to reflect an increase in paid in
capital of $22, an increase in undistributed net investment income of
$30,995, and a decrease in accumulated net realized gain (loss) of $31,017.
Net investment income, net realized gains, and net assets were not affected
by this change.
M. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 4,831,900 $ 48,424,276
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 23,521 236,142
- --------------------------------------------------------------------------------------
Shares redeemed (408,337) (4,090,253)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Institutional Service
Share transactions 4,447,084 $ 44,570,165
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C> <C>
SELECT SHARES SHARES DOLLARS
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 402,183 $ 4,032,259
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,090 20,985
- --------------------------------------------------------------------------------------
Shares redeemed (28,241) (284,097)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Select Share transactions 376,032 $ 3,769,147
- -------------------------------------------------------------------------------------- ---------- -------------
Total net change resulting from Fund Share transactions 4,823,116 $ 48,339,312
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
*For the period from January 27, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors on an annualized basis. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Service Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
each class of shares for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts. For the
period ended November 30, 1994, Institutional Service Shares did not incur a
shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($34,633) and start-up
administrative service expenses ($39,068) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following March 11,
1994 (date the Fund first became effective). For the period ended November 30,
1994, the Fund paid $2,117 and $2,388, respectively pursuant to this agreement.
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 92,905,649
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 47,019,671
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
MANAGED SERIES TRUST
(Federated Managed Growth and Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio of investments, as of November 30, 1994, and the related statement of
operations and changes in net assets, and the financial highlights (see pages 2
and 27 of the prospectus) for the period from January 27, 1994 (start of
business) to November 30, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust) as of November 30, 1994, and the results of its operations, the
changes in its net assets, and its financial highlights for the period from
January 27, 1994 (start of business) to November 30, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 17, 1995
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC--Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Managed 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
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 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 January 31, 1995
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
56166K305
3122007A-SS (1/95)
[Logo] [Logo]
Federated Managed Growth Federated Managed
and Income Fund Growth Fund
[Logo]
Lifecycle Investing
Managed Series Trust
From Federated Investors
[Logo] [Logo]
Federated Managed Federated Managed
Income Fund Aggressive Growth Fund
Federated Managed Growth and Income Fund
[Logo]
Lifecycle Investing
From Federated Investors
Select Shares
Federated Managed Growth and Income Fund
is part of Managed Series Trust,
a lifecycle investing program
from Federated Investors
Other funds available in Managed
Series Trust are Federated Managed Income
Fund, Federated Managed Growth Fund, and
Federated Managed Aggressive Growth Fund
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Asset Allocation 3
Bond Asset Categories 4
U.S. Treasury Securities 4
Mortgage-Backed Securities 5
Investment-Grade Corporate Bonds 5
High Yield Corporate Bonds 5
Investment Risks 5
Foreign Bonds 6
Equity Asset Categories 6
Large Company Stocks 6
Utility Stocks 6
Small Company Stocks 6
Investment Risks 6
Foreign Stocks 7
Equity Reserves 7
Acceptable Investments 7
U.S. Treasury and Other U.S.
Government Securities 7
Mortgage-Backed Securities 7
Collateralized Mortgage
Obligations ("CMOs") 8
Real Estate Mortgage Investment
Conduits ("REMICS") 8
Characteristics of Mortgage-Backed
Securities 8
Corporate Bonds 9
Equity Securities 10
Foreign Securities 10
Investment Risks 10
Equity Reserves 10
Repurchase Agreements 10
Convertible Securities 11
Investing in Securities of Other
Investment Companies 11
Restricted and Illiquid Securities 11
When-Issued and Delayed
Delivery Transactions 11
Lending of Portfolio Securities 12
Foreign Currency Transactions 12
Currency Risks 12
Forward Foreign Currency Exchange
Contracts 12
Options 13
Futures and Options on Futures 13
Risks 14
Portfolio Turnover 14
Investment Limitations 15
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Select Shares 18
Distribution and Shareholder
Services Plans 18
Other Payments to Financial Institutions 19
Administration of the Fund 19
Administrative Services 19
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Select Shares 20
NET ASSET VALUE 20
- ------------------------------------------------------
INVESTING IN SELECT SHARES 21
- ------------------------------------------------------
Share Purchases 21
Through a Financial Institution 21
By Wire 21
By Mail 21
Minimum Investment Required 21
What Shares Cost 21
Subaccounting Services 22
Systematic Investment Program 22
Certificates and Confirmations 22
Dividends 22
Capital Gains 22
REDEEMING SELECT SHARES 23
- ------------------------------------------------------
Through a Financial Institution 23
Telephone Redemption 23
Written Requests 23
Signatures 23
Receiving Payment 24
Systematic Withdrawal Program 24
Accounts with Low Balances 24
SHAREHOLDER INFORMATION 25
- ------------------------------------------------------
Voting Rights 25
Massachusetts Partnership Law 25
TAX INFORMATION 25
- ------------------------------------------------------
Federal Income Tax 25
Pennsylvania Corporate and
Personal Property Taxes 26
PERFORMANCE INFORMATION 26
- ------------------------------------------------------
OTHER CLASSES OF SHARES 26
- ------------------------------------------------------
Financial Highlights--
Institutional Service Shares 28
FINANCIAL STATEMENTS 29
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 57
- ------------------------------------------------------
APPENDIX 58
- ------------------------------------------------------
ADDRESSES 61
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)....................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)..................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).......................................... None
Exchange Fee................................................................................................ None
ANNUAL SELECT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................................................... 0.28%
12b-1 Fee (after waiver) (2)................................................................................ 0.50%
Total Other Expenses........................................................................................ 0.97%
Shareholder Services Fee..................................................................... 0.25%
Total Select Shares Operating Expenses (3)......................................................... 1.75%
</TABLE>
- ------------
(1) The management fee has been reduced to reflect the 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 in the table above are based on
expenses expected during the fiscal year ending November 30, 1995. The Total
Select Shares Operating Expenses were 1.64% for the fiscal year ended
November 30, 1994 and would have been 2.48% absent the voluntary waivers of
a portion of the management fee and a portion of the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of 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 charges permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $18 $55
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Select Shares of the Fund. The Fund 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."
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 57.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.21
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations (0.04)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.83
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** (0.40%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.64%(a)
- ----------------------------------------------------------------------------------------
Net investment income 4.33%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.84%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,697
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 132%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
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 equities. 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 equities. 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 equities. The
equities asset categories are large company stocks, utility stocks, small
company stocks, foreign stocks, and equity 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 0-7.5%
Foreign Bonds 0-7.5%
EQUITIES 30-50%
Large Company Stocks 0-50%
Utility Stocks 0-20%
Small Company Stocks 0-7.5%
Foreign Stocks 0-7.5%
Equity Reserves 0-15%
</TABLE>
The Fund's adviser will regularly review the Fund's allocation among the asset
categories and make any changes, within the ranges established for each asset
category, that it believes will provide the most favorable outlook for achieving
the Fund's investment objective. The Fund's adviser will attempt to exploit
inefficiencies among the various asset categories. If, for example, large
company stocks are judged to be unusually attractive relative to other asset
categories, the allocation for large company stocks may be moved to its upper
limit. At other times, when large company stocks appear to be overvalued, the
commitment may be moved down to a lesser allocation. There is no assurance,
however, that the adviser's attempts to pursue this strategy will result in a
benefit to the Fund.
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 prices of fixed income securities fluctuate
inversely to the direction of interest rates. 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. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.
HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to 7.5 percent of its total assets in high yield corporate bonds. There
is no minimal acceptable rating for a security to be purchased or held in
the Fund's portfolio, and the Fund may, from time to time, purchase or hold
securities rated in the lowest rating category. (See "Appendix.") In
certain cases, the Fund's adviser may choose bonds which are unrated if it
determines that such bonds are of comparable quality or have similar
characteristics to the high yield bonds described above.
INVESTMENT RISKS. Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than
higher-rated securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.
FOREIGN BONDS. Foreign bonds are high-quality debt securities of countries
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 countries other than the United
States and subject to the Fund's credit limitations for foreign bonds. The
Fund may invest up to 7.5 percent of its total assets in foreign bonds.
EQUITY ASSET CATEGORIES. The portion of the Fund's assets which is invested in
equities will be allocated among the following asset categories within the
ranges specified:
LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's adviser and may outweigh
revenues. The Fund may invest up to 50 percent of its total assets in large
company stocks.
UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 20 percent of its
total assets in utility stocks. Common stocks of utilities are generally
characterized by higher dividend yields and lower growth rates than common
stocks of industrial companies. Under normal market conditions, the higher
income stream from utility stocks tends to make them less volatile than
stocks of industrial companies.
SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price x number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to 7.5 percent of its total assets in small
company stocks.
INVESTMENT RISKS. Stocks in the small capitalization sector of the
United States equity market have historically been more volatile in
price than larger capitalization stocks, such as those included in the
Standard & Poor's 500 Index. This is because, among other things, small
companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to have
a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting greater volatility, the
stocks of small companies may, to some degree, fluctuate independently
of the stocks of large companies; that is, small company stocks may
decline in price as large company stocks rise in price 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. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of the asset category ranges. The Fund may invest up to
7.5 percent of its total assets in foreign stocks.
EQUITY RESERVES. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments such as commercial paper
rated A-1 by Standard and Poor's Ratings Group, Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. The Fund
may invest up to 15 percent of its total assets in equity reserves.
ACCEPTABLE INVESTMENTS
U.S. TREASURY AND OTHER U.S. GOVERNMENT SECURITIES. The U.S. Treasury and
other U.S. government securities in which the Fund invests are either
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The U.S. government securities in which the Fund may
invest are limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
obligations issued by U.S. government agencies or instrumentalities,
including securities that are supported by the full faith and credit of
the U.S. Treasury (such as GNMA certificates); securities that are
supported by the right of the issuer to borrow from the U.S. Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of an 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 or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity,
when the entire principal amount is returned. This is caused by the
need to reinvest at lower interest rates both distributions of
principal generally and significant prepayments which become more
likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed
securities may have less potential for capital appreciation during
periods of declining interest rates than other non-callable,
fixed-income government securities of comparable stated maturities.
However, mortgage-backed securities may experience less pronounced
declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest rates
fall, counter to changes in value experienced by most fixed-income
securities. The Fund's adviser intends to use this characteristic of
interest-only SMBSs to reduce the effects of interest rate changes on
the value of the Fund's portfolio, while continuing to pursue the
Fund's investment objective.
CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:
rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");
unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or
unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.
The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.
EQUITY SECURITIES. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks have
neither fixed maturity dates nor fixed schedules of promised payments.
Utility stocks are common stocks of utility companies, including water
companies, companies that produce, transmit, or distribute gas and electric
energy and those companies that provide communications facilities, such as
telephone and telegraph companies. Foreign stocks are equity securities of
foreign issuers.
FOREIGN SECURITIES. The foreign bonds in which the Fund invests are rated
within the four highest ratings for bonds by Moody's (Aaa, Aa, A or Baa) or
by Standard & Poor's (AAA, AA, A or BBB) or are unrated if determined to be
of equivalent quality by the Fund's adviser.
INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.
EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. The adviser may treat
convertible securities as large company stocks, small company stocks, or
high yield bonds for purposes of the asset category ranges, depending upon
current market conditions, including the relationship of the then-current
price to the conversion price. The convertible securities in which the Fund
invests may be rated "high yield" or of comparable quality at the time of
purchase.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100 percent of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
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. The Fund will not invest more than 7.5% of its
total assets in forward foreign currency exchange contracts.
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. Interest rate
futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract, and the buyer agrees to
take delivery of the instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the
value of the index at the close of the last trading day of the contract and the
price at which the index contract was originally written. The Fund may utilize
stock index futures to handle cash flows into and out of the Fund and to
potentially reduce transactional costs.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since the Fund's inception. In
allocating the Fund's assets, Mr. Ritter evaluates the market environment
and economic outlook, utilizing the services of the investment adviser's
economist and strategist. Mr. Ritter joined Federated Investors in 1983 and
has been a Vice President of the Fund's investment adviser since 1992. From
1988 until 1991, Mr. Ritter acted as an Assistant Vice President. Mr.
Ritter is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Chicago and his M.S. in Economics from Carnegie
Mellon University.
The portfolio managers for each of the individual asset categories are as
follows:
Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.
Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the investment adviser from 1989 until 1991, and from 1986 until
1989 he acted as Project Manager
in the Product Development Department. Mr. Balestrino is a Chartered
Financial Analyst and received his M.A. in Urban and Regional Planning from
the University of Pittsburgh.
Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 and has been
a Vice President of the Fund's investment adviser since January, 1995.
Prior to this, Mr. Bauer served as an Assistant Vice President of the
Fund's investment adviser. Mr. Bauer was an Assistant Vice President of the
International Banking Division at Pittsburgh National Bank from 1982 until
1989. Mr. Bauer is a Chartered Financial Analyst and received his M.B.A. in
Finance from Pennsylvania State University.
Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category. He has been one of the Fund's portfolio
managers since its inception. Mr. Anderson joined Federated Investors in
1972 and is presently a Senior Vice President of the Fund's investment
adviser. Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Wisconsin.
Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from
the University of Wisconsin.
James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie Mellon University.
Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.
DISTRIBUTION OF 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 AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of
0.75 of 1% of the average daily net asset value of the Select Shares, to finance
any activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Trust has adopted a Shareholder Service Plan (the "Services
Plan") under which the Fund may make payments up to 0.25 of 1% of the average
daily net asset value of the Select Shares to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Distribution and Services Plans, financial institutions may be
compensated by the distributor, who may be reimbursed by the adviser, or
affiliates thereof, for providing administrative support services to holders of
Shares. These payments will be made directly by the distributor and will not be
made from the assets of the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated
Securities Corp. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Trustees.
EXPENSES OF THE FUND AND 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 reserve the right to allocate
certain other expenses to holders of Shares as they deem 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 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.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Growth and Income Fund--Select Shares; Fund Number (this number can be
found on the account statement or by contacting the Fund); Group Number or Wire
Order Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Growth and Income Fund--Select Shares to Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
the quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SELECT SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution, by telephone
request or by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written 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. As of January 11, 1995, IU & Co. of
Columbus, Indiana, acting in various capacities for numerous accounts, was the
owner of record of 111,762.445 Select Shares (28.572%) of Federated Managed
Growth and Income Fund, and therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
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 and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED MANAGED GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 57.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.25
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.25)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations 0.00
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.15)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.85
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.02%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.88%(a)
- ----------------------------------------------------------------------------------------
Net investment income 5.07%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.59%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $43,793
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 132%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
FEDERATED MANAGED GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCK--27.7%*
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--13.0%
----------------------------------------------------------------------------------
BASIC INDUSTRY--1.0%
----------------------------------------------------------------------------------
1,600 Eastman Chemical Co. $ 75,400
----------------------------------------------------------------------------------
2,600 Lubrizol Corp. 81,900
----------------------------------------------------------------------------------
3,500 Phelps Dodge Corp. 200,375
----------------------------------------------------------------------------------
5,500 Praxair, Inc. 111,375
---------------------------------------------------------------------------------- -------------
Total 469,050
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--1.1%
----------------------------------------------------------------------------------
2,000 Chrysler Corp. 96,750
----------------------------------------------------------------------------------
2,800 Eastman Kodak Co. 127,750
----------------------------------------------------------------------------------
4,000 Ford Motor Co. 108,500
----------------------------------------------------------------------------------
7,100 Mattel, Inc. 189,925
---------------------------------------------------------------------------------- -------------
Total 522,925
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.0%
----------------------------------------------------------------------------------
1,700 Avon Products, Inc. 105,187
----------------------------------------------------------------------------------
2,800 Philip Morris Cos., Inc. 167,300
----------------------------------------------------------------------------------
3,500 Reebok International, Ltd. 134,313
----------------------------------------------------------------------------------
12,500 RJR Nabisco Holdings, Conv. Pfd., Series C 84,375
---------------------------------------------------------------------------------- -------------
Total 491,175
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.7%
----------------------------------------------------------------------------------
5,000 American Stores Co. 131,875
----------------------------------------------------------------------------------
3,700 Sears, Roebuck & Co. 174,825
---------------------------------------------------------------------------------- -------------
Total 306,700
---------------------------------------------------------------------------------- -------------
ENERGY--1.4%
----------------------------------------------------------------------------------
4,600 Baker Hughes, Inc. 82,800
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
ENERGY--CONTINUED
----------------------------------------------------------------------------------
3,700 Chevron Corp. $ 161,412
----------------------------------------------------------------------------------
2,000 Mapco, Inc. 100,250
----------------------------------------------------------------------------------
2,500 Texaco, Inc. 155,313
----------------------------------------------------------------------------------
6,000 USX Marathon Group 108,000
----------------------------------------------------------------------------------
1,600 (a)Western Atlas, Inc. 69,800
---------------------------------------------------------------------------------- -------------
Total 677,575
---------------------------------------------------------------------------------- -------------
FINANCE--2.3%
----------------------------------------------------------------------------------
2,000 AMLI Residential Properties Trust, REIT 36,750
----------------------------------------------------------------------------------
1,800 Bankers Trust of New York Corp. 106,650
----------------------------------------------------------------------------------
3,400 Citicorp 141,525
----------------------------------------------------------------------------------
2,300 Dean Witter, Discover & Co. 80,500
----------------------------------------------------------------------------------
1,300 Federal National Mortgage Association 92,463
----------------------------------------------------------------------------------
3,648 Mellon Bank Corp. 120,840
----------------------------------------------------------------------------------
4,200 PNC Financial Corp. 87,150
----------------------------------------------------------------------------------
1,700 Providian Corp. 51,425
----------------------------------------------------------------------------------
4,200 Ryder Systems, Inc. 90,825
----------------------------------------------------------------------------------
2,300 Transamerica Corp. 108,963
----------------------------------------------------------------------------------
4,700 Travelers, Inc. 154,513
---------------------------------------------------------------------------------- -------------
Total 1,071,604
---------------------------------------------------------------------------------- -------------
HEALTHCARE--1.1%
----------------------------------------------------------------------------------
2,600 American Home Products Corp. 169,325
----------------------------------------------------------------------------------
2,300 Becton, Dickinson & Co. 108,675
----------------------------------------------------------------------------------
2,300 Bristol-Myers Squibb Co. 132,825
----------------------------------------------------------------------------------
3,000 U.S. Healthcare, Inc. 134,250
---------------------------------------------------------------------------------- -------------
Total 545,075
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--1.5%
----------------------------------------------------------------------------------
1,500 Caterpillar, Inc. $ 81,000
----------------------------------------------------------------------------------
900 Deere & Co. 57,825
----------------------------------------------------------------------------------
2,600 (a)FMC Corp. 151,450
----------------------------------------------------------------------------------
2,100 General Electric Co. 96,600
----------------------------------------------------------------------------------
2,100 (a)Litton Industries, Inc. 71,663
----------------------------------------------------------------------------------
1,100 Loews Corp. 95,013
----------------------------------------------------------------------------------
3,200 Textron, Inc. 150,400
---------------------------------------------------------------------------------- -------------
Total 703,951
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--1.8%
----------------------------------------------------------------------------------
4,800 General Motors Corp., Class E 176,400
----------------------------------------------------------------------------------
1,900 Hewlett-Packard Co. 186,200
----------------------------------------------------------------------------------
1,000 International Business Machines Corp. 70,750
----------------------------------------------------------------------------------
3,400 Martin-Marietta Corp. 147,475
----------------------------------------------------------------------------------
2,600 Raytheon Co. 163,475
----------------------------------------------------------------------------------
3,900 Rockwell International Corp. 132,113
---------------------------------------------------------------------------------- -------------
Total 876,413
---------------------------------------------------------------------------------- -------------
UTILITIES--1.1%+
----------------------------------------------------------------------------------
3,500 AT&T Corp. 171,938
----------------------------------------------------------------------------------
800 British Telecommunications PLC, ADR 47,500
----------------------------------------------------------------------------------
1,900 Duke Power Co. 77,425
----------------------------------------------------------------------------------
1,900 Enron Corp. 51,300
----------------------------------------------------------------------------------
4,400 MCI Communications Corp. 85,800
----------------------------------------------------------------------------------
2,100 Telefonos De Mexico, Class L, ADR 111,300
---------------------------------------------------------------------------------- -------------
Total 545,263
---------------------------------------------------------------------------------- -------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $6,436,440) 6,209,731
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--2.1%**
----------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
----------------------------------------------------------------------------------
400 (a)Acme Metals, Inc. $ 6,500
----------------------------------------------------------------------------------
600 (a)Magma Copper Co. 9,675
----------------------------------------------------------------------------------
300 Texas Industries, Inc. 9,938
---------------------------------------------------------------------------------- -------------
Total 26,113
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--0.1%
----------------------------------------------------------------------------------
630 Anthony Industries, Inc. 10,395
----------------------------------------------------------------------------------
500 Arctco, Inc. 10,000
----------------------------------------------------------------------------------
300 (a)Champion Enterprises, Inc. 8,512
----------------------------------------------------------------------------------
200 Polaris Industries Partners, L.P. 8,875
----------------------------------------------------------------------------------
300 (a)Scientific Games Holding Corp. 12,825
----------------------------------------------------------------------------------
600 SPX Corp. 9,300
----------------------------------------------------------------------------------
300 Toro Co. 8,400
---------------------------------------------------------------------------------- -------------
Total 68,307
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--0.1%
----------------------------------------------------------------------------------
400 (a)Cyrk International, Inc. 14,800
----------------------------------------------------------------------------------
400 Haggar Corp. 8,600
----------------------------------------------------------------------------------
400 Hudson Foods, Inc., Class A 9,050
---------------------------------------------------------------------------------- -------------
Total 32,450
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.3%
----------------------------------------------------------------------------------
400 (a)APS Holding Corp., Class A 10,125
----------------------------------------------------------------------------------
300 (a)Carmike Cinemas, Inc. 6,750
----------------------------------------------------------------------------------
300 (a)Devon Group, Inc. 7,650
----------------------------------------------------------------------------------
300 Fair Isaac & Co., Inc. 12,637
----------------------------------------------------------------------------------
500 La Quinta Inns, Inc. 10,625
----------------------------------------------------------------------------------
300 (a)Landstar System, Inc. 7,650
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
CONSUMER SERVICES--CONTINUED
----------------------------------------------------------------------------------
400 Media General, Inc., Class A $ 11,650
----------------------------------------------------------------------------------
1,200 (a)Prime Hospitality Corp. 9,000
----------------------------------------------------------------------------------
600 (a)Revco D. S., Inc. 13,500
----------------------------------------------------------------------------------
400 Strawbridge & Clothier, Class A 9,200
----------------------------------------------------------------------------------
600 (a)Super Rite Foods Holdings Corp. 6,900
----------------------------------------------------------------------------------
800 (a)The Good Guys, Inc. 9,600
----------------------------------------------------------------------------------
1,000 (a)Vitalink Pharmacy Services, Inc. 11,500
---------------------------------------------------------------------------------- -------------
Total 126,787
---------------------------------------------------------------------------------- -------------
ENERGY--0.1%
----------------------------------------------------------------------------------
600 (a)Dekalb Energy Co., Class B 9,000
----------------------------------------------------------------------------------
300 Diamond Shamrock, Inc. 7,725
----------------------------------------------------------------------------------
1,500 (a)Numac Energy, Inc. 8,813
----------------------------------------------------------------------------------
700 Southwest Gas Corp. 10,675
----------------------------------------------------------------------------------
800 (a)Tide West Oil Co. 8,800
----------------------------------------------------------------------------------
2,100 (a)Wainoco Oil Corp. 10,238
---------------------------------------------------------------------------------- -------------
Total 55,251
---------------------------------------------------------------------------------- -------------
FINANCIAL--0.5%
----------------------------------------------------------------------------------
600 (a)Acceptance Insurance Cos., Inc. 8,625
----------------------------------------------------------------------------------
600 Allied Capital Commercial 9,975
----------------------------------------------------------------------------------
400 Allied Group, Inc. 10,200
----------------------------------------------------------------------------------
400 Centura Banks, Inc. 8,600
----------------------------------------------------------------------------------
900 City National Corp. 8,550
----------------------------------------------------------------------------------
500 Comdisco, Inc. 10,687
----------------------------------------------------------------------------------
500 Commerce Bancorp, Inc. 9,000
----------------------------------------------------------------------------------
400 Fremont General Corp. 9,250
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
FINANCIAL--CONTINUED
----------------------------------------------------------------------------------
300 GFC Financial Corp. $ 8,850
----------------------------------------------------------------------------------
1,200 Hibernia Corp., Class A 9,450
----------------------------------------------------------------------------------
800 Hilb Rogal & Hamilton Co. 9,000
----------------------------------------------------------------------------------
500 Money Stores, Inc. 8,875
----------------------------------------------------------------------------------
400 (a)Mutual Assurance 11,200
----------------------------------------------------------------------------------
600 North Fork Bancorp, Inc. 8,400
----------------------------------------------------------------------------------
300 PHH Corp. 10,538
----------------------------------------------------------------------------------
300 Protective Life Corp. 13,050
----------------------------------------------------------------------------------
300 Provident Bancorp, Inc. 9,075
----------------------------------------------------------------------------------
400 Southern National Corp. 7,350
----------------------------------------------------------------------------------
300 TCF Financial Corp. 11,063
----------------------------------------------------------------------------------
500 Uslico Corp. 10,000
----------------------------------------------------------------------------------
500 Washington National Corp. 10,000
----------------------------------------------------------------------------------
600 Webb (Del) Corp. 9,900
----------------------------------------------------------------------------------
300 WestAmerica Bancorporation 9,150
---------------------------------------------------------------------------------- -------------
Total 220,788
---------------------------------------------------------------------------------- -------------
HEALTHCARE--0.2%
----------------------------------------------------------------------------------
500 (a)Advantage Health Corp. 14,750
----------------------------------------------------------------------------------
400 (a)Bio Rad Laboratories, Inc., Class A 11,100
----------------------------------------------------------------------------------
400 (a)Genesis Health Ventures, Inc. 11,300
----------------------------------------------------------------------------------
500 ICN Pharmaceuticals 11,188
----------------------------------------------------------------------------------
400 (a)Sierra Health Services, Inc. 12,300
----------------------------------------------------------------------------------
400 (a)Universal Health Services, Inc., Class B 10,000
----------------------------------------------------------------------------------
400 West, Inc. 10,450
---------------------------------------------------------------------------------- -------------
Total 81,088
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--0.3%
----------------------------------------------------------------------------------
200 AGCO Corp. $ 9,125
----------------------------------------------------------------------------------
300 Blount, Inc., Class A 13,425
----------------------------------------------------------------------------------
400 Borden Chemicals & Plastics, L.P. 8,750
----------------------------------------------------------------------------------
400 Borg-Warner Automotive 9,400
----------------------------------------------------------------------------------
600 Brush Wellman, Inc. 9,075
----------------------------------------------------------------------------------
300 Butler Manufacturing Co. 10,200
----------------------------------------------------------------------------------
500 Castle (A.M.) & Co. 6,500
----------------------------------------------------------------------------------
550 Commercial Intertech Corp. 8,800
----------------------------------------------------------------------------------
500 (a)Galey & Lord, Inc. 8,000
----------------------------------------------------------------------------------
300 Pittway Corp., Class A 11,588
----------------------------------------------------------------------------------
600 (a)Smith International, Inc. 8,100
----------------------------------------------------------------------------------
1,000 Terra Industries, Inc. 10,875
----------------------------------------------------------------------------------
500 (a)Western Waste Industries 7,625
----------------------------------------------------------------------------------
400 (a)Wolverine Tube, Inc. 9,600
---------------------------------------------------------------------------------- -------------
Total 131,063
---------------------------------------------------------------------------------- -------------
RETAIL TRADE--0.0%
----------------------------------------------------------------------------------
500 Bradlees, Inc. 6,875
----------------------------------------------------------------------------------
300 (a)Eckerd Corp. 8,512
----------------------------------------------------------------------------------
500 Wolohan Lumber Co. 7,750
---------------------------------------------------------------------------------- -------------
Total 23,137
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--0.3%
----------------------------------------------------------------------------------
550 (a)Bell Industries, Inc. 12,100
----------------------------------------------------------------------------------
400 (a)Electronics for Imaging, Inc. 9,400
----------------------------------------------------------------------------------
500 Energen Corp. 10,000
----------------------------------------------------------------------------------
600 (a)Frame Technology Corp. 9,000
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
----------------------------------------------------------------------------------
500 (a)International Rectifier Corp. $ 10,875
----------------------------------------------------------------------------------
500 (a)Kemet Corp. 10,813
----------------------------------------------------------------------------------
600 Methode Electronics, Inc., Class A 8,400
----------------------------------------------------------------------------------
600 Pioneer Standard Electronics, Inc. 9,600
----------------------------------------------------------------------------------
500 (a)SCI Systems, Inc. 9,250
----------------------------------------------------------------------------------
500 (a)Silicon Valley Group, Inc. 10,063
----------------------------------------------------------------------------------
400 (a)Tech-Sym Corp. 8,750
----------------------------------------------------------------------------------
300 Tektronix, Inc. 11,213
----------------------------------------------------------------------------------
400 (a)Tencor Instruments 17,750
----------------------------------------------------------------------------------
300 Watkins Johnson Co. 9,900
----------------------------------------------------------------------------------
600 (a)Western Digital Corp. 11,100
---------------------------------------------------------------------------------- -------------
Total 158,214
---------------------------------------------------------------------------------- -------------
TRANSPORATION--0.0%
----------------------------------------------------------------------------------
600 Alaska Air Group, Inc. 9,825
----------------------------------------------------------------------------------
300 (a)Wisconsin Central Transportation Corp. 12,450
---------------------------------------------------------------------------------- -------------
Total 22,275
---------------------------------------------------------------------------------- -------------
UTILITIES--0.1%+
----------------------------------------------------------------------------------
300 Buckeye Partners 10,012
----------------------------------------------------------------------------------
400 CIPSCO, Inc. 10,700
----------------------------------------------------------------------------------
400 Teppco Partners, L.P. 10,600
---------------------------------------------------------------------------------- -------------
Total 31,312
---------------------------------------------------------------------------------- -------------
TOTAL SMALL COMPANY (IDENTIFIED COST, $1,010,255) 976,785
---------------------------------------------------------------------------------- -------------
UTILITY--9.7%+
----------------------------------------------------------------------------------
UTILITIES--9.7%
----------------------------------------------------------------------------------
7,000 Ameritech Corp. 276,500
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
6,400 AT&T Corp. $ 314,400
----------------------------------------------------------------------------------
4,100 Baltimore Gas & Electric Co. 92,762
----------------------------------------------------------------------------------
5,400 Bell Atlantic Corp. 270,675
----------------------------------------------------------------------------------
5,100 BellSouth Corp. 264,562
----------------------------------------------------------------------------------
8,421 Cinergy Corp. 187,367
----------------------------------------------------------------------------------
4,700 CMS Energy Corp. 104,575
----------------------------------------------------------------------------------
2,100 Consolidated Natural Gas Co. 73,500
----------------------------------------------------------------------------------
5,000 DPL, Inc. 101,875
----------------------------------------------------------------------------------
3,400 DQE, Inc. 102,850
----------------------------------------------------------------------------------
2,500 Duke Power Co. 101,875
----------------------------------------------------------------------------------
2,400 Enron Corp. 64,800
----------------------------------------------------------------------------------
3,400 Florida Progress Corp. 103,275
----------------------------------------------------------------------------------
3,200 FPL Group, Inc. 113,200
----------------------------------------------------------------------------------
8,800 GTE Corp. 269,500
----------------------------------------------------------------------------------
4,100 General Public Utilities Corp. 105,575
----------------------------------------------------------------------------------
4,000 MCN Corp. 72,500
----------------------------------------------------------------------------------
3,800 NIPSCO Industries, Inc. 111,150
----------------------------------------------------------------------------------
6,700 NYNEX Corp. 252,088
----------------------------------------------------------------------------------
3,300 Pacific Enterprises 70,538
----------------------------------------------------------------------------------
6,500 Pacificorp 120,250
----------------------------------------------------------------------------------
3,900 Peco Energy Co. 94,088
----------------------------------------------------------------------------------
5,400 Pinnacle West Capital Corp. 104,625
----------------------------------------------------------------------------------
2,700 Sonat, Inc. 75,938
----------------------------------------------------------------------------------
5,000 Southern Co. 103,750
----------------------------------------------------------------------------------
7,900 Southern New England Telecommunications Corp. 260,700
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
6,800 Southwestern Bell Corp. $ 281,350
----------------------------------------------------------------------------------
3,500 UGI Corp. 66,063
----------------------------------------------------------------------------------
7,400 U.S. West, Inc. 260,850
----------------------------------------------------------------------------------
3,500 Utilicorp United, Inc. 90,125
----------------------------------------------------------------------------------
3,500 Western Resources, Inc. 98,438
---------------------------------------------------------------------------------- -------------
TOTAL UTILITIES (IDENTIFIED COST, $4,675,517) 4,609,744
---------------------------------------------------------------------------------- -------------
FOREIGN EQUITY--2.5%
----------------------------------------------------------------------------------
AUSTRALIA--0.1%
----------------------------------------------------------------------------------
1,000 Broken Hill Proprietary Co. 14,356
----------------------------------------------------------------------------------
6,400 Publishing & Broadcasting 18,051
---------------------------------------------------------------------------------- -------------
Total 32,407
---------------------------------------------------------------------------------- -------------
BELGIUM--0.0%
----------------------------------------------------------------------------------
300 Delhaize-Le Lion 12,054
---------------------------------------------------------------------------------- -------------
FINLAND--0.0%
----------------------------------------------------------------------------------
200 Kone Corp. 'B' 21,215
---------------------------------------------------------------------------------- -------------
FRANCE--0.1%
----------------------------------------------------------------------------------
400 Elf Aquitaine 27,361
---------------------------------------------------------------------------------- -------------
GERMANY--0.1%
----------------------------------------------------------------------------------
50 Daimler Benz AG 23,631
---------------------------------------------------------------------------------- -------------
HONG KONG--0.1%
----------------------------------------------------------------------------------
5,400 Cheung Kong Holdings 22,483
----------------------------------------------------------------------------------
1,800 HSBC Holdings PLC 19,900
---------------------------------------------------------------------------------- -------------
Total 42,383
---------------------------------------------------------------------------------- -------------
ITALY--0.0%
----------------------------------------------------------------------------------
500 Assicurazioni Generali 11,541
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
JAPAN--1.3%
----------------------------------------------------------------------------------
2,000 Asahi Bank, Ltd. $ 23,036
----------------------------------------------------------------------------------
1,000 Bank of Tokyo, Ltd., Tokyo 14,953
----------------------------------------------------------------------------------
1,000 Dai-Ichi Kangyo Bank, Ltd., Tokyo 17,782
----------------------------------------------------------------------------------
3,000 Fuji Bank, Ltd., Tokyo 61,834
----------------------------------------------------------------------------------
2,000 Hitachi, Ltd. 19,742
----------------------------------------------------------------------------------
2,000 Industrial Bank of Japan, Ltd., Tokyo 55,570
----------------------------------------------------------------------------------
1,000 Ito Yokado Co. 53,044
----------------------------------------------------------------------------------
4,000 Kawasaki Heavy Industries 18,348
----------------------------------------------------------------------------------
3,000 Kirin Brewery Co., Ltd. 31,826
----------------------------------------------------------------------------------
1,000 Matsushita Electric Industrial Co. 15,458
----------------------------------------------------------------------------------
1,000 Mitsubishi Bank 22,329
----------------------------------------------------------------------------------
2,000 Mitsubishi Corp. 26,673
----------------------------------------------------------------------------------
4,000 Mitsubishi Heavy Industries 29,664
----------------------------------------------------------------------------------
1,000 Mitsubishi Trust & Banking 14,145
----------------------------------------------------------------------------------
3,000 Mitsukoshi, Ltd. 28,674
----------------------------------------------------------------------------------
1,000 Nomura Securities, Co., Ltd. 19,601
----------------------------------------------------------------------------------
1,000 Sakura Bank, Ltd., Tokyo 13,236
----------------------------------------------------------------------------------
1,000 Sumitomo Bank, Ltd., Osaka 17,883
----------------------------------------------------------------------------------
6,000 Sumitomo Heavy Industries 22,976
----------------------------------------------------------------------------------
2,000 Takeda Chemical Industries 24,855
----------------------------------------------------------------------------------
3,000 Tokio Marine & Fire 34,554
----------------------------------------------------------------------------------
1,000 Tokyo Electric Power 28,290
----------------------------------------------------------------------------------
1,000 Toshiba Corp. 6,992
----------------------------------------------------------------------------------
1,000 Toyota Motor Corp. 21,319
---------------------------------------------------------------------------------- -------------
Total 622,784
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
MALAYSIA--0.0%
----------------------------------------------------------------------------------
5,000 Tenaga Nasional Berhad $ 21,521
---------------------------------------------------------------------------------- -------------
NETHERLANDS--0.1%
----------------------------------------------------------------------------------
500 Philips Electronics 15,122
----------------------------------------------------------------------------------
200 Royal Dutch Petroleum Co. 21,725
----------------------------------------------------------------------------------
200 Unilever NV-Cert 22,331
---------------------------------------------------------------------------------- -------------
Total 59,178
---------------------------------------------------------------------------------- -------------
SINGAPORE--0.0%
----------------------------------------------------------------------------------
10,000 Singapore Telecommunications, Ltd. 19,939
---------------------------------------------------------------------------------- -------------
SPAIN--0.1%
----------------------------------------------------------------------------------
500 Empresa Nac de Electridad 22,621
---------------------------------------------------------------------------------- -------------
SWEDEN--0.0%
----------------------------------------------------------------------------------
400 Ericsson LM B-F 22,024
---------------------------------------------------------------------------------- -------------
SWITZERLAND--0.1%
----------------------------------------------------------------------------------
50 Sandoz AG 25,668
---------------------------------------------------------------------------------- -------------
UNITED KINGDOM--0.5%
----------------------------------------------------------------------------------
7,000 British Petroleum PLC 46,586
----------------------------------------------------------------------------------
7,000 Coats Viyella PLC 22,581
----------------------------------------------------------------------------------
3,000 Eastern Electricity PLC 37,700
----------------------------------------------------------------------------------
3,000 Midlands Electricity PLC 36,267
----------------------------------------------------------------------------------
2,000 RMC Group PLC 31,271
----------------------------------------------------------------------------------
4,000 Williams Holdings PLC 22,017
----------------------------------------------------------------------------------
2,000 Wolseley PLC 23,959
---------------------------------------------------------------------------------- -------------
Total 220,381
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $1,218,459) 1,184,708
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CLOSED-END REGISTERED INVESTMENT COMPANIES--0.4%
----------------------------------------------------------------------------------
5,400 France Growth Fund, Inc. $ 53,325
----------------------------------------------------------------------------------
5,700 Germany Fund, Inc. 64,838
----------------------------------------------------------------------------------
1,500 Italy Fund, Inc. 12,188
----------------------------------------------------------------------------------
2,000 Swiss Helvetia Fund, Inc. 37,250
---------------------------------------------------------------------------------- -------------
TOTAL CLOSED-END REGISTERED INVESTMENT COMPANIES
(IDENTIFIED COST, $181,577) 167,601
---------------------------------------------------------------------------------- -------------
TOTAL STOCKS (IDENTIFIED COST, $13,522,248) 13,148,569
---------------------------------------------------------------------------------- -------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
BONDS--64.1%
- ---------------------------------------------------------------------------------------------------
TREASURY--30.3%
----------------------------------------------------------------------------------
$ 1,000,000 United States Treasury Note, 6.875%, 7/31/99 965,340
----------------------------------------------------------------------------------
13,600,000 United States Treasury Note, 7.50%, 10/31/99 13,442,240
---------------------------------------------------------------------------------- -------------
TOTAL TREASURY (IDENTIFIED COST, $14,494,313) 14,407,580
---------------------------------------------------------------------------------- -------------
MORTAGE BACKED SECURITIES--17.3%
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--17.3%
----------------------------------------------------------------------------------
264,034 Federal Home Loan Mortgage Corporation, Pool D54720, 7.00%,
7/1/2024 238,039
----------------------------------------------------------------------------------
402,580 Federal Home Loan Mortgage Corporation, Pool D54761, 8.50%,
7/1/2024 396,034
----------------------------------------------------------------------------------
397,536 Federal Home Loan Mortgage Corporation, Pool C80177, 7.50%,
5/1/2024 370,822
----------------------------------------------------------------------------------
403,417 Federal Home Loan Mortgage Corporation, Pool E20105, 7.00%,
4/1/2009 379,079
----------------------------------------------------------------------------------
769,043 Federal Home Loan Mortgage Corporation, Pool E58069, 7.00%,
4/1/2009 722,647
----------------------------------------------------------------------------------
522,638 Federal National Mortgage Association, Pool 250083, 7.00%, 7/1/2024 472,982
----------------------------------------------------------------------------------
$ 1,276,132 Federal National Mortgage Association, Pool 250197, 9.50%, 10/1/2024 $ 1,316,394
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
MORTAGE BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
----------------------------------------------------------------------------------
246,076 Federal National Mortgage Association, Pool 278507, 7.50%, 6/1/2009 236,383
----------------------------------------------------------------------------------
515,100 Federal National Mortgage Association, Pool 303073, 8.00%, 11/1/2024 493,682
----------------------------------------------------------------------------------
241,536 Government National Mortgage Association, Pool 379445, 7.50%,
5/15/2024 222,662
----------------------------------------------------------------------------------
1,105,000 Government National Mortgage Association, Pool 380656, 8.00%,
11/15/2024 1,051,463
----------------------------------------------------------------------------------
1,834,775 Government National Mortgage Association, Pool 386246, 8.50%,
10/15/2024 1,801,492
----------------------------------------------------------------------------------
499,664 Government National Mortgage Association, Pool 393201, 8.50%,
9/15/2024 490,600
---------------------------------------------------------------------------------- -------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $8,418,098) 8,192,279
---------------------------------------------------------------------------------- -------------
HIGH YIELD--2.3%
----------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.3%
----------------------------------------------------------------------------------
125,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 125,938
---------------------------------------------------------------------------------- -------------
BUSINESS EQUIPMENT & SERVICES--0.3%
----------------------------------------------------------------------------------
150,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 141,750
---------------------------------------------------------------------------------- -------------
CABLE T.V.--0.2%
----------------------------------------------------------------------------------
125,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 112,500
---------------------------------------------------------------------------------- -------------
CHEMICALS & PLASTICS--0.4%
----------------------------------------------------------------------------------
125,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 120,625
----------------------------------------------------------------------------------
100,000 G-I Holdings, Sr. Disc. Note, 10/1/98 60,750
---------------------------------------------------------------------------------- -------------
Total 181,375
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.2%
----------------------------------------------------------------------------------
125,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 108,438
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
HIGH YIELD--CONTINUED
----------------------------------------------------------------------------------
FOOD SERVICES--0.2%
----------------------------------------------------------------------------------
$ 125,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 $ 114,688
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.3%
----------------------------------------------------------------------------------
125,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 115,000
---------------------------------------------------------------------------------- -------------
RETAILERS--0.3%
----------------------------------------------------------------------------------
125,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 124,375
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--0.1%
----------------------------------------------------------------------------------
125,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 54,063
---------------------------------------------------------------------------------- -------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,143,427) 1,078,127
---------------------------------------------------------------------------------- -------------
INVESTMENT GRADE--7.2%
----------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.7%
----------------------------------------------------------------------------------
325,000 Grumman Corp., Deb., 10.375%, 1/1/99 334,857
---------------------------------------------------------------------------------- -------------
BANKING--0.6%
----------------------------------------------------------------------------------
300,000 Chase Manhattan Corp., Medium Term Note, 9.00%, 2/24/99 307,059
---------------------------------------------------------------------------------- -------------
CONGLOMERATES--0.6%
----------------------------------------------------------------------------------
250,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 265,000
---------------------------------------------------------------------------------- -------------
FINANCE-AUTOMOTIVE--0.3%
----------------------------------------------------------------------------------
150,000 GMAC, Medium Term Note, 7.25%, 4/30/99 143,586
---------------------------------------------------------------------------------- -------------
FINANCE-RETAIL--0.3%
----------------------------------------------------------------------------------
150,000 Household Finance Corp., Deb., 6.45%, 2/1/2009 122,787
---------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--0.6%
----------------------------------------------------------------------------------
300,000 Merrill Lynch & Co., Inc., Medium Term Note, 7.25%, 6/14/2004 291,861
---------------------------------------------------------------------------------- -------------
FOOD & DRUG RETAILERS--0.4%
----------------------------------------------------------------------------------
200,000 Hook-Superx, Sr. Note, 10.125%, 6/1/2002 205,250
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.4%
----------------------------------------------------------------------------------
200,000 Georgia-Pacific Corp., Deb., 10.125%, 5/15/2000 203,006
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
INVESTMENT GRADE--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--0.4%
----------------------------------------------------------------------------------
$ 200,000 Tennessee Valley Authority, 7.318%, 5/31/99 $ 193,642
---------------------------------------------------------------------------------- -------------
INSURANCE--0.5%
----------------------------------------------------------------------------------
250,000 Sunamerica, Inc., Medium Term Note, 6.58%, 1/15/2002 223,218
---------------------------------------------------------------------------------- -------------
PRINTING & PUBLISHING--0.5%
----------------------------------------------------------------------------------
250,000 News America Holdings, Sr. Note, 7.50%, 3/1/2000 235,450
---------------------------------------------------------------------------------- -------------
SOVEREIGN GOVERNMENT--1.1%
----------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2004 272,304
----------------------------------------------------------------------------------
141,000 Ontario Hydro, Local Gov't. Guarantee, 9.25%, 5/1/95 142,674
----------------------------------------------------------------------------------
100,000 Quebec Hydro, Deb., 7.375%, 2/1/2003 93,260
---------------------------------------------------------------------------------- -------------
Total 508,238
---------------------------------------------------------------------------------- -------------
UTILITIES--0.8%
----------------------------------------------------------------------------------
200,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 179,778
----------------------------------------------------------------------------------
200,000 Gulf States Utilities, FMB, 6.75%, 10/1/98 189,168
---------------------------------------------------------------------------------- -------------
Total 368,946
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENT GRADE (IDENTIFIED COST, $3,495,243) 3,402,900
---------------------------------------------------------------------------------- -------------
OTHER CORPORATE--0.2%
----------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.2%
----------------------------------------------------------------------------------
80,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $108,600) 108,838
---------------------------------------------------------------------------------- -------------
FOREIGN
CURRENCY
PAR AMOUNT
- ---------------
----------------------------------------------------------------------------------
FOREIGN--6.8%
----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.2%
----------------------------------------------------------------------------------
100,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 82,080
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
BELGIAN FRANC--0.2%
----------------------------------------------------------------------------------
3,200,000 Belgian Govt., Foreign Gov't. Guarantee, 10.00%, 4/6/96 $ 103,479
---------------------------------------------------------------------------------- -------------
CANADIAN DOLLAR--0.4%
----------------------------------------------------------------------------------
250,000 Ontario Hydro, 9.00%, 6/24/2002 177,736
---------------------------------------------------------------------------------- -------------
DEUTSCHE MARK--1.1%
----------------------------------------------------------------------------------
325,000 Bundesobligation, 8.875%, 1/22/96 213,557
----------------------------------------------------------------------------------
300,000 Bundesobligationen, Deb., 7.25%, 10/20/97 193,787
----------------------------------------------------------------------------------
200,000 Treuhandanstalt, 7.75%, 10/1/2002 129,217
---------------------------------------------------------------------------------- -------------
Total 536,561
---------------------------------------------------------------------------------- -------------
FRENCH FRANC--0.8%
----------------------------------------------------------------------------------
850,000 France O.A.T., 8.50%, 11/25/2002 164,090
----------------------------------------------------------------------------------
800,000 France O.A.T., 9.80%, 1/30/96 154,036
----------------------------------------------------------------------------------
400,000 KFW International Finance, 7.00%, 5/12/2000 72,082
---------------------------------------------------------------------------------- -------------
Total 390,208
---------------------------------------------------------------------------------- -------------
ITALIAN LIRA--0.4%
----------------------------------------------------------------------------------
305,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 191,052
---------------------------------------------------------------------------------- -------------
JAPANESE YEN--2.2%
----------------------------------------------------------------------------------
30,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 343,932
----------------------------------------------------------------------------------
63,000,000 KFW International Finance, Gtd. Note, 6.00%, 11/29/99 684,262
---------------------------------------------------------------------------------- -------------
Total 1,028,194
---------------------------------------------------------------------------------- -------------
NETHERLANDS GUILDER--0.4%
----------------------------------------------------------------------------------
350,000 Netherlands Government, 6.00%, 4/15/95 199,176
---------------------------------------------------------------------------------- -------------
SPANISH PESETA--0.3%
----------------------------------------------------------------------------------
18,000,000 Spain (Government), 8.30%, 12/15/98 126,133
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
UNITED KINGDOM POUND--0.8%
----------------------------------------------------------------------------------
250,000 UK Conversion, 9.00%, 3/3/2000 $ 400,901
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN (IDENTIFIED COST, $3,234,960) 3,235,520
---------------------------------------------------------------------------------- -------------
TOTAL BONDS (IDENTIFIED COST, $30,894,641) 30,425,244
---------------------------------------------------------------------------------- -------------
PRINCIPAL
AMOUNT
- --------------- ----------------------------------------------------------------------------------
CASH EQUIVALENTS--7.5%**
- ---------------------------------------------------------------------------------------------------
$ 750,000 U.S. Treasury Bill, 1/26/95 (IDENTIFIED COST, $744,383) 744,053
----------------------------------------------------------------------------------
2,810,000 ***J.P. Morgan Securities, Inc., 5.77%, dated 11/28/94, due 12/5/94
(at amortized cost) 2,810,000
---------------------------------------------------------------------------------- -------------
TOTAL CASH EQUIVALENTS 3,554,053
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $47,971,272) $ 47,127,866+
---------------------------------------------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR -- American Depository Receipts
PLC -- Public Limited Company
REIT -- Real Estate Investment Trust
(a) Non-income producing.
(b) Restricted securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, this security amounted to
$272,304, which represents .6% of net assets.
The cost for federal income tax purposes amounts to $48,026,745. The net
unrealized depreciation on a federal tax cost basis amounts to $898,879, and
is comprised of $377,654 appreciation and $1,276,533 depreciation at November
30, 1994.
The Fund's overall exposure to utility stocks is 10.9%.
* The Fund's overall exposure to stocks is 30.2%, after adjustment for the use
of S&P 500 and
S&P Midcap futures contracts.
** The Fund holds cash equivalents as collateral for the four S&P 500 futures
contracts it bought with a market value of $909,475. Consequently, the
Fund's exposure to large cap stocks is 15.0%
of the Fund. The Fund holds cash equivalents as collateral for the three S&P
Midcap futures contracts it bought with a market value of $254,600.
Consequently, the Fund's exposure to small cap stocks is 2.6% of the Fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($47,490,278) at
November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $47,971,272 and tax cost, $48,026,745) $ 47,127,866
- ----------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost, $51,847) 51,602
- ----------------------------------------------------------------------------------------------------
Cash 33,668
- ----------------------------------------------------------------------------------------------------
Dividend and interest receivable 438,216
- ----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 74,484
- ----------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 13,407
- ----------------------------------------------------------------------------------------------------
Deferred expenses 51,521
- ---------------------------------------------------------------------------------------------------- ------------
Total assets 47,790,764
- ---------------------------------------------------------------------------------------------------- ------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------------
Payable for investments purchased $ 152,574
- -----------------------------------------------------------------------------------------
Payable for Fund shares redeemed 32,778
- -----------------------------------------------------------------------------------------
Payable for foreign currency purchased 13,429
- -----------------------------------------------------------------------------------------
Payable for futures variation margin 5,200
- -----------------------------------------------------------------------------------------
Tax withholding liability 1,043
- -----------------------------------------------------------------------------------------
Accrued expenses 95,462
- ----------------------------------------------------------------------------------------- ---------
Total liabilities 300,486
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 4,823,116 shares of beneficial interest outstanding $ 47,490,278
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------
Paid-in capital $ 48,339,334
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation
of assets and liabilities in foreign currency, and futures contracts (856,361)
- ----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency
transactions, and futures contracts (447,919)
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income 455,224
- ---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 47,490,278
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------------------
Institutional Service Shares ($43,792,915 / 4,447,084 shares of beneficial interest outstanding) $9.85
- ---------------------------------------------------------------------------------------------------- ------------
Select Shares ($3,697,363 / 376,032 shares of beneficial interest outstanding) $9.83
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $1,629 and dollar roll interest expense of $14,256) $1,021,238
- -------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $1,229) 207,757
- ------------------------------------------------------------------------------------------------------- ----------
Total investment income 1,228,995
- ------------------------------------------------------------------------------------------------------- ----------
EXPENSES:
- -------------------------------------------------------------------------------------------------------
Investment advisory fee $ 154,964
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 42,041
- --------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 59,331
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 23,851
- --------------------------------------------------------------------------------------------
Legal fees 2,000
- --------------------------------------------------------------------------------------------
Fund share registration costs 8,385
- --------------------------------------------------------------------------------------------
Printing and postage 3,138
- --------------------------------------------------------------------------------------------
Insurance premiums 5,158
- --------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 3,647
- --------------------------------------------------------------------------------------------
Distribution services fee 10,942
- --------------------------------------------------------------------------------------------
Miscellaneous 3,511
- -------------------------------------------------------------------------------------------- ---------
Total expenses 316,968
- --------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 121,127
- ---------------------------------------------------------------------------------
Waiver of distribution services fee 3,647 124,774
- --------------------------------------------------------------------------------- --------- ---------
Net expenses 192,194
- ------------------------------------------------------------------------------------------------------- ----------
Net investment income 1,036,801
- ------------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) (416,902)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities in foreign currency, and futures contracts (856,361)
- ------------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts (1,273,263)
- ------------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ (236,462)
- ------------------------------------------------------------------------------------------------------- ----------
</TABLE>
*For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------------- -------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------
Net investment income $ 1,036,801
- ---------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions,
and futures contracts ($405,899 net loss, as computed for federal
income tax purposes) (416,902)
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures
contracts (856,361)
- --------------------------------------------------------------------------------------- -------------------------
Change in net assets resulting from operations (236,462)
- --------------------------------------------------------------------------------------- -------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------------------
Institutional Service Shares (576,693)
- ---------------------------------------------------------------------------------------
Select Shares (35,879)
- --------------------------------------------------------------------------------------- -------------------------
Change in net assets resulting from distributions to shareholders (612,572)
- --------------------------------------------------------------------------------------- -------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ---------------------------------------------------------------------------------------
Proceeds from sale of shares 52,456,535
- ---------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 257,127
- ---------------------------------------------------------------------------------------
Cost of shares redeemed (4,374,350)
- --------------------------------------------------------------------------------------- -------------------------
Change in net assets from Fund share transactions 48,339,312
- --------------------------------------------------------------------------------------- -------------------------
Change in net assets 47,490,278
- ---------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------- -------------------------
End of period (including undistributed net investment income of $455,224) $ 47,490,278
- --------------------------------------------------------------------------------------- -------------------------
</TABLE>
* For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein are only those of Federated Managed Growth and Income
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares, Institutional Service Shares and Select
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities, bonds, corporate bonds and other fixed income securities are
generally valued at the price provided by an independent pricing service.
Short-term securities with remaining maturities of sixty days or less may
be stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $405,899, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($405,899).
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and
the original futures contract value is reflected in the "daily variation
margin" account. Daily variation margin adjustments, arising from this
"marking to market" process, are recorded by the Fund as unrealized gains
or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended November 30, 1994, the Fund had a realized
gain of $149,143 on futures contracts.
At November 30, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION CONTRACTS APPRECIATION
DATE TO DELIVER/RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
December 1994 3 S&P 500 Index Futures Long $ (9,704)
December 1994 1 S&P Midcap Index Future Long (4,250)
March 1995 1 S&P 500 Index Future Long 400
March 1995 2 S&P Midcap Index Futures Long 850
-----------------
Net Unrealized Appreciation (Depreciation)
on Futures Contracts $ (12,704)
-----------------
</TABLE>
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994, the foreign portion of the portfolio was diversified
with the following industries:
<TABLE>
<S> <C>
Agency 2.0%
Automotive 0.1
Banking 0.4
Beverage & Tobacco 0.1
Building & Development 0.2
Chemical 0.1
Diversified 0.1
Electronics & Electric 0.2
Energy 0.2
Insurance 0.1%
Machinery & Equipment 0.2
Pharmaceutical 0.1
Retailers 0.2
Sovereign 5.0
State/Provincial 0.2
Supranational 0.7
Telecomm. & Cellular 0.1
Utilities 0.3
</TABLE>
J. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
K. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee. Additional information on each restricted security held
at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Freeport Terminal (Malta) 6/16/94 $284,100
</TABLE>
L. RECLASSIFICATION--During the period ended November 30, 1994, the Fund
adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax differences have been reclassified. These differences are due to
differing treatments for foreign currency and futures transactions. Amounts
as of November 30, 1994, have been reclassified to reflect an increase in
paid in capital of $22, an increase in undistributed net investment income
of $30,995, and a decrease in accumulated net realized gain (loss) of
$31,017. Net investment income, net realized gains, and net assets were not
affected by this change.
M. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 4,831,900 $ 48,424,276
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 23,521 236,142
- --------------------------------------------------------------------------------------
Shares redeemed (408,337) (4,090,253)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Institutional Service
Share transactions 4,447,084 $ 44,570,165
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C> <C>
SELECT SHARES SHARES DOLLARS
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 402,183 $ 4,032,259
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,090 20,985
- --------------------------------------------------------------------------------------
Shares redeemed (28,241) (284,097)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Select Share transactions 376,032 $ 3,769,147
- -------------------------------------------------------------------------------------- ---------- -------------
Total net change resulting from Fund Share transactions 4,823,116 $ 48,339,312
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
*For the period from January 27, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors on an annualized basis. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Select Shares. The Plan provides that the Fund
may incur distribution expenses up to .75 of 1% of the average daily net assets
of the Select Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
Under the terms of a Shareholder Service Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets of
each class of shares for the period. This fee is to obtain certain personal
services for shareholders and to maintain the shareholder accounts. For the
period ended November 30, 1994, Institutional Service Shares did not incur a
shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($34,633) and start-up
administrative service expenses ($39,068) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following March 11,
1994 (date the Fund first became effective). For the period ended November 30,
1994, the Fund paid $2,117 and $2,388, respectively pursuant to this agreement.
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 92,905,649
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 47,019,671
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
MANAGED SERIES TRUST
(Federated Managed Growth and Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of November 30, 1994, and the related statements of
operations and changes in net assets, and the financial highlights (see pages 2
and 28 of the prospectus) for the period from January 27, 1994 (start of
business) to November 30, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust) as of November 30, 1994, and the results of its operations, the
changes in its net assets, and its financial highlights for the period from
January 27, 1994 (start of business) to November 30, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 17, 1995
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC--Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Managed 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
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED
GROWTH AND INCOME FUND
SELECT SHARES
PROSPECTUS
A Diversified Portfolio
of Managed Series Trust,
an Open-End Management
Investment Company
Prospectus dated January 31, 1995
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
56166K404
3122006A-SEL (1/95)
[Logo] [Logo]
Federated Managed Growth Federated Managed
and Income Fund Growth Fund
[Logo]
Lifecycle Investing
Managed Series Trust
From Federated Investors
[Logo] [Logo]
Federated Managed Federated Managed
Income Fund Aggressive Growth Fund
Federated Managed Growth Fund
[Logo]
Lifecycle Investing
From Federated Investors
Institutional Service Shares
Federated Managed Growth Fund
is part of Managed Series Trust,
a lifecycle investing program
from Federated Investors
Other funds available in Managed
Series Trust are Federated Managed Income
Fund, Federated Managed Growth and Income
Fund, and Federated Managed Aggressive Growth Fund
[Logo]
Federated Securities Corp.
Distributor
A Subsidiary of Federated Investors
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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Asset Allocation 3
Equity Asset Categories 4
Large Company Stocks 4
Utility Stocks 5
Small Company Stocks 5
Investment Risks 5
Foreign Stocks 5
Equity Reserves 5
Bond Asset Categories 5
U.S. Treasury Securities 6
Mortgaged-Backed Securities 6
Investment-Grade Corporate Bonds 6
High Yield Corporate Bonds 6
Investment Risks 7
Foreign Bonds 7
Acceptable Investments 7
Equity Securities 7
Foreign Securities 7
Investment Risks 7
Equity Reserves 8
Repurchase Agreements 8
Convertible Securities 8
U.S. Treasury and Other U.S.
Government Securities 9
Mortgage-Backed Securities 9
Collateralized Mortgage Obligations
("CMOs") 9
Real Estate Mortgage Investment
Conduits ("REMICs") 10
Characteristics of Mortgage-Backed
Securities 10
Corporate Bonds 11
Investing in Securities of Other
Investment Companies 11
Restricted and Illiquid Securities 11
When-Issued and Delayed Delivery
Transactions 11
Lending of Portfolio Securities 12
Foreign Currency Transactions 12
Currency Risks 12
Forward Foreign Currency Exchange
Contracts 12
Options 13
Futures and Options on Futures 13
Risks 14
Portfolio Turnover 15
Investment Limitations 15
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Institutional Service Shares 18
Administration of the Fund 18
Administrative Services 18
Shareholder Services Plan 18
Other Payments to Financial Institutions 19
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Institutional
Service Shares 19
NET ASSET VALUE 20
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 20
- ------------------------------------------------------
Share Purchases 20
Through a Financial Institution 20
By Wire 20
By Mail 21
Minimum Investment Required 21
What Shares Cost 21
Subaccounting Services 21
Systematic Investment Program 21
Certificates and Confirmations 22
Dividends 22
Capital Gains 22
REDEEMING INSTITUTIONAL SERVICE SHARES 22
- ------------------------------------------------------
Through a Financial Institution 22
Telephone Redemption 22
Written Requests 23
Signatures 23
Receiving Payment 23
Systematic Withdrawal Program 23
Accounts with Low Balances 24
SHAREHOLDER INFORMATION 24
- ------------------------------------------------------
Voting Rights 24
Massachusetts Partnership Law 24
TAX INFORMATION 25
- ------------------------------------------------------
Federal Income Tax 25
Pennsylvania Corporate and
Personal Property Taxes 25
PERFORMANCE INFORMATION 25
- ------------------------------------------------------
OTHER CLASSES OF SHARES 26
- ------------------------------------------------------
Financial Highlights--Select Shares 27
FINANCIAL STATEMENTS 28
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 57
- ------------------------------------------------------
APPENDIX 58
- ------------------------------------------------------
ADDRESSES 61
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)............................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)......................................................................... 0.00%
12b-1 Fee................................................................................................. None
Total Other Expenses (after expense reimbursement)........................................................ 1.00%
Shareholder Services Fee (after waiver) (2)................................................ 0.00%
Total Institutional Service Shares Operating Expenses (3)........................................ 1.00%
</TABLE>
- ------------
(1) The management fee has been reduced to reflect the voluntary waiver 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 services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the table above
are based on expenses expected during the fiscal year ending November 30,
1995. The Total Institutional Service Shares Operating Expenses were 0.89%
for the fiscal year ended November 30, 1994 and were 1.79% absent the
voluntary waiver of the management fee and the voluntary reimbursement of
certain other expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in Institutional
Service Shares" and "Fund Information." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $10 $32
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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."
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 57.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.20
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.26)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations (0.06)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.12)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.82
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** (0.59%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.89%(a)
- ----------------------------------------------------------------------------------------
Net investment income 4.28%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.90%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $28,973
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 71%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994 the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
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:
equities and bonds. 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 equities. The
equities asset categories are large company stocks, utility stocks, small
company stocks, foreign stocks and equity 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>
EQUITIES 50-70%
Large Company Stocks 0-70%
Utility Stocks 0-7.5%
Small Company Stocks 0-21%
Foreign Stocks 0-21%
Equity Reserves 0-15%
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
equities will be allocated among the following asset categories within the
ranges specified:
LARGE COMPANY STOCKS. Large company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of high-quality companies selected by the Fund's
adviser. Ordinarily, these companies will be in the top 25 percent of their
industries with regard to revenues and have a market capitalization of
$500,000,000 or more. However, other factors, such as a company's product
position, market share, current earnings and/or dividend and earnings
growth prospects, will be considered by the Fund's
adviser and may outweigh revenues. The Fund may invest up to 70 percent of
its total assets in large company stocks.
UTILITY STOCKS. Utility stocks are common stocks and securities
convertible into or exchangeable for common stocks, such as rights and
warrants, of utility companies. The Fund may invest up to 7.5 percent of
its total assets in utility stocks. Common stocks of utilities are
generally characterized by higher dividend yields and lower growth rates
than common stocks of industrial companies. Under normal market conditions,
the higher income stream from utility stocks tends to make them less
volatile than stocks of industrial companies.
SMALL COMPANY STOCKS. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price x number of shares outstanding) below the top 1,000 stocks that
comprise the large and mid-range capitalization sector of the United States
equity market. These stocks are comparable to, but not limited to, the
stocks comprising the Russell 2000 Index, an index of small capitalization
stocks. The Fund may invest up to 21 percent of its total assets in small
company stocks.
INVESTMENT RISKS. Stocks in the small capitalization sector of the
United States equity market have historically been more volatile in
price than larger capitalization stocks, such as those included in the
Standard & Poor's 500 Index. This is because, among other things, small
companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to have
a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks of
large companies; that is, small company stocks may decline in price as
large company stocks rise in price 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. American Depository Receipts ("ADRs"), including dollar
denominated ADRs which are issued by domestic banks and traded in the
United States on exchanges or over-the-counter, are treated as foreign
stocks for purposes of the asset category ranges. The Fund may invest up to
21 percent of its total assets in foreign stocks.
EQUITY RESERVES. When the adviser believes that a temporary defensive
position is desirable, the Fund may invest in equity reserves. Equity
reserves will be used to adjust the risk level of the equity portion of the
Fund in response to market conditions. Equity reserves will consist of U.S.
and foreign short-term money market instruments such as commercial paper
rated A-1 by Standard and Poor's Ratings Group, Prime-1 by Moody's
Investors Service, Inc., or F-1 by Fitch Investors Service, Inc. The Fund
may invest up to 15 percent of its total assets in equity 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. The prices of fixed income securities fluctuate
inversely to the direction of interest rates. 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
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. Yankee bonds, which are U.S.
dollar-denominated bonds issued and traded in the United States by foreign
issuers, are treated as investment-grade corporate bonds for purposes of
the asset category ranges.
HIGH YIELD CORPORATE BONDS. High yield corporate bonds are corporate debt
obligations having fixed or floating rates of interest and which are rated
BB or lower by NRSROs (commonly known as junk bonds). The Fund may invest
up to 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.
INVESTMENT RISKS. Lower-rated securities will usually offer higher
yields than higher-rated securities. However, there is more risk
associated with these investments. This is because of reduced
creditworthiness and increased risk of default. Lower-rated securities
generally tend to reflect short-term corporate and market developments
to a greater extent than higher-rated securities which react primarily
to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major
issuers, underwriters, or dealers of lower-rated corporate debt
obligations. In addition, since there are fewer investors in
lower-rated securities, it may be harder to sell the securities at an
optimum time. As a result of these factors, lower-rated securities tend
to have more price volatility and carry more risk to principal than
higher-rated securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more
likely to call bonds during periods of declining interest rates. In
these cases, if the Fund owns a bond which is called, the Fund will
receive its return of principal earlier than expected and would likely
be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.
FOREIGN BONDS. Foreign bonds are high-quality debt securities of countries
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 countries 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 Ratings Group (AAA, AA, A
or BBB) or are unrated if determined to be of equivalent quality by the
Fund's adviser.
INVESTMENT RISKS. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
apply to securities issued by foreign corporations and sovereign
governments. These risks relate to political and economic developments
abroad, as well as those that result from the differences between the
regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to,
expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual
obligations or obtain court judgments abroad than would be the case in
the United States because of differences in the legal systems. If the
issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt, the Fund
may have limited legal recourse in the event of default. Moreover,
individual foreign economies may differ favorably or unfavorably from
the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly
available information about foreign issuers; credit risks associated
with certain foreign governments; the lack of uniform financial
accounting standards applicable to foreign issuers; less readily
available market quotations on foreign issuers; the likelihood that
securities of foreign issuers may be less liquid or more volatile;
generally higher foreign brokerage commissions; and unreliable mail
service between countries.
EQUITY RESERVES. The Fund's equity reserves may be cash received from the
sale of Fund shares, reserves for temporary defensive purposes or to take
advantage of market opportunities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. The adviser may treat
convertible securities as large company stocks, small company stocks, or
high yield bonds for purposes of the asset category ranges, depending upon
current market conditions, including the relationship of the then-current
price to the conversion price. The convertible securities in which the Fund
invests may be rated "high yield" or of comparable quality at the time of
purchase.
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 an 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 or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the
entity is not subject to federal income taxation. Instead, income is
passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or
more classes of "regular interests," some of which may offer adjustable
rates, and a single class of "residual interests." To qualify as a
REMIC, substantially all of the assets of the entity must be in assets
directly or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities have yield and maturity characteristics corresponding to the
underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal
payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective
maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking
in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the
entire principal amount is returned. This is caused by the need to
reinvest at lower interest rates both distributions of principal
generally and significant prepayments which become more likely as
mortgage interest rates decline. Since comparatively high interest
rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of
declining interest rates than other non-callable, fixed-income
government securities of comparable stated maturities. However,
mortgage-backed securities may experience less pronounced declines in
value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in
the amount of payments made to holders of interest-only SMBSs. It is
possible that the Fund might not recover its original investment in
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. Therefore, interest-only SMBSs generally increase
in value as interest rates rise and decrease in value as interest
rates fall, counter to changes in value experienced by most fixed
income securities. The Fund's adviser intends to use this
characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to
pursue the Fund's investment objective.
CORPORATE BONDS. The investment-grade corporate bonds in which the Fund
invests are:
rated within the four highest ratings for corporate bonds by Moody's
Investors Service, Inc. (Aaa, Aa, A, or Baa) ("Moody's"), Standard &
Poor's Ratings Group (AAA, AA, A, or BBB) ("Standard & Poor's"), or Fitch
Investors Service, Inc. (AAA, AA, A, or BBB) ("Fitch");
unrated if other long-term debt securities of that issuer are rated, at
the time of purchase, Baa or better by Moody's or BBB or better by
Standard & Poor's or Fitch; or
unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so.
The high yield corporate bonds in which the Fund invests are rated Ba or
lower by Moody's or BB or lower by Standard & Poor's or Fitch (commonly
known as junk bonds). A description of the rating categories is contained
in the Appendix to this prospectus.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3
percent of the total outstanding voting stock of any such investment company,
invest more than 5 percent of its total assets in any one such investment
company, or invest more than 10 percent of its total assets in such other
investment companies in general. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies in
addition to the fees and expenses payable directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, over-the-counter
options, and repurchase agreements providing for settlement in more than seven
days after notice, to 15 percent of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100 percent of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
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. The Fund will not invest more than 21% of its total assets in
forward foreign currency exchange contracts.
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. Interest rate
futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract, and the buyer agrees to
take delivery of the instrument at the specified future time.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The Fund may utilize stock index futures to
handle cash flows into and out of the Fund and to potentially reduce
transactional costs.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5
percent of the market value of the Fund's total assets. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts are unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the investment adviser could be incorrect in
its expectations about the direction or extent of market factors such as
stock price movements. In these events, the Fund may lose money on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. It is not anticipated that the portfolio trading engaged in
by the Fund will result in its annual rate of portfolio turnover exceeding 100%.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15 percent of
the value of those assets to secure such borrowings;
lend any securities except for portfolio securities; or
underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by other mutual funds with similar
objectives and policies. Under the advisory contract, which provides for
voluntary reimbursement of expenses by the adviser, the adviser may
voluntarily waive some or all of its fee. This does not include
reimbursement to the Fund of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, Chairman
and Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's
son, J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Charles A. Ritter is the portfolio manager for the Fund and performs the
overall allocation of the assets of the Fund among the various asset
categories. He has performed these duties since the Fund's inception. In
allocating the Fund's assets, Mr. Ritter evaluates the market environment
and economic outlook, utilizing the services of the investment adviser's
economist and strategist. Mr. Ritter joined Federated Investors in 1983 and
has been a Vice President of the Fund's investment adviser since 1992. From
1988 until 1991, Mr. Ritter acted as an Assistant Vice President. Mr.
Ritter is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Chicago and his M.S. in Economics from Carnegie
Mellon University.
The portfolio managers for each of the individual asset categories are as
follows:
Peter R. Anderson is the senior portfolio manager for the domestic large
company stocks asset category. He has been one of the Fund's portfolio
managers since its inception. Mr. Anderson joined Federated Investors in
1972 and is presently a Senior Vice President of the Fund's investment
adviser. Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Wisconsin.
Frederick L. Plautz is the portfolio manager for the domestic large company
stocks asset category and the portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Plautz joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994. Prior to
this, Mr. Plautz served as an Assistant Vice President of the investment
adviser. Mr. Plautz was a portfolio manager at Banc One Asset Management
Corp. from 1986 until 1990. Mr. Plautz received his M.S. in Finance from
the University of Wisconsin.
James Grefenstett is the co-portfolio manager for the domestic small
company stocks asset category. He has served in this capacity since August
1994. Mr. Grefenstett joined Federated Investors in 1992 and has been an
Assistant Vice President of the Fund's investment adviser since 1994. From
1992 until 1994, Mr. Grefenstett acted as an investment analyst. Mr.
Grefenstett was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992, and an investment officer at Pittsburgh National Bank from 1987
until 1990. Mr. Grefenstett is a Chartered Financial Analyst and received
his M.B.A. in Finance from Carnegie Mellon University.
Christopher H. Wiles is the portfolio manager for the utility stocks asset
category, and has been one of the Fund's portfolio managers since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
Randall S. Bauer is the portfolio manager for the foreign stocks and
foreign bonds asset categories. He has performed these duties since the
Fund's inception. Mr. Bauer joined Federated Investors in 1989 and has been
a Vice President of the Fund's investment adviser since January, 1995.
Prior to this, Mr. Bauer served as an Assistant Vice President of the
Fund's investment adviser. Mr. Bauer was an Assistant Vice President of the
International Banking Division at Pittsburgh National Bank from 1982 until
1989. Mr. Bauer is a Chartered Financial Analyst and received his M.B.A. in
Finance from Pennsylvania State University.
Susan M. Nason and Gary J. Madich are co-portfolio managers for the U.S.
Treasury securities asset category. They have performed these duties since
the Fund's inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Fund's investment adviser since 1993. Ms.
Nason served as an Assistant Vice President of the investment adviser from
1990 until 1992, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received her M.B.A.
in Finance from Carnegie Mellon University. Mr. Madich joined Federated
Investors in 1984 and has been a Senior Vice President of the Fund's
investment adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a Chartered
Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh.
Thomas M. Franks is the portfolio manager for the equity reserves asset
category. He has performed these duties since June 1994. Mr. Franks joined
Federated Investors in 1985 and has been a Vice President of the Fund's
investment adviser since 1990. Mr. Franks acted as an Assistant Vice
President of the investment adviser from 1987 until 1990. Mr. Franks is a
Chartered Financial Analyst and received his M.S. in Business
Administration from Carnegie Mellon University.
Kathleen M. Foody-Malus and Gary J. Madich are co-portfolio managers for
the mortgage-backed securities asset category. They have performed these
duties since the Fund's inception. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Vice President of the Fund's investment
adviser since 1993. Ms. Foody-Malus served as an Assistant Vice President
of the investment adviser from 1990 until 1992, and from 1986 until 1989
she acted as an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
Joseph M. Balestrino and Susan M. Nason are co-portfolio managers for the
investment-grade corporate bonds asset category. They have performed these
duties since the Fund's inception. Mr. Balestrino joined Federated
Investors in 1986 and has been an Assistant Vice President of the Fund's
investment adviser since 1991. Mr. Balestrino served as an investment
analyst of the
investment adviser from 1989 until 1991, and from 1986 until 1989 he acted
as Project Manager in the Product Development Department. Mr. Balestrino is
a Chartered Financial Analyst and received his M.A. in Urban and Regional
Planning from the University of Pittsburgh.
Mark E. Durbiano is the portfolio manager for the high yield corporate
bonds asset category. He has performed these duties since the Fund's
inception. Mr. Durbiano joined Federated Investors in 1982 and has been a
Vice President of the Fund's investment adviser since 1988. Mr. Durbiano is
a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Shares. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments up to 0.25 of 1% of
the average daily net asset value of the Institutional Service Shares to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts ("shareholder services"). The Trust has entered into a Shareholder
Services Agreement with Federated Shareholder Services, a subsidiary of
Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Trust and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to receiving the payments
under the Services Plan, financial institutions could be compensated by the
distributor, who could be reimbursed by the adviser, or affiliates thereof, for
providing administrative support services to holders of Shares. These payments
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.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem 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
Services Plan, if any; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; registration fees paid to the Securities and Exchange
Commission and registration fees paid to state securities commissions;
expenses related to administrative personnel and services as required to support
holders of Shares; legal fees relating solely to Shares; and Trustees' fees
incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Institutional Service Shares may exceed that of Select Shares due to the
variance in daily net income realized by each class. Such variance will reflect
only accrued net income to which the shareholders of a particular class are
entitled.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased through a financial institution which has a
sales agreement with the distributor or by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish an account will be taken over the telephone. The
Fund reserves the right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Managed Growth Fund-- Institutional Service Shares; Fund Number (this number can
be found on the account statement or by contacting the Fund); Group Number or
Wire Order Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Managed Growth Fund--Institutional Service Shares to Federated Services Company,
c/o State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account had been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution, by telephone
request or by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written instructions to the Fund. The financial institution may
charge customary fees and commissions for this service.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). All proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name and class of shares
name, his account number, and the Share or dollar amount requested. If Share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agents have received
payment for Shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Shares,
and the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually use up, the shareholder's
investment in the
Fund. For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $25,000. A shareholder may apply for participation in this program through
Federated Securities Corp.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
Shares are sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Service
Shares and Select Shares. Because Select Shares are subject to 12b-1 fees, the
total return and yield for Institutional Service Shares, for the same period,
will exceed that of Select Shares.
From time to time, the Fund may advertise the performance of Institutional
Service Shares using certain financial publications and/or compare the
performance of Institutional Service Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Select Shares are sold primarily to retail and private banking customers of
financial institutions. Select Shares are sold at net asset value. Investments
in Select Shares are subject to a minimum initial investment of $1,500.
Select Shares are distributed pursuant to a 12b-1 Plan adopted by the Trust
whereby the distributor is paid a fee of .75 of 1% of the Select Shares' average
daily net assets. Select Shares are also subject to a 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 generally
exceed that of Select Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS--SELECT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 57.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.15
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments,
foreign currency transactions, and futures contracts (0.24)
- ---------------------------------------------------------------------------------------- -------
Total from investment operations (0.09)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.10)
- ---------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.81
- ---------------------------------------------------------------------------------------- -------
TOTAL RETURN** (0.90%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.70%(a)
- ----------------------------------------------------------------------------------------
Net investment income 3.53%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.15%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 2,952
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 71%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994 the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the period ended November 30, 1994, which can be obtained free
of charge.
FEDERATED MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--40.6%*
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--14.6%**
----------------------------------------------------------------------------------
BASIC INDUSTRY--1.2%
----------------------------------------------------------------------------------
1,700 Eastman Chemical Co. $ 80,113
----------------------------------------------------------------------------------
2,000 Lubrizol Corp. 63,000
----------------------------------------------------------------------------------
2,600 Phelps Dodge Corp. 148,850
----------------------------------------------------------------------------------
4,200 Praxair, Inc. 85,050
---------------------------------------------------------------------------------- -------------
Total 377,013
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--1.2%
----------------------------------------------------------------------------------
1,400 Chrysler Corp. 67,725
----------------------------------------------------------------------------------
2,100 Eastman Kodak Co. 95,813
----------------------------------------------------------------------------------
3,000 Ford Motor Co. 81,375
----------------------------------------------------------------------------------
5,300 Mattel, Inc. 141,775
---------------------------------------------------------------------------------- -------------
Total 386,688
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.2%
----------------------------------------------------------------------------------
1,300 Avon Products, Inc. 80,437
----------------------------------------------------------------------------------
2,100 Philip Morris Cos., Inc. 125,475
----------------------------------------------------------------------------------
2,600 Reebok International, Ltd. 99,775
----------------------------------------------------------------------------------
9,400 RJR Nabisco Holdings, Conv. Pfd., Series C 63,450
---------------------------------------------------------------------------------- -------------
Total 369,137
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.7%
----------------------------------------------------------------------------------
3,800 American Stores Co. 100,225
----------------------------------------------------------------------------------
2,800 Sears, Roebuck & Co. 132,300
---------------------------------------------------------------------------------- -------------
Total 232,525
---------------------------------------------------------------------------------- -------------
ENERGY--1.6%
----------------------------------------------------------------------------------
3,400 Baker Hughes, Inc. 61,200
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
ENERGY--CONTINUED
----------------------------------------------------------------------------------
2,800 Chevron Corp. $ 122,150
----------------------------------------------------------------------------------
1,500 Mapco, Inc. 75,188
----------------------------------------------------------------------------------
1,900 Texaco, Inc. 118,038
----------------------------------------------------------------------------------
4,500 USX Marathon Group 81,000
----------------------------------------------------------------------------------
1,200 (a)Western Atlas, Inc. 52,350
---------------------------------------------------------------------------------- -------------
Total 509,926
---------------------------------------------------------------------------------- -------------
FINANCE--2.6%
----------------------------------------------------------------------------------
1,500 AMLI Residential Properties Trust, REIT 27,562
----------------------------------------------------------------------------------
1,300 Bankers Trust of New York Corp. 77,025
----------------------------------------------------------------------------------
2,500 Citicorp 104,063
----------------------------------------------------------------------------------
1,700 Dean Witter, Discover & Co. 59,500
----------------------------------------------------------------------------------
1,000 Federal National Mortgage Association 71,125
----------------------------------------------------------------------------------
2,802 Mellon Bank Corp. 92,816
----------------------------------------------------------------------------------
3,200 PNC Financial Corp. 66,400
----------------------------------------------------------------------------------
1,800 Providian Corp. 54,450
----------------------------------------------------------------------------------
3,100 Ryder Systems, Inc. 67,038
----------------------------------------------------------------------------------
1,700 Transamerica Corp. 80,538
----------------------------------------------------------------------------------
3,500 Travelers, Inc. 115,063
---------------------------------------------------------------------------------- -------------
Total 815,580
---------------------------------------------------------------------------------- -------------
HEALTHCARE--1.3%
----------------------------------------------------------------------------------
2,000 American Home Products Corp. 130,250
----------------------------------------------------------------------------------
1,700 Becton, Dickinson & Co. 80,325
----------------------------------------------------------------------------------
1,700 Bristol-Myers Squibb Co. 98,175
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
HEALTHCARE--CONTINUED
----------------------------------------------------------------------------------
2,300 U.S. Healthcare, Inc. $ 102,925
---------------------------------------------------------------------------------- -------------
Total 411,675
---------------------------------------------------------------------------------- -------------
INDUSTRIAL/MANUFACTURING--1.7%
----------------------------------------------------------------------------------
1,600 Caterpillar, Inc. 86,400
----------------------------------------------------------------------------------
700 Deere & Co. 44,975
----------------------------------------------------------------------------------
2,000 (a)FMC Corp. 116,500
----------------------------------------------------------------------------------
1,500 General Electric Co. 69,000
----------------------------------------------------------------------------------
1,600 (a)Litton Industries, Inc. 54,600
----------------------------------------------------------------------------------
800 Loews Corp. 69,100
----------------------------------------------------------------------------------
2,400 Textron, Inc. 112,800
---------------------------------------------------------------------------------- -------------
Total 553,375
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--2.1%
----------------------------------------------------------------------------------
3,600 General Motors Corp., Class E 132,300
----------------------------------------------------------------------------------
1,400 Hewlett-Packard Co. 137,200
----------------------------------------------------------------------------------
800 International Business Machines Corp. 56,600
----------------------------------------------------------------------------------
2,600 Martin-Marietta Corp. 112,775
----------------------------------------------------------------------------------
1,900 Raytheon Co. 119,463
----------------------------------------------------------------------------------
3,000 Rockwell International Corp. 101,625
---------------------------------------------------------------------------------- -------------
Total 659,963
---------------------------------------------------------------------------------- -------------
UTILITIES--1.0%+
----------------------------------------------------------------------------------
2,500 AT&T Corp. 122,813
----------------------------------------------------------------------------------
600 British Telecommunications PLC, ADR 35,625
----------------------------------------------------------------------------------
1,400 Duke Power Co. 57,050
----------------------------------------------------------------------------------
1,500 Enron Corp. 40,500
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
LARGE COMPANY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
3,300 MCI Communications Corp. $ 64,350
---------------------------------------------------------------------------------- -------------
Total 320,338
---------------------------------------------------------------------------------- -------------
TOTAL LARGE COMPANY (IDENTIFIED COST, $4,805,103) 4,636,220
---------------------------------------------------------------------------------- -------------
SMALL COMPANY--9.5%**
----------------------------------------------------------------------------------
BASIC INDUSTRY--0.3%
----------------------------------------------------------------------------------
1,300 (a)Acme Metals, Inc. 21,125
----------------------------------------------------------------------------------
1,800 (a)Magma Copper Co. 29,025
----------------------------------------------------------------------------------
900 Texas Industries, Inc. 29,813
---------------------------------------------------------------------------------- -------------
Total 79,963
---------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--0.7%
----------------------------------------------------------------------------------
2,100 Anthony Industries, Inc. 34,650
----------------------------------------------------------------------------------
1,500 Arctco, Inc. 30,000
----------------------------------------------------------------------------------
900 (a)Champion Enterprises, Inc. 25,538
----------------------------------------------------------------------------------
700 Polaris Industries Partners, L.P. 31,063
----------------------------------------------------------------------------------
900 (a)Scientific Games Holding Corp. 38,475
----------------------------------------------------------------------------------
1,800 SPX Corp. 27,900
----------------------------------------------------------------------------------
1,100 Toro Co. 30,800
---------------------------------------------------------------------------------- -------------
Total 218,426
---------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--0.3%
----------------------------------------------------------------------------------
1,400 (a)Cyrk International, Inc. 51,800
----------------------------------------------------------------------------------
1,100 Haggar Corp. 23,650
----------------------------------------------------------------------------------
1,400 Hudson Foods, Inc., Class A 31,675
---------------------------------------------------------------------------------- -------------
Total 107,125
---------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--1.2%
----------------------------------------------------------------------------------
1,400 (a)APS Holding Corp., Class A 35,437
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
CONSUMER SERVICES--CONTINUED
----------------------------------------------------------------------------------
1,000 (a)Carmike Cinemas, Inc. $ 22,500
----------------------------------------------------------------------------------
900 (a)Devon Group, Inc. 22,950
----------------------------------------------------------------------------------
1,000 Fair Isaac & Co., Inc. 42,125
----------------------------------------------------------------------------------
1,400 La Quinta Inns, Inc. 29,750
----------------------------------------------------------------------------------
1,000 (a)Landstar System, Inc. 25,500
----------------------------------------------------------------------------------
1,100 Media General, Inc., Class A 32,038
----------------------------------------------------------------------------------
3,800 (a)Prime Hospitality Corp. 28,500
----------------------------------------------------------------------------------
1,800 (a)Revco D.S., Inc. 40,500
----------------------------------------------------------------------------------
1,400 Strawbridge & Clothier, Class A 32,200
----------------------------------------------------------------------------------
1,700 (a)Super Rite Foods Holdings Corp. 19,550
----------------------------------------------------------------------------------
2,500 (a)The Good Guys, Inc. 30,000
----------------------------------------------------------------------------------
2,900 (a)Vitalink Pharmacy Services, Inc. 33,350
---------------------------------------------------------------------------------- -------------
Total 394,400
---------------------------------------------------------------------------------- -------------
ENERGY--0.5%
----------------------------------------------------------------------------------
2,000 (a)Dekalb Energy Co., Class B 30,000
----------------------------------------------------------------------------------
1,000 Diamond Shamrock, Inc. 25,750
----------------------------------------------------------------------------------
4,800 (a)Numac Energy, Inc. 28,200
----------------------------------------------------------------------------------
2,000 Southwest Gas Corp. 30,500
----------------------------------------------------------------------------------
2,400 (a)Tide West Oil Co. 26,400
----------------------------------------------------------------------------------
7,000 (a)Wainoco Oil Corp. 34,125
---------------------------------------------------------------------------------- -------------
Total 174,975
---------------------------------------------------------------------------------- -------------
FINANCIAL--2.1%
----------------------------------------------------------------------------------
2,000 (a)Acceptance Insurance Cos., Inc. 28,750
----------------------------------------------------------------------------------
1,800 Allied Capital Commercial 29,925
----------------------------------------------------------------------------------
1,100 Allied Group, Inc. 28,050
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
FINANCIAL--CONTINUED
----------------------------------------------------------------------------------
1,300 Centura Banks, Inc. $ 27,950
----------------------------------------------------------------------------------
2,900 City National Corp. 27,550
----------------------------------------------------------------------------------
1,500 Comdisco, Inc. 32,063
----------------------------------------------------------------------------------
1,500 Commerce Bancorp., Inc. 27,000
----------------------------------------------------------------------------------
1,200 Fremont General Corp. 27,750
----------------------------------------------------------------------------------
900 GFC Financial Corp. 26,550
----------------------------------------------------------------------------------
3,900 Hibernia Corp., Class A 30,713
----------------------------------------------------------------------------------
2,800 Hilb Rogal & Hamilton Co. 31,500
----------------------------------------------------------------------------------
1,500 Money Store, Inc. 26,625
----------------------------------------------------------------------------------
1,400 (a)Mutual Assurance 39,200
----------------------------------------------------------------------------------
2,100 North Fork Bancorp, Inc. 29,400
----------------------------------------------------------------------------------
900 PHH Corp. 31,613
----------------------------------------------------------------------------------
800 Protective Life Corp. 34,800
----------------------------------------------------------------------------------
900 Provident Bancorp., Inc. 27,225
----------------------------------------------------------------------------------
1,200 Southern National Corp. 22,050
----------------------------------------------------------------------------------
800 TCF Financial Corp. 29,500
----------------------------------------------------------------------------------
1,500 Uslico Corp. 30,000
----------------------------------------------------------------------------------
1,400 Washington National Corp. 28,000
----------------------------------------------------------------------------------
1,800 Webb (Del) Corp. 29,700
----------------------------------------------------------------------------------
1,000 WestAmerica Bancorporation 30,500
---------------------------------------------------------------------------------- -------------
Total 676,414
---------------------------------------------------------------------------------- -------------
HEALTHCARE--0.8%
----------------------------------------------------------------------------------
1,500 (a)Advantage Health Corp. 44,250
----------------------------------------------------------------------------------
1,400 (a)Bio Rad Laboratories, Inc., Class A 38,850
----------------------------------------------------------------------------------
1,200 (a)Genesis Health Ventures, Inc. 33,900
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
HEALTHCARE--CONTINUED
----------------------------------------------------------------------------------
1,500 ICN Pharmaceuticals $ 33,563
----------------------------------------------------------------------------------
1,200 (a)Sierra Health Services, Inc. 36,900
----------------------------------------------------------------------------------
1,100 (a)Universal Health Services, Inc., Class B 27,500
----------------------------------------------------------------------------------
1,300 West, Inc. 33,963
---------------------------------------------------------------------------------- -------------
Total 248,926
---------------------------------------------------------------------------------- -------------
INDUSTRIAL/MANUFACTURING--1.3%
----------------------------------------------------------------------------------
700 AGCO Corp. 31,937
----------------------------------------------------------------------------------
800 Blount, Inc., Class A 35,800
----------------------------------------------------------------------------------
1,500 Borden Chemicals & Plastics, L.P. 32,813
----------------------------------------------------------------------------------
1,200 Borg-Warner Automotive 28,200
----------------------------------------------------------------------------------
1,900 Brush Wellman, Inc. 28,738
----------------------------------------------------------------------------------
1,000 Butler Manufacturing Co. 34,000
----------------------------------------------------------------------------------
1,500 Castle (A.M.) & Co. 19,500
----------------------------------------------------------------------------------
1,700 Commercial Intertech Corp. 27,200
----------------------------------------------------------------------------------
1,700 (a)Galey & Lord, Inc. 27,200
----------------------------------------------------------------------------------
800 Pittway Corp., Class A 30,900
----------------------------------------------------------------------------------
2,000 (a)Smith International, Inc. 27,000
----------------------------------------------------------------------------------
3,100 Terra Industries, Inc. 33,713
----------------------------------------------------------------------------------
1,600 (a)Western Waste Industries 24,400
----------------------------------------------------------------------------------
1,300 (a)Wolverine Tube, Inc. 31,200
---------------------------------------------------------------------------------- -------------
Total 412,601
---------------------------------------------------------------------------------- -------------
RETAIL TRADE--0.2%
----------------------------------------------------------------------------------
1,900 Bradlees, Inc. 26,125
----------------------------------------------------------------------------------
900 (a)Eckerd Corp. 25,538
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
RETAIL TRADE--CONTINUED
----------------------------------------------------------------------------------
1,700 Wolohan Lumber Co. $ 26,350
---------------------------------------------------------------------------------- -------------
Total 78,013
---------------------------------------------------------------------------------- -------------
TECHNOLOGY--1.6%
----------------------------------------------------------------------------------
1,775 (a)Bell Industries, Inc. 39,050
----------------------------------------------------------------------------------
1,400 (a)Electronics for Imaging, Inc. 32,900
----------------------------------------------------------------------------------
1,500 Energen Corp. 30,000
----------------------------------------------------------------------------------
1,700 (a)Frame Technology Corp. 25,500
----------------------------------------------------------------------------------
1,500 (a)International Rectifier Corp. 32,625
----------------------------------------------------------------------------------
1,700 (a)Kemet Corp. 36,763
----------------------------------------------------------------------------------
1,900 Methode Electronics, Inc., Class A 26,600
----------------------------------------------------------------------------------
2,000 Pioneer Standard Electronics, Inc. 32,000
----------------------------------------------------------------------------------
1,600 (a)SCI Systems, Inc. 29,600
----------------------------------------------------------------------------------
1,600 (a)Silicon Valley Group, Inc. 32,200
----------------------------------------------------------------------------------
1,300 (a)Tech-Sym Corp. 28,438
----------------------------------------------------------------------------------
1,000 Tektronix, Inc. 37,375
----------------------------------------------------------------------------------
1,100 (a)Tencor Instruments 48,813
----------------------------------------------------------------------------------
900 Watkins Johnson Co. 29,700
----------------------------------------------------------------------------------
2,100 (a)Western Digital Corp. 38,850
---------------------------------------------------------------------------------- -------------
Total 500,414
---------------------------------------------------------------------------------- -------------
TRANSPORTATION--0.2%
----------------------------------------------------------------------------------
1,800 Alaska Air Group, Inc. 29,475
----------------------------------------------------------------------------------
800 (a)Wisconsin Central Transportation Corp. 33,200
---------------------------------------------------------------------------------- -------------
Total 62,675
---------------------------------------------------------------------------------- -------------
UTILITIES--0.3%+
----------------------------------------------------------------------------------
900 Buckeye Partners 30,038
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SMALL COMPANY--CONTINUED
----------------------------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------------------------------------
1,100 CIPSCO, Inc. $ 29,425
----------------------------------------------------------------------------------
1,100 Teppco Partners, L.P. 29,150
---------------------------------------------------------------------------------- -------------
Total 88,613
---------------------------------------------------------------------------------- -------------
TOTAL SMALL COMPANY (IDENTIFIED COST, $3,148,322) 3,042,545
---------------------------------------------------------------------------------- -------------
UTILITY--5.0%+
----------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.9%
----------------------------------------------------------------------------------
1,700 Baltimore Gas & Electric Co. 38,462
----------------------------------------------------------------------------------
3,339 Cinergy Corp. 74,293
----------------------------------------------------------------------------------
1,600 CMS Energy Corp. 35,600
----------------------------------------------------------------------------------
1,700 DPL, Inc. 34,638
----------------------------------------------------------------------------------
1,200 DQE, Inc. 36,300
----------------------------------------------------------------------------------
800 Duke Power Co. 32,600
----------------------------------------------------------------------------------
1,300 Florida Progress Corp. 39,488
----------------------------------------------------------------------------------
1,100 FPL Group, Inc. 38,913
----------------------------------------------------------------------------------
1,400 General Public Utilities Corp. 36,050
----------------------------------------------------------------------------------
1,200 NIPSCO Industries, Inc. 35,100
----------------------------------------------------------------------------------
1,800 Pacificorp 33,300
----------------------------------------------------------------------------------
1,500 Peco Energy Co. 36,188
----------------------------------------------------------------------------------
1,600 Pinnacle West Capital Corp. 31,000
----------------------------------------------------------------------------------
1,800 Southern Co. 37,350
----------------------------------------------------------------------------------
1,300 Utilicorp United, Inc. 33,475
----------------------------------------------------------------------------------
1,200 Western Resources, Inc. 33,750
---------------------------------------------------------------------------------- -------------
Total 606,507
---------------------------------------------------------------------------------- -------------
NATURAL GAS--0.6%
----------------------------------------------------------------------------------
750 Consolidated Natural Gas Co. 26,250
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
----------------------------------------------------------------------------------
NATURAL GAS--CONTINUED
----------------------------------------------------------------------------------
900 Enron Corp. $ 24,300
----------------------------------------------------------------------------------
1,600 MCN Corp. 29,000
----------------------------------------------------------------------------------
1,100 Pacific Enterprises 23,513
----------------------------------------------------------------------------------
1,600 Sonat, Inc. 45,000
----------------------------------------------------------------------------------
1,700 UGI Corp. 32,088
---------------------------------------------------------------------------------- -------------
Total 180,151
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--2.5%
----------------------------------------------------------------------------------
2,500 Ameritech Corp. 98,750
----------------------------------------------------------------------------------
2,500 AT&T Corp. 122,813
----------------------------------------------------------------------------------
1,900 Bell Atlantic Corp. 95,238
----------------------------------------------------------------------------------
1,800 BellSouth Corp. 93,375
----------------------------------------------------------------------------------
3,100 GTE Corp. 94,938
----------------------------------------------------------------------------------
2,300 NYNEX Corp. 86,538
----------------------------------------------------------------------------------
2,200 Southern New England Telecommunications Corp. 72,600
----------------------------------------------------------------------------------
1,600 Southwestern Bell Corp. 66,200
----------------------------------------------------------------------------------
2,000 U.S. West, Inc. 70,500
---------------------------------------------------------------------------------- -------------
Total 800,952
---------------------------------------------------------------------------------- -------------
TOTAL UTILITY (IDENTIFIED COST, $1,633,939) 1,587,610
---------------------------------------------------------------------------------- -------------
FOREIGN EQUITY--10.3%
----------------------------------------------------------------------------------
AUSTRALIA--0.3%
----------------------------------------------------------------------------------
3,000 Broken Hill Proprietary Co. 43,068
----------------------------------------------------------------------------------
19,300 Publishing & Broadcasting 54,435
---------------------------------------------------------------------------------- -------------
Total 97,503
---------------------------------------------------------------------------------- -------------
BELGIUM--0.1%
----------------------------------------------------------------------------------
1,100 Delhaize-Le Lion 44,200
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
FINLAND--0.1%
----------------------------------------------------------------------------------
200 Kone Corp., 'B' $ 21,215
---------------------------------------------------------------------------------- -------------
FRANCE--0.4%
----------------------------------------------------------------------------------
1,000 Elf Aquitaine 68,402
----------------------------------------------------------------------------------
300 LVMH (Moet-Hennessy) 47,946
---------------------------------------------------------------------------------- -------------
Total 116,348
---------------------------------------------------------------------------------- -------------
GERMANY--0.4%
----------------------------------------------------------------------------------
50 Allianz AG Holding 76,194
----------------------------------------------------------------------------------
100 Daimler Benz AG 47,263
---------------------------------------------------------------------------------- -------------
Total 123,457
---------------------------------------------------------------------------------- -------------
HONG KONG--0.4%
----------------------------------------------------------------------------------
16,800 Cheung Kong Holdings 69,948
----------------------------------------------------------------------------------
3,300 HSBC Holdings PLC 36,483
----------------------------------------------------------------------------------
6,000 Hutchison Whampoa 23,895
---------------------------------------------------------------------------------- -------------
Total 130,326
---------------------------------------------------------------------------------- -------------
ITALY--0.1%
----------------------------------------------------------------------------------
1,900 Assicurazioni Generali 43,854
---------------------------------------------------------------------------------- -------------
JAPAN--5.3%
----------------------------------------------------------------------------------
5,000 Asahi Bank, Ltd. 57,590
----------------------------------------------------------------------------------
5,000 Bank of Tokyo, Ltd., Tokyo 74,766
----------------------------------------------------------------------------------
4,000 Dai-Ichi Kangyo Bank, Ltd., Tokyo 71,129
----------------------------------------------------------------------------------
3,000 Fuji Bank, Ltd., Tokyo 61,834
----------------------------------------------------------------------------------
7,000 Hitachi, Ltd. 69,098
----------------------------------------------------------------------------------
2,000 Industrial Bank of Japan, Ltd., Tokyo 55,570
----------------------------------------------------------------------------------
1,000 Ito Yokado Co. 53,044
----------------------------------------------------------------------------------
14,000 Kawasaki Heavy Industries 64,218
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
JAPAN--CONTINUED
----------------------------------------------------------------------------------
6,000 Kirin Brewery Co., Ltd. $ 63,652
----------------------------------------------------------------------------------
4,000 Matsushita Electric Industrial Co. 61,834
----------------------------------------------------------------------------------
3,000 Mitsubishi Bank 66,987
----------------------------------------------------------------------------------
4,000 Mitsubishi Corp. 53,347
----------------------------------------------------------------------------------
9,000 Mitsubishi Heavy Industries 66,744
----------------------------------------------------------------------------------
5,000 Mitsubishi Trust & Banking 70,725
----------------------------------------------------------------------------------
6,000 Mitsukoshi, Ltd. 57,348
----------------------------------------------------------------------------------
15,000 (a)Nippon Steel Co. 58,197
----------------------------------------------------------------------------------
10 Nippon Telegraph & Telephone Corp. 84,870
----------------------------------------------------------------------------------
4,000 Nomura Securities Co., Ltd. 78,404
----------------------------------------------------------------------------------
6,000 Sakura Bank, Ltd., Tokyo 79,414
----------------------------------------------------------------------------------
4,000 Sumitomo Bank, Ltd., Osaka 71,533
----------------------------------------------------------------------------------
12,000 Sumitomo Heavy Industries 45,951
----------------------------------------------------------------------------------
6,000 Takeda Chemical Industries 74,564
----------------------------------------------------------------------------------
5,000 Tokio Marine & Fire 57,590
----------------------------------------------------------------------------------
2,000 Tokyo Electric Power 56,580
----------------------------------------------------------------------------------
11,000 Toshiba Corp. 76,908
----------------------------------------------------------------------------------
3,000 Toyota Motor Corp. 63,956
---------------------------------------------------------------------------------- -------------
Total 1,695,853
---------------------------------------------------------------------------------- -------------
MALAYSIA--0.2%
----------------------------------------------------------------------------------
5,000 Telekom Malaysia Myr l 36,781
----------------------------------------------------------------------------------
5,000 Tenaga Nasional Berhad 21,521
---------------------------------------------------------------------------------- -------------
Total 58,302
---------------------------------------------------------------------------------- -------------
NETHERLANDS--0.4%
----------------------------------------------------------------------------------
1,000 Philips Electronics 30,244
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN EQUITY--CONTINUED
----------------------------------------------------------------------------------
NETHERLANDS--CONTINUED
----------------------------------------------------------------------------------
700 Royal Dutch Petroleum Co. $ 76,038
----------------------------------------------------------------------------------
300 Unilever NV-Cert 33,650
---------------------------------------------------------------------------------- -------------
Total 139,932
---------------------------------------------------------------------------------- -------------
SINGAPORE--0.1%
----------------------------------------------------------------------------------
20,000 Singapore Telecommunications, Ltd. 39,877
---------------------------------------------------------------------------------- -------------
SWEDEN--0.2%
----------------------------------------------------------------------------------
500 Ericsson LM B-F 27,530
----------------------------------------------------------------------------------
2,500 Volvo (AB), Series B 48,095
---------------------------------------------------------------------------------- -------------
Total 75,625
---------------------------------------------------------------------------------- -------------
SWITZERLAND--0.5%
----------------------------------------------------------------------------------
50 Nestle SA 46,368
----------------------------------------------------------------------------------
150 Sandoz AG 77,004
---------------------------------------------------------------------------------- -------------
Total 123,372
---------------------------------------------------------------------------------- -------------
UNITED KINGDOM--1.8%
----------------------------------------------------------------------------------
9,000 British Petroleum PLC 59,897
----------------------------------------------------------------------------------
13,000 British Telecom PLC 77,357
----------------------------------------------------------------------------------
24,000 Coats Viyella PLC 77,419
----------------------------------------------------------------------------------
5,000 Eastern Electricity PLC 62,833
----------------------------------------------------------------------------------
20,000 Hanson PLC 73,598
----------------------------------------------------------------------------------
4,000 Midlands Electricity PLC 48,355
----------------------------------------------------------------------------------
4,200 RMC Group PLC 65,670
----------------------------------------------------------------------------------
11,000 Williams Holdings PLC 60,547
----------------------------------------------------------------------------------
4,000 Wolseley PLC 47,917
---------------------------------------------------------------------------------- -------------
Total 573,593
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN EQUITY (IDENTIFIED COST, $3,401,097) 3,283,457
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CLOSED-END REGISTERED INVESTMENT COMPANIES--1.2%
----------------------------------------------------------------------------------
7,000 (a)First Iberian Fund, Inc. $ 51,625
----------------------------------------------------------------------------------
11,400 France Growth Fund, Inc. 112,575
----------------------------------------------------------------------------------
9,400 Germany Fund, Inc. 106,925
----------------------------------------------------------------------------------
4,800 Italy Fund, Inc. 39,000
----------------------------------------------------------------------------------
2,600 Malaysia Fund, Inc. 52,325
----------------------------------------------------------------------------------
1,800 Swiss Helvetia Fund, Inc. 33,525
---------------------------------------------------------------------------------- -------------
TOTAL CLOSED-END REGISTERED INVESTMENT COMPANIES
(IDENTIFIED COST, $432,088) 395,975
---------------------------------------------------------------------------------- -------------
TOTAL STOCKS (IDENTIFIED COST, $13,420,549) 12,945,807
---------------------------------------------------------------------------------- -------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------------- ----------------------------------------------------------------------------------
BONDS--44.9%
- ---------------------------------------------------------------------------------------------------
TREASURY--17.5%
----------------------------------------------------------------------------------
$ 5,625,000 United States Treasury Note, 7.25%, 8/15/2004 5,379,975
----------------------------------------------------------------------------------
200,000 United States Treasury Note, 7.50%, 10/31/99 197,680
---------------------------------------------------------------------------------- -------------
TOTAL TREASURY (IDENTIFIED COST, $5,720,168) 5,577,655
---------------------------------------------------------------------------------- -------------
MORTGAGE-BACKED SECURITIES--7.3%
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--7.3%
----------------------------------------------------------------------------------
299,379 Federal Home Loan Mortgage Corporation,
Pool C80177, 7.50%, 5/1/2024 279,261
----------------------------------------------------------------------------------
248,389 Federal National Mortgage Association, Pool 250175, 7.00%, 9/1/2009 233,172
----------------------------------------------------------------------------------
473,703 Federal National Mortgage Association, Pool 296711, 8.00%, 10/1/2024 454,006
----------------------------------------------------------------------------------
255,000 Federal National Mortgage Association, Pool 303073, 8.00%, 11/1/2024 244,397
----------------------------------------------------------------------------------
98,304 Federal Home Loan Mortgage Corporation, Pool D54761, 8.50%,
7/1/2024 96,706
----------------------------------------------------------------------------------
268,568 Government National Mortgage Association, Pool 371785, 7.00%,
5/15/2024 239,023
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
GOVERNMENT AGENCY--CONTINUED
----------------------------------------------------------------------------------
$ 314,000 Government National Mortgage Association, Pool 380656, 8.00%,
11/15/2024 $ 298,787
----------------------------------------------------------------------------------
254,832 Government National Mortgage Association, Pool 407068, 8.50%,
10/15/2024 250,209
----------------------------------------------------------------------------------
226,040 Government National Mortgage Association, Pool 175827, 9.50%,
1/15/2020 233,172
---------------------------------------------------------------------------------- -------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $2,373,764) 2,328,733
---------------------------------------------------------------------------------- -------------
HIGH YIELD--4.7%
----------------------------------------------------------------------------------
BROADCASTING RADIO & T.V.--0.2%
----------------------------------------------------------------------------------
75,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 75,563
---------------------------------------------------------------------------------- -------------
BUSINESS EQUIPMENT & SERVICES--0.3%
----------------------------------------------------------------------------------
100,000 Bell & Howell Co., Sr. Sub. Note, Series B, 10.75%, 10/1/2002 94,500
---------------------------------------------------------------------------------- -------------
CABLE T.V.--0.2%
----------------------------------------------------------------------------------
75,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 67,500
---------------------------------------------------------------------------------- -------------
CHEMICALS & PLASTICS--0.8%
----------------------------------------------------------------------------------
75,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 72,375
----------------------------------------------------------------------------------
100,000 G-I Holdings, Sr. Disc. Note, 10/1/98 60,750
----------------------------------------------------------------------------------
125,000 (b)Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002 121,875
---------------------------------------------------------------------------------- -------------
Total 255,000
---------------------------------------------------------------------------------- -------------
CLOTHING & TEXTILES--0.2%
----------------------------------------------------------------------------------
75,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 66,281
---------------------------------------------------------------------------------- -------------
CONTAINER & GLASS PRODUCTS--0.3%
----------------------------------------------------------------------------------
100,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 100,500
---------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--0.4%
----------------------------------------------------------------------------------
125,000 American Life Holding Co., Sr. Sub. Note, 11.25%, 9/15/2004 124,075
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
HIGH YIELD--CONTINUED
----------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.3%
----------------------------------------------------------------------------------
$ 75,000 (a)Grand Union Co., Sr. Sub. Note, 12.25%, 7/15/2002 $ 29,906
----------------------------------------------------------------------------------
75,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 65,063
---------------------------------------------------------------------------------- -------------
Total 94,969
---------------------------------------------------------------------------------- -------------
FOOD SERVICES--0.2%
----------------------------------------------------------------------------------
75,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 68,813
---------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--0.2%
----------------------------------------------------------------------------------
75,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 69,000
---------------------------------------------------------------------------------- -------------
HOME PRODUCTS & FURNISHINGS--0.2%
----------------------------------------------------------------------------------
75,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 47,812
---------------------------------------------------------------------------------- -------------
PRINTING & PUBLISHING--0.3%
----------------------------------------------------------------------------------
100,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 88,000
---------------------------------------------------------------------------------- -------------
RETAILERS--0.4%
----------------------------------------------------------------------------------
125,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 124,375
---------------------------------------------------------------------------------- -------------
STEEL--0.6%
----------------------------------------------------------------------------------
125,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 125,313
----------------------------------------------------------------------------------
75,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 67,500
---------------------------------------------------------------------------------- -------------
Total 192,813
---------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--0.1%
----------------------------------------------------------------------------------
75,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 32,438
---------------------------------------------------------------------------------- -------------
TOTAL HIGH YIELD (IDENTIFIED COST, $1,602,243) 1,501,639
---------------------------------------------------------------------------------- -------------
INVESTMENT GRADE--2.4%
----------------------------------------------------------------------------------
CONGLOMERATES--0.8%
----------------------------------------------------------------------------------
250,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 265,000
---------------------------------------------------------------------------------- -------------
RETAILERS--0.8%
----------------------------------------------------------------------------------
250,000 Penny J.C., Inc., Deb., 9.45%, 7/15/2002 261,715
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
INVESTMENT GRADE--CONTINUED
----------------------------------------------------------------------------------
TOBACCO--0.8%
----------------------------------------------------------------------------------
$ 300,000 Philip Morris, Deb., 6.00%, 7/15/2001 $ 261,321
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENT GRADE (IDENTIFIED COST, $779,410) 788,036
---------------------------------------------------------------------------------- -------------
OTHER CORPORATE--0.3%
----------------------------------------------------------------------------------
ELECTRONICS & ELECTRIC--0.3%
----------------------------------------------------------------------------------
60,000 General Instrument Corp., Conv. Jr. Sub. Note, 5.00%, 6/15/2000
(IDENTIFIED COST, $81,450) 81,629
---------------------------------------------------------------------------------- -------------
FOREIGN
CURRENCY
PAR AMOUNT
- --------------- ----------------------------------------------------------------------------------
FOREIGN--12.7%
----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--0.4%
----------------------------------------------------------------------------------
150,000 State Bank of New South Wales, Deb., 12.25%, 2/26/2001 123,120
---------------------------------------------------------------------------------- -------------
BELGIAN FRANC--0.5%
----------------------------------------------------------------------------------
4,500,000 Belgian Government, Foreign Government Guarantee, 10.00%, 4/6/96 145,517
---------------------------------------------------------------------------------- -------------
CANADIAN DOLLAR--0.7%
----------------------------------------------------------------------------------
300,000 Ontario Hydro, Local Government Guarantee, 9.00%, 6/24/2002 213,283
---------------------------------------------------------------------------------- -------------
DANISH KRONE--0.2%
----------------------------------------------------------------------------------
400,000 Denmark, 8.00%, 5/15/2003 62,558
---------------------------------------------------------------------------------- -------------
DEUTSCHE MARK--2.1%
----------------------------------------------------------------------------------
250,000 Bundesobligation, 8.875%, 1/22/96 164,274
----------------------------------------------------------------------------------
550,000 Bundesobligationen, Deb., 7.25%, 10/20/97 355,277
----------------------------------------------------------------------------------
250,000 Treuhandanstalt, 7.75%, 10/1/2002 161,521
---------------------------------------------------------------------------------- -------------
Total 681,072
---------------------------------------------------------------------------------- -------------
FRENCH FRANC--1.4%
----------------------------------------------------------------------------------
900,000 France O.A.T., 8.50%, 11/25/2002 173,742
----------------------------------------------------------------------------------
800,000 France O.A.T., 9.80%, 1/30/96 154,036
----------------------------------------------------------------------------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FOREIGN--CONTINUED
----------------------------------------------------------------------------------
FRENCH FRANC--CONTINUED
----------------------------------------------------------------------------------
$ 800,000 KFW International Finance, Inc., 7.00%, 5/12/2000 $ 144,163
---------------------------------------------------------------------------------- -------------
Total 471,941
---------------------------------------------------------------------------------- -------------
ITALIAN LIRA--0.7%
----------------------------------------------------------------------------------
375,000,000 Buoni Poliennali Del Tes, 12.00%, 9/1/97 234,900
---------------------------------------------------------------------------------- -------------
JAPANESE YEN--3.8%
----------------------------------------------------------------------------------
30,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 343,932
----------------------------------------------------------------------------------
79,000,000 KFW International Finance, Gtd. Note, 6.00%, 11/29/99 858,043
---------------------------------------------------------------------------------- -------------
Total 1,201,975
---------------------------------------------------------------------------------- -------------
NETHERLANDS GUILDER--0.8%
----------------------------------------------------------------------------------
450,000 Netherlands Government, 6.00%, 4/15/95 256,083
---------------------------------------------------------------------------------- -------------
SPANISH PESETA--0.6%
----------------------------------------------------------------------------------
26,000,000 Spain (Government), 8.30%, 12/15/98 182,192
---------------------------------------------------------------------------------- -------------
UNITED KINGDOM POUND--1.5%
----------------------------------------------------------------------------------
300,000 UK Conversion, 9.00%, 3/3/2000 481,081
---------------------------------------------------------------------------------- -------------
TOTAL FOREIGN (IDENTIFIED COST, $4,081,599) 4,053,722
---------------------------------------------------------------------------------- -------------
TOTAL BONDS (IDENTIFIED COST, $14,638,634) 14,331,414
---------------------------------------------------------------------------------- -------------
</TABLE>
FEDERATED MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- --------------- ---------------------------------------------------------------------------------- -------------
CASH EQUIVALENTS--14.2%**
- ---------------------------------------------------------------------------------------------------
$ 2,750,000 U.S. Treasury Bill, 1/26/95 (IDENTIFIED COST, $2,729,217) $ 2,728,193
----------------------------------------------------------------------------------
1,800,000 ***J.P. Morgan Securities, Inc., 5.77%, dated 11/28/94,
due 12/5/94 (at amortized cost) 1,800,000
---------------------------------------------------------------------------------- -------------
TOTAL CASH EQUIVALENTS 4,528,193
---------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $32,588,400) $ 31,805,414+
---------------------------------------------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR--American Depository Receipts
PLC--Public Limited Co.
REIT--Real Estate Investment Trust
(a) Non-income producing.
(b) Restricted securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, this security amounted to
$121,875 which represents .4% of net assets.
The cost for federal income tax purposes amounts to $32,595,520. The net
unrealized depreciation on a federal tax basis amounts to $790,106, which is
comprised of $358,185 appreciation and $1,148,291 depreciation at November 30,
1994.
The Fund's overall exposure to utility stocks is 6.3%.
* The Fund's overall exposure to stocks is 50.2%, after adjustment for the use
of S&P 500 and S&P Midcap futures contracts.
** The Fund holds cash equivalents as collateral for the twelve S&P 500 futures
contracts with a market value of $2,723,700. Consequently, the Fund's
exposure to large cap stocks is 23.1% of the Fund. The Fund holds cash
equivalents as collateral for the four S&P Midcap futures contracts with a
market value of $337,400. Consequently, the Fund's exposure to small cap
stocks is 10.6% of the Fund.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($31,925,163) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GRAND UNION COMPANY
On January 17, 1995, The Grand Union Company announced that it would default on
its January 15, 1995, interest payment. The company is currently in negotiations
with bondholders on a restructuring plan. Fund management is unable to predict
the outcome or timing of these proceedings.
FEDERATED MANAGED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $32,588,400 and tax cost, $32,595,520) $ 31,805,414
- ----------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost, $62,381) 62,091
- ----------------------------------------------------------------------------------------------------
Cash 925
- ----------------------------------------------------------------------------------------------------
Dividends and interest receivable 380,422
- ----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 89,304
- ----------------------------------------------------------------------------------------------------
Receivable for investments sold 37,379
- ----------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 14,195
- ----------------------------------------------------------------------------------------------------
Deferred expenses 41,723
- ---------------------------------------------------------------------------------------------------- ------------
Total assets 32,431,453
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------------
Payable for investments purchased $ 399,355
- -----------------------------------------------------------------------------------------
Payable for futures variation margin 14,700
- -----------------------------------------------------------------------------------------
Payable for foreign currency purchased 14,219
- -----------------------------------------------------------------------------------------
Tax withholding liability 1,994
- -----------------------------------------------------------------------------------------
Accrued expenses 76,022
- ----------------------------------------------------------------------------------------- ---------
Total liabilities 506,290
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 3,251,792 shares of beneficial interest outstanding $ 31,925,163
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------
Paid-in capital $ 32,610,298
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments, translation of assets and liabilities in
foreign currency, and futures contracts (875,447)
- ----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments, foreign currency transactions, and futures
contracts (61,697)
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income 252,009
- ---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 31,925,163
- ---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------------------
Institutional Service Shares ($28,973,376 / 2,950,782 shares of beneficial interest outstanding) $9.82
- ---------------------------------------------------------------------------------------------------- ------------
Select Shares ($2,951,787 / 301,010 shares of beneficial interest outstanding) $9.81
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $2,080 and dollar roll interest expense of $3,960) $ 554,844
- ---------------------------------------------------------------------------------------------------------
Dividend (net of foreign taxes withheld of $3,090) 115,186
- --------------------------------------------------------------------------------------------------------- ---------
Total investment income 670,030
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------
Investment advisory fee $ 97,226
- ----------------------------------------------------------------------------------------------
Administrative personnel and services fee 42,466
- ----------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 55,403
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 11,379
- ----------------------------------------------------------------------------------------------
Legal fees 2,500
- ----------------------------------------------------------------------------------------------
Fund share registration costs 9,366
- ----------------------------------------------------------------------------------------------
Printing and postage 4,336
- ----------------------------------------------------------------------------------------------
Insurance premiums 5,144
- ----------------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 2,408
- ----------------------------------------------------------------------------------------------
Distribution services fee 7,223
- ----------------------------------------------------------------------------------------------
Miscellaneous 4,602
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 242,053
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 97,226
- -----------------------------------------------------------------------------------
Waiver of distribution services fee 2,408
- -----------------------------------------------------------------------------------
Reimbursement of other operating expenses 19,799 119,433
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 122,620
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 547,410
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, AND FUTURES CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions, and futures contracts
(identified cost basis) (55,426)
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities in foreign currency, and futures contracts (875,447)
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments, foreign currency, and futures contracts (930,873)
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $(383,463)
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
- ---------------------------------------------------------------------------------------- ------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------
Net investment income $ 547,410
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments, foreign currency transactions,
and futures contracts ($146,501 net loss, as computed for federal tax
purposes) (55,426)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities in foreign currency, and futures
contracts (875,447)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from operations (383,463)
- ---------------------------------------------------------------------------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ----------------------------------------------------------------------------------------
Institutional Service Shares (281,776)
- ----------------------------------------------------------------------------------------
Select Shares (19,872)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets resulting from distributions to shareholders (301,648)
- ---------------------------------------------------------------------------------------- ------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 34,167,264
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 142,853
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (1,699,843)
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets from Fund share transactions 32,610,274
- ---------------------------------------------------------------------------------------- ------------------------
Change in net assets 31,925,163
- ----------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------- ------------------------
End of period (including undistributed net investment income of $252,009) $ 31,925,163
- ---------------------------------------------------------------------------------------- ------------------------
</TABLE>
* For the period from January 27, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of four diversified portfolios. The financial
statements included herein are only those of Federated Managed Growth Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The Fund offers
two classes of shares, Institutional Service Shares and Select Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed equity securities are valued at the
last sale price reported on national securities exchanges. Unlisted
securities, bonds, corporate bonds and other fixed income securities are
generally valued at the price provided by an independent pricing service.
Short-term securities with remaining maturities of sixty days or less may
be stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $146,501, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($146,501).
F. FUTURES CONTRACTS--Upon entering into a financial futures contract with a
broker, the Fund is required to deposit in a segregated account an amount
("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. The Fund agrees to receive from or pay
the broker an amount of cash equal to a specific dollar amount times the
difference between the closing value and the price at which the contract
was made. On a daily basis, the value of the financial futures contract is
determined and any difference between such value and
the original futures contract value is reflected in the "daily variation
margin" account. Daily variation margin adjustments, arising from this
"marking to market" process, are recorded by the Fund as unrealized gains
or losses.
The Fund may decide to close its position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Fund
recognizes a realized gain or loss. Risks of entering into futures
contracts include the possibility that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For the period ended November 30, 1994, the Fund had a realized
gain of $155,487 on futures contracts.
At November 30, 1994, the Fund had outstanding futures contracts as set out
below:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION CONTRACTS TO APPRECIATION
DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
December 1994 12 S&P 500 Index Futures Long ($ 80,236)
December 1994 4 S&P Midcap Futures Long (11,550)
-----------------
Net Unrealized Appreciation (Depreciation)
on Futures Contracts ($ 91,786)
-----------------
</TABLE>
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
I. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994, the foreign portion of the portfolio was diversified
with the following industries:
<TABLE>
<S> <C> <C> <C> <C> <C>
Agency 3.7% Clothing & Textiles 0.2% Pharmaceuticals 0.2%
Automotive 0.5 Consumer Products 0.1 Retail 0.3
Banking 2.0 Diversified 0.5 Sovereign 7.3
Beverage & Tobacco 0.2 Electronics & Electric 0.8 State/Provincial 0.4
Broadcasting Radio & TV 0.2 Energy 0.8 Steel 0.2
Brokerage & Investment 0.2 Food & Drug Retailers 0.1 Supranational 1.1
Building & Development 0.8 Food Products
</TABLE>
