MANAGED SERIES TRUST, 485APOS, 1997-11-26

MANAGED SERIES TRUST
485APOS, 1997-11-26

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. .......................

Post-Effective Amendment No. 7 ...................... X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 8 ..................................... X

MANAGED SERIES TRUST

(Exact Name of Registrant as Specified in Charter)

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

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

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

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) on pursuant to paragraph
(b) 60 days after filing pursuant to paragraph (a) (i)
X on January 31, 1998 pursuant to paragraph (a) (i) 75 days after filing
pursuant to paragraph (a)(ii) on _______________ pursuant to paragraph
(a)(ii) of Rule 485

If appropriate, check the following box:

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

Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L. Street, N.W.
Washington, DC 20037

<PAGE>

CROSS-REFERENCE SHEET

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

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

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

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

Item 3. Condensed Financial
Information (1a-4a) Financial Highlights - Institutional Shares;
(1b-4b) Financial Highlights - Select Shares;
(1-4) Performance Information.

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

Item 5. Management of the Fund (1-4) Trust
Information; (1-4) Management of the
Trust; (1-4) Administration of the
Fund; (1-4) Brokerage Transactions.

Item 6. Capital Stock and Other
Securities (1-4) Dividends; (1-4) Capital Gains;
(1-4) Shareholder Information; (1-4)
Voting Rights; (1-4) Tax Information;
(1-4) Federal Income Tax; (1-4) State
and Local Taxes; (1-4) Other Classes
of Shares.

Item 7. Purchase of Securities Being
Offered (1-4) Net Asset Value; (1a-4a)
Investing in Institutional Shares;
(1b-4b) Investing in Select Shares;
(1-4) Share Purchases; (1-4) Minimum
Investment Required; (1-4) What Shares
Cost; (1a-4a) Distribution of
Institutional Shares; (1b-4b)
Distribution of Select Shares; (1-4)
Systematic Investment Program; (1-4)
Confirmations and Account Statements.

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

Item 9. Pending Legal Proceedings None.

<PAGE>

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

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

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

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

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

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

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

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

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

Item 18. Capital Stock and Other
Securities Not applicable.

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

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

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

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

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

</TABLE>

<PAGE>

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

Federated Managed Income Fund
(A Portfolio of Managed Series Trust)
Institutional Shares

Prospectus
- --------------------------------------------------------------------------------

The Institutional 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 Shares are sold at net asset value. The Institutional
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 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 Shares
of the Fund. Keep this prospectus for future reference. The Fund has also
filed a Statement of Additional Information for Institutional Shares and Select
Shares of all portfolios of the Trust dated January 31, 1998, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Fund are maintained electronically with the SEC at Internet Web
site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated January
31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Institutional Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Institutional Shares and Select Shares. This prospectus relates only to
Institutional Shares. Institutional Shares ("Shares") of the Fund are designed
to give institutions, individuals, and financial institutions acting in a
fiduciary or agency capacity a convenient means of accumulating an interest in a
professionally managed, diversified investment portfolio. A minimum initial
investment of $25,000 over a 90-day period is required. Shares are currently
sold and redeemed at net asset value without a sales charge imposed by the Fund.
Investment Information
Investment Objective

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

Asset Allocation. The Fund will primarily invest in two types of assets: bonds
and 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% 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%
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 and utility
stocks. The following is a summary of the asset categories and the amount of the
Fund's total assets which may be invested in each asset category:
Asset Category Range
Bonds 70-90%
U.S. Treasury Securities 0-72%
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 7.5-22.5%
Utility Stocks 2.5-7.5%

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 four nor more than six 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 72% 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% 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% 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 10% 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. The Fund may invest in the High Yield Bond
Portfolio, a portfolio of Federated Core Trust, as an efficient means
of investing in high-yield debt obligations. Federated Core Trust is a
registered investment company advised by Federated Research Corp., an
affiliate of the Fund's adviser. The High Yield Bond Portfolio's
investment objective is to seek high current income and its primary
investment policy is to invest in lower-rated, high-yield debt
securities. The High Yield Bond Portfolio currently does not charge an
advisory fee and is sold without any sales charge. The High Yield Bond
Porftolio may incur expenses for administrative and accounting
services. The Fund's adviser anticipates that the High Yield Bond
Portfolio will provide the Fund broad diversity and exposure to all
aspects of the high-yield bond sector of the market while at the same
time providing greater liquidity than if high-yield debt obligations
were purchased separately for the Fund. The Fund will be deemed to own
a pro rata portion of each investment of the High Yield Bond Portfolio.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds.
The Fund may invest up to 10% 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% 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 22.5% 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% 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.

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S.
government securities noted above pursuant to repurchase agreements.
Mortgage-Backed Securities. Mortgaged-backed securities are securities
collateralized by residential mortgages. The mortgage-backed
securities in which the Fund may invest may be:

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

o 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;

o 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

o 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: o 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.

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

o 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:

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

o 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

o 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. 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 would 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.

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 include a spectrum of
securities which can be exchanged for or converted into common stock.
Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of
usable bonds and warrants; or securities which cap or otherwise limit
returns to the convertible security holder, such as DECS - (Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS - (Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS - (Preferred Equity
Redemption Cumulative Stock (an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES - (Preferred Redeemable Increased Dividend
Securities (which are essentially the same as DECS; the difference is
little more than who initially underwrites the issue). The adviser may
treat convertible securities as large company stocks, utility stocks,
or high yield corporate 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. Please see
"High Yield Corporate Bonds."

Investing in Securities of Other Investment Companies. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses. 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. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities including over-the-counter options, and
repurchase agreements providing for settlement in more than seven days after
notice, to 15% 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. 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 into 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% of the value of the securities loaned. Foreign Currency Transactions.
The Fund will enter into foreign currency transactions to obtain the necessary
currencies to settle securities transactions. Currency transactions may be
conducted either on a spot or cash basis at prevailing rates or through forward
foreign currency exchange contracts. The Fund may also enter into foreign
currency transactions to protect Fund assets against adverse changes in foreign
currency exchange rates or exchange control regulations. Such changes could
unfavorably affect the value of Fund assets which are denominated in foreign
currencies, such as foreign securities or funds deposited in foreign banks, as
measured in U.S. dollars. Although foreign currency exchanges may be used by the
Fund to protect against a decline in the value of one or more currencies, such
efforts may also limit any potential gain that might result from a relative
increase in the value of such currencies and might, in certain cases, result in
losses to the Fund.
Currency Risks. To the extent that debt securities purchased by the
Fund are denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates will affect the Fund's net asset
value; the value of interest earned; gains and losses realized on the
sale of securities; and net investment income and capital gain, if any,
to be distributed to shareholders by the Fund. If the value of a
foreign currency rises against the U.S. dollar, the value of the Fund's
assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S.
dollar, the value of the Fund's assets denominated in that currency
will decrease.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time the Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled.
The Fund will not enter into a forward contract with a term of more than one
year.
The Fund will generally enter into a forward contract to provide the proper
currency to settle a securities transaction at the time the transaction occurs
("trade date"). The period between trade date and settlement date will vary
between 24 hours and 30 days, depending upon local custom. The Fund may also
protect against the decline of a particular foreign currency by entering into a
forward contract to sell an amount of that currency approximating the value of
all or a portion of the Fund's assets denominated in that currency ("hedging").
The success of this type of short-term hedging strategy is highly uncertain due
to the difficulties of predicting short-term currency market movements and of
precisely matching forward contract amounts and the constantly changing value of
the securities involved. Although the adviser will consider the likelihood of
changes in currency values when making investment decisions, the adviser
believes that it is important to be able to enter into forward contracts when it
believes the interests of the Fund will be served. The Fund will not enter into
forward contracts for hedging purposes in a particular currency in an amount in
excess of the Fund's assets denominated in that currency. 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other considerations when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o 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% of the value of those assets to secure such borrowings;

o lend any securities except for portfolio securities; or

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

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

Board of Trustees. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board. Investment Adviser. Except as noted below with regard to
the sub-adviser, investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "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 0.75% 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.

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.

Sub-Adviser. Under the terms of the Sub-Advisory Agreement between the Adviser
and Federated Global Research Corp. (the "Sub-Adviser"), the Sub-Adviser will
provide the Adviser such investment advice, statistical and other factual
information as may, from time to time, be reasonably requested by the Adviser.

Sub-Advisory Fees. For its services under the Sub-Advisory Agreement,
the Sub-Adviser receives an allocable portion of the Fund's advisory
fee. Such allocation is based on the amount of foreign securities which
the Sub-Adviser manages for the Fund. This fee is paid by the Adviser
out of its resources and is not an incremental Fund expense.

Sub-Adviser's Background. Federated Global Research Corp., incorporated
in Delaware on May 12, 1995, is a registered investment adviser under
the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

The Trust, the Adviser, and the Sub-Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees and could
result in severe penalties.

Portfolio Managers' Backgrounds.

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 Adviser's Investment Strategy Committee. Mr.
Ritter joined Federated Investors in 1983 and has been a Vice President of the
Fund's Adviser and Federated Research Corp. since 1992. From 1988 until 1991,
Mr. Ritter acted as an Assistant Vice President of the Fund's Adviser and
Federated Research Corp. 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 Joseph M. Balestrino are portfolio managers for the
U.S. Treasury securities asset category. Susan M. Nason has been a portfolio
manager of the Fund since the Fund's inception. Ms. Nason joined Federated
Investors in 1987 and has been a Senior Vice President of the Fund's Adviser and
Federated Research Corp. since April 1997. Ms. Nason served as a Vice President
of the Fund's Adviser and Federated Research Corp. from 1993 to 1997 and as an
Assistant Vice President of the Adviser and Federated Research Corp. from 1990
until 1992. Ms. Nason is a Chartered Financial Analyst and received her M.S. in
Industrial Administration from Carnegie Mellon University.

Joseph M. Balestrino has been a portfolio manager of the Fund since March 1995.
Mr. Balestrino joined Federated Investors in 1986 and has been Vice President of
the Fund's Adviser and Federated Research Corp. since 1995. Mr. Balestrino
served as an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. from 1991 until 1995. Mr. Balestrino is a Chartered Financial
Analyst and received his M.A. in Urban and Regional Planning from the University
of Pittsburgh.

Kathleen M. Foody-Malus and Robert E. Cauley are the portfolio managers for the
mortgage-backed securities asset category. Kathleen M. Foody-Malus has 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 Adviser and
Federated Research Corp. since 1993. Ms. Foody-Malus served as an Assistant Vice
President of the Adviser and Federated Research Corp. from 1990 until 1992. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.

Robert E. Cauley has been a portfolio manager of the Fund since July 1997. Mr.
Cauley joined Federated Investors in 1996 as an Assistant Vice President of the
Fund's Adviser and Federated Research Corp. Mr. Cauley served as an Associate in
the Asset-Backed Securities Group at Lehman Brothers Holding, Inc. from 1994 to
1996. From 1992 to 1994, Mr. Cauley served as a Senior Associate/Corporate
Finance at Barclays Bank, PLC. Mr. Cauley earned his M.S.I.A., concentrating in
Finance and Economics, from Carnegie Mellon University.

Joseph M. Balestrino and John T. Gentry are portfolio managers for the
investment-grade corporate bonds asset category. Mr. Balestrino has performed
these duties since the Fund's inception.

John T. Gentry has been a portfolio manager of the Fund since July 1997. Mr.
Gentry joined Federated Investors in 1995 as an Investment Analyst and has been
an Assistant Vice President of the Fund's Adviser and Federated Research Corp.
since April 1997. Mr. Gentry served as a Senior Treasury Analyst at Sun Company,
Inc. from 1991 to 1995. Mr. Gentry is a Chartered Financial Analyst and earned
his M.B.A., with concentrations in Finance and Accounting, from Cornell
University.

Henry A. Frantzen, Drew J. Collins, Robert M. Kowit and Micheal W. Casey are
portfolio managers for the foreign bonds asset category. Henry A. Frantzen has
been a portfolio manager of the Fund since November 1995. Mr. Frantzen joined
Federated Investors in 1995 as an Executive Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from 1992 to
1995.

Drew J. Collins has been a portfolio manager of the Fund since November 1995.
Mr. Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's Sub-Adviser and Federated Research Corp. Mr. Collins served as a Vice
President/Portfolio Manager of international equity portfolios at Arnhold and
Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College Retirement
Equities Fund from 1986 to 1994. Mr. Collins is a Chartered Financial Analyst
and received his M.B.A. in finance from the Wharton School of The University of
Pennsylvania. Robert M. Kowit joined Federated Investors in 1995 as a Vice
President of the Fund's Sub-Adviser and Federated Research Corp. Mr. Kowit
served as a Managing Partner of Copernicus Global Asset Management from January
1995 through October 1995. From 1990 to 1994, he served as Senior Vice President
of International Fixed Income and Foreign Exchange for John Hancock Advisers.
Mr. Kowit received his M.B.A. from Iona College with a concentration in finance.

Micheal W. Casey, Ph.D. has been a portfolio manager of the Fund since January
1997. Mr. Casey joined Federated Investors in 1996 as an Assistant Vice
President of the Fund's Sub-Adviser and Federated Research Corp. Mr. Casey
served as an International Economist and Portfolio Strategist for Maria Fiorini
Ramirez Inc. from 1990 to 1996. Mr. Casey earned a Ph.D. concentrating in
economics from The New School for Social Research and a M.Sc. from the London
School of Economics.

Scott B. Schermerhorn has been a portfolio manager of the Fund since July 1996.
Mr. Schermerhorn joined Federated Investors in 1996 as a Vice President of the
Fund's Adviser and Federated Research Corp. From 1990 through 1996, Mr.
Schermerhorn was a Senior Vice President and Senior Investment Officer at J W
Seligman & Co., Inc. Mr. Schermerhorn received his M.B.A. in Finance and
International Business from Seton Hall University.

Michael P. Donnelly has been a portfolio manager of the Fund since June 1997.
Mr. Donnelly joined Federated in 1989 as an Investment Analyst and has been a
Vice President of the Fund's Adviser and Federated Research Corp. since 1994. He
served as an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. from 1992 to 1994. Mr. Donnelly is a Chartered Financial Analyst
and received his M.B.A. from the University of Virginia.

James E. Grefenstette has been a portfolio manager of the Fund since August
1994. Mr. Grefenstette joined Federated Investors in 1992 and has been a Vice
President of the Fund's Adviser and Federated Research Corp. since 1996. From
1994 until 1996, Mr. Grefenstette acted as an Assistant Vice President of the
Fund's Adviser and Federated Research, and served as an Investment Analyst of
the Adviser from 1992 to 1994. Mr. Grefenstette was a credit analyst at
Westinghouse Credit Corp. from 1990 until 1992. Mr. Grefenstette is a Chartered
Financial Analyst; he received his M.S. in Industrial Administration from
Carnegie Mellon University. Linda A. Duessel and Steven J. Lehman are portfolio
managers of the utility stocks asset category.

Linda A. Duessel has been a portfolio manager of the Fund since February 1997.
Ms. Duessel joined Federated Investors in 1991 and has been a Vice President of
the Fund's Adviser and Federated Research Corp. since 1995. Ms. Duessel was an
Assistant Vice President of the Fund's Adviser and Federated Research Corp. from
1991 until 1995. Ms. Duessel is a Chartered Financial Analyst and received her
M.S. in Industrial Administration from Carnegie Mellon University.

Steven J. Lehman has been a portfolio manager of the Fund since July 1997. Mr.
Lehman joined Federated Investors in May 1997 as a Vice President of the Fund's
Adviser and Federated Research Corp. From 1985 to May 1997, Mr. Lehman served as
a Portfolio Manager, then Vice President/Senior Portfolio Manager, at First
Chicago NBD Investment Management Company. Mr. Lehman is a Chartered Financial
Analyst; he received his M.A. from the University of Chicago.

Distribution of Institutional 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 Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company 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:
Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

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 Services Company may choose voluntarily to waive a portion of its fee.

Shareholder Services. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, 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 Fund and Federated Shareholder Services. Supplemental Payments to
Financial Institutions. In addition to receiving the payments under the
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of Shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's Adviser or its affiliates.
Brokerage Transactions

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those 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.
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 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 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 Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Managed
Income Fund--Institutional 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. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement. By Mail. To purchase
Shares by mail, send a check made payable to Federated Managed Income
Fund--Institutional Shares to: Federated Shareholder Services Company, P.O. Box
8600, Boston, Massachusetts 02266-8600. Orders by mail are considered received
when payment by check is converted by State Street Bank and Trust Company
("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 financial intermediary 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 financial intermediary may be charged an additional service fee
by that financial intermediary.

The net asset value is determined as of the close of trading (normally 4:00 p.m.
Eastern time) on the New York Stock Exchange, 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,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
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.

Confirmations and Account Statements

Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions.) In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.
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 Shares
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Investors who redeem Shares through a financial
intermediary may be charged a service fee by that financial intermediary.
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.
Proceeds from redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about telephone
redemptions on days when wire transfers are restricted should be directed to
your shareholder services representative at the telephone number listed on your
account statement. 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

Redeeming Shares By Mail. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, Massachusetts 02266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or certified
mail to the address noted above. The written request should state: the Fund name
and the class designation; the account name as registered with the Fund; the
account number; and the number of Shares to be redeemed or the dollar amount
requested. All owners of the account must sign the request exactly as the Shares
are registered. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed. Shareholders requesting 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 their
signatures guaranteed by a commercial or savings bank, trust company or savings
association whose deposits are insured by an organization which is administered
by the Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934. The Fund does not accept signatures guaranteed
by a notary public.
Systematic Withdrawal Program

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

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
SEC) 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
charge or other similar non-recurring charges. Total return and yield will be
calculated separately for Institutional Shares and Select Shares. From time to
time, advertisements for the Fund's Institutional Shares may refer to ratings,
rankings, and other information in certain financial publications and/or compare
the Fund's Institutional Shares performance to certain indices.
Other Classes of Shares
The Fund also offers another class of shares called Select Shares which are sold
at net asset value primarily to retail and private banking customers of
financial institutions and are subject to a minimum initial investment of
$1,500. Select Shares are distributed under a 12b-1 Plan adopted by the Fund and
also are subject to shareholder services fees. Select Shares and Institutional
Shares are subject to certain of the same expenses. Expense differences,
however, between Select Shares and Institutional Shares may affect the
performance of each class. To obtain more information and a prospectus for
Select Shares, investors may call 1-800-341-7400.

<PAGE>

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 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.

<PAGE>

Addresses
Federated Managed Income Fund
Institutional 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

Sub-Adviser
Federated Global Research 175 Water Street
Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

- --------------------------------------------------------------------------------
Federated Managed
Income Fund
Institutional Shares
- --------------------------------------------------------------------------------

Prospectus

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

Prospectus dated January 31, 1998

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

Cusip 56166K206
3122012A-SEL (1/98)

<PAGE>

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 Statement of
Additional Information for Select Shares and Institutional Shares of all
portfolios of the Trust dated January 31, 1998, with the Securities and Exchange
Commission ("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Statement of Additional Information or a paper copy of this
prospectus, if you have received your prospectus electronically, free of charge
by calling 1-800-341-7400. To obtain other information or to make inquiries
about the Fund, contact the Fund at the address listed in the back of this
prospectus. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund are
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated January
31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Select Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Select Shares and Institutional 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

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 72% 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.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 10% 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:

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S.
government securities noted above pursuant to repurchase agreements.
Mortgage-Backed Securities. Mortgage-backed securities are securities
collateralized by residential mortgages. The mortgage-backed
securities in which the Fund may invest may be: o issued by an agency
of the U.S. government, typically GNMA, FNMA or FHLMC;

o 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: o 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.

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

Corporate Bonds. The investment-grade corporate bonds in which
the Fund invests are:

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

o 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

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

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. Under criteria
established by the Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be
liquid, the Fund will limit their purchase, together with other illiquid
securities including over-the-counter options, and repurchase agreements
providing for settlement in more than seven days after notice, to 15% 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. 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 into 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% of the value of the securities loaned. Foreign Currency
Transactions. The Fund will enter into foreign currency transactions to obtain
the necessary currencies to settle securities transactions. Currency
transactions may be conducted either on a spot or cash basis at prevailing rates
or through forward foreign currency exchange contracts. The Fund may also enter
into foreign currency transactions to protect Fund assets against adverse
changes in foreign currency exchange rates or exchange control regulations. Such
changes could unfavorably affect the value of Fund assets which are denominated
in foreign currencies, such as foreign securities or funds deposited in foreign
banks, as measured in U.S. dollars. Although foreign currency exchanges may be
used by the Fund to protect against a decline in the value of one or more
currencies, such efforts may also limit any potential gain that might result
from a relative increase in the value of such currencies and might, in certain
cases, result in losses to the Fund.
Currency Risks. To the extent that debt securities purchased by the
Fund are denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates will affect the Fund's net asset
value; the value of interest earned; gains and losses realized on the
sale of securities; and net investment income and capital gain, if any,
to be distributed to shareholders by the Fund. If the value of a
foreign currency rises against the U.S. dollar, the value of the Fund's
assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar, the
value of the Fund's assets denominated in that currency will decrease.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time the Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled. The Fund will not enter into a
forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between 24 hours and 30
days, depending upon local custom. The Fund may also protect against the decline
of a particular foreign currency by entering into a forward contract to sell an
amount of that currency approximating the value of all or a portion of the
Fund's assets denominated in that currency ("hedging"). The success of this type
of short-term hedging strategy is highly uncertain due to the difficulties of
predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the securities
involved. Although the adviser will consider the likelihood of changes in
currency values when making investment decisions, the adviser believes that it
is important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other considerations when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

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.

Sub-Advisory Fees. For its services under the Sub-Advisory
Agreement, the Sub-Adviser receives an allocable portion of the
Fund's advisory fee. Such allocation is based on the amount of
foreign securities which the Sub-Adviser manages for the Fund. This
fee is paid by the Adviser out of its resources and is not an
incremental Fund expense.

Sub-Adviser's Background. Federated Global Research Corp.,
incorporated in Delaware on May 12, 1995, is a registered investment
adviser under the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

Portfolio Managers' Backgrounds.

Susan M. Nason and Joseph M. Balestrino are portfolio managers for the U.S.
Treasury securities asset category. Susan M. Nason has been a portfolio manager
of the Fund since the Fund's inception. Ms. Nason joined Federated Investors in
1987 and has been a Senior Vice President of the Fund's Adviser and Federated
Research since January 1997. Ms. Nason served as a Vice President of the Fund's
Adviser and Federated Research Corp from 1993 to 1997 and as an Assistant Vice
President of the Adviser and Federated Research Corp. from 1990 until 1992. Ms.
Nason is a Chartered Financial Analyst and received her M.S. in Industrial
Administration from Carnegie Mellon University. Joseph M. Balestrino has been a
portfolio manager of the Fund since March 1995. Mr. Balestrino joined Federated
Investors in 1986 and has been Vice President of the Fund's Adviser and
Federated Research Corp since 1995. Mr. Balestrino served as an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. from 1991 until
1995. 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 Senior Vice President
of the Fund's Adviser and Federated Research Corp. since January 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of the Fund's Adviser and
Federated Research Corp. Mr. Durbiano is a Chartered Financial Analyst and
received his M.B.A. in Finance from the University of Pittsburgh. Henry A.
Frantzen, Drew J. Collins, Robert M. Kowit and Micheal W. Casey are portfolio
managers for the foreign bonds asset category. Henry A. Frantzen has been a
portfolio manager of the Fund since November 1995. Mr. Frantzen joined Federated
Investors in 1995 as an Executive Vice President of the Fund's Sub-Adviser and
Federated Research Corp. Mr. Frantzen served as Chief Investment Officer of
international equities at Brown Brothers Harriman & Co. from 1992 to 1995.

Charles A. Ritter, Scott B. Schermerhorn, Michael P. Donnelly, and James E.
Grefenstette are the portfolio managers for the domestic large company stocks
asset category. Mr. Ritter has performed these duties since the Fund's
inception. Scott B. Schermerhorn has been a portfolio manager of the Fund since
July 1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice
President of the Fund's Adviser and Federated Researc Corp. From 1990 through
1996, Mr. Schermerhorn was a Senior Vice President and Senior Investment Officer
at J W Seligman & Co., Inc. Mr. Schermerhorn received his M.B.A. in Finance and
International Business from Seton Hall University.

James E. Grefenstette has been a portfolio manager of the Fund since August
1994. Mr. Grefenstette joined Federated Investors in 1992 and has been a Vice
President of the Fund's Adviser and Federated Research Corp. since 1996. From
1994 until 1996, Mr. Grefenstette acted as an Assistant Vice President of the
Fund's Adviser and Federated Research Corp., and served as an Investment Analyst
of the Adviser from 1992 to 1994. Mr. Grefenstette was a credit analyst at
Westinghouse Credit Corp. from 1990 until 1992. Mr. Grefenstette is a Chartered
Financial Analyst; he received his M.S. in Industrial Administration from
Carnegie Mellon University.

Linda A. Duessel and Steven J. Lehman are portfolio managers of the utility
stocks asset category.
Linda A. Duessel has been a portfolio manager of the Fund since February 1997.
Ms. Duessel joined Federated Investors in 1991 and has been a Vice President of
the Fund's Adviser and Federated Research Corp. since 1995. Ms. Duessel was an
Assistant Vice President of the Fund's Adviser and Federated Research Corp. from
1991 until 1995. Ms. Duessel is a Chartered Financial Analyst and received her
M.S. in Industrial 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 Plan and Shareholder Services. Under a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"), the
distributor may be paid a fee in an amount computed at an annual rate of 0.75%
of the average daily net assets of 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 services or distribution-related 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 Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Select Shares to obtain certain personal services
for shareholders and for the maintenance of shareholder accounts. Under the
Shareholder Services Agreement, 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 Fund and Federated Shareholder Services. Supplemental Payments to
Financial Institutions. In addition to receiving the payments under the
Distribution Plan and Shareholder Services Agreement, Federated Securities Corp.
and Federated Shareholder Services, from their own assets, may pay financial
institutions supplemental fees for the performance of substantial sales
services, distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's Adviser or its affiliates.
Administration of the Fund

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 Shareholder 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. Shares cannot be purchased by
wire on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement. By Mail. To purchase Shares by
mail, send a check made payable to Federated Managed Income Fund--Select Shares
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600. Orders by mail are considered received when payment by check is
converted by State Street Bank and Trust Company ("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 financial intermediary may be subject to a smaller minimum investment.
What Shares Cost

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.

Confirmations and Account Statements

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. Investors who redeem Shares through a financial
intermediary may be charged a service fee by that financial intermediary.
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

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.
Proceeds from redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about telephone
redemptions on days when wire transfers are restricted should be directed to
your shareholder services representative at the telephone number listed on your
account statement. 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

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, other than retirement accounts subject to required
minimum distributions.. 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

In the opinion of Houston, Donnelly and Meck, counsel to the Trust, 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 SEC) 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 a sales charge or other similar non-recurring charges.
Total return and yield will be calculated separately for Select Shares and
Institutional Shares. From time to time, advertisements for the Fund's Select
Shares may refer to ratings, rankings, and other information in certain
financial publications and/or compare the Fund's Select Shares performance to
certain indices.
Other Classes of Shares
The Fund also offers another class of shares called Institutional Shares that
are sold at net asset value primarily to financial institutions acting in a
fiduciary or agency capacity and are subject to a minimum initial investment of
$25,000 over a 90-day period. Institutional Shares are distributed with no 12b-1
Plan but are subject to shareholder services fees. Institutional Shares and
Select Shares are subject to certain of the same expenses. Expense differences,
however, between Institutional Shares and Select Shares may affect the
performance of each class. To obtain more information and a prospectus for
Institutional Shares, investors may call 1-800-341-7400.

<PAGE>

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

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

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

Sub-Adviser
Federated Global Research 175 Water Street
Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

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

Federated Managed
Income Fund
Select Shares
- --------------------------------------------------------------------------------

Prospectus

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

Prospectus dated January 31, 1998

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Cusip 56166K206
3122012A-SEL (1/98)

<PAGE>

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

Federated Managed Growth and Income Fund
(A Portfolio of Managed Series Trust)
Institutional Shares

Prospectus
- --------------------------------------------------------------------------------

The Institutional 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 Shares
are sold at net asset value. The Institutional 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 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 Shares of the Fund. Keep this prospectus for
future reference. The Fund has also filed a Statement of Additional
Information for Institutional Shares and Select Shares of all portfolios of the
Trust dated January 31, 1998, with the Securities and Exchange Commission
("SEC"). The information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Statement of Additional Information or a paper copy of this prospectus, if you
have received your prospectus electronically, free of charge by calling
1-800-341-7400. To obtain other information or to make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus. The
Statement of Additional Information, material incorporated by reference into
this document, and other information regarding the Fund are maintained
electronically with the SEC at Internet Web site (http://www.sec.gov). THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. Prospectus dated January 31, 1998

<PAGE>

40
Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Institutional Shares
To be added.

<PAGE>

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% 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%
of its assets in equities. The equities asset categories are large company
stocks, utility stocks, small company stocks, and foreign stocks. The following
is a summary of the asset categories and the amount of the Fund's total assets
which may be invested in each asset category:
Asset Category Range
Bonds 50-70%
U.S. Treasury Securities 0-56%
Mortgage-Backed Securities 0-35%
Investment-Grade Corporate Bonds 0-35%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%
Equities 30-50%
Large Company Stocks 22.5-37.5%
Utility Stocks 2.5-7.5%
Small Company Stocks 0-5%
Foreign Stocks 0-5%

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. 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 four nor more than six 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 56% 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% 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% 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.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 10% 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:

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 5% 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 Ratings Group 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.

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S. government
securities noted above pursuant to repurchase agreements. Mortgage-Backed
Securities. Mortgaged-backed securities are securities collateralized by
residential mortgages. The mortgage-backed securities in which the Fund may
invest may be: o issued by an agency of the U.S. government, typically
GNMA, FNMA or FHLMC;

o 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: o 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.

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

o 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:

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

o 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 o 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 would 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.

Convertible Securities. Convertible securities include a spectrum of
securities which can be exchanged for or converted into common stock.
Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of
usable bonds and warrants; or securities which cap or otherwise limit
returns to the convertible security holder, such as DECS - (Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS - (Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS - (Preferred Equity
Redemption Cumulative Stock (an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES - (Preferred Redeemable Increased Dividend
Securities (which are essentially the same as DECS; the difference is
little more than who initially underwrites the issue). The adviser may
treat convertible securities as large company stocks, small company
stocks, utility stocks, or high yield corporate 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.
Please see "High Yield Corporate Bonds."

Investing in Securities of Other Investment Companies. The Fund may invest its
assets in securitites of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.

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% of the value of the securities loaned. Foreign Currency
Transactions. The Fund will enter into foreign currency transactions to obtain
the necessary currencies to settle securities transactions. Currency
transactions may be conducted either on a spot or cash basis at prevailing rates
or through forward foreign currency exchange contracts. The Fund may also enter
into foreign currency transactions to protect Fund assets against adverse
changes in foreign currency exchange rates or exchange control regulations. Such
changes could unfavorably affect the value of Fund assets which are denominated
in foreign currencies, such as foreign securities or funds deposited in foreign
banks, as measured in U.S. dollars. Although foreign currency exchanges may be
used by the Fund to protect against a decline in the value of one or more
currencies, such efforts may also limit any potential gain that might result
from a relative increase in the value of such currencies and might, in certain
cases, result in losses to the Fund.
Currency Risks. To the extent that debt securities purchased by the
Fund are denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates will affect the Fund's net asset
value; the value of interest earned; gains and losses realized on the
sale of securities; and net investment income and capital gain, if any,
to be distributed to shareholders by the Fund. If the value of a
foreign currency rises against the U.S. dollar, the value of the Fund's
assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar, the
value of the Fund's assets denominated in that currency will decrease.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time the Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled. The Fund will not enter into a
forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between 24 hours and 30
days, depending upon local custom. The Fund may also protect against the
decline of a particular foreign currency by entering into a forward contract to
sell an amount of that currency approximating the value of all or a portion of
the Fund's assets denominated in that currency ("hedging"). The success of this
type of short-term hedging strategy is highly uncertain due to the difficulties
of predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the securities
involved. Although the adviser will consider the likelihood of changes in
currency values when making investment decisions, the adviser believes that it
is important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. The Fund will not invest more
than 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other considerations when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

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.

Sub-Adviser. Under the terms of the Sub-Advisory Agreement between the
Adviser and Federated Global Research Corp. (the "Sub-Adviser"), the
Sub-Adviser will provide the Adviser such investment advice,
statistical and other factual information as may, from time to time,
be reasonably requested by the Adviser.

Sub-Advisory Fees. For its services under the Sub-Advisory
Agreement, the Sub-Adviser receives an allocable portion of the
Fund's advisory fee. Such allocation is based on the amount of
foreign securities which the Sub-Adviser manages for the Fund. This
fee is paid by the Adviser out of its resources and is not an
incremental Fund expense.

Sub-Adviser's Background. Federated Global Research Corp.,
incorporated in Delaware on May 12, 1995, is a registered investment
adviser under the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

Violations of the codes are subject to review by the Trustees and could result
in severe penalties.

Portfolio Managers' Backgrounds.

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 Adviser's Investment Strategy Committee. Mr.
Ritter joined Federated Investors in 1983 and has been a Vice President of the
Fund's Adviser and Federated Researc Corp. since 1992. From 1988 until 1991, Mr.
Ritter acted as an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. 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:

Kathleen M. Foody-Malus and Robert E. Cauley are portfolio managers for the
mortgage-backed securities asset category. Kathleen M. Foody-Malus has 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 Adviser and
Federated Research Corp. since 1993. Ms. Foody-Malus served as an Assistant Vice
President of the Adviser and Federated Research Corp. from 1990 until 1992. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.

Henry A. Frantzen, Drew J. Collins, Robert M. Kowit and Micheal W. Casey are
portfolio managers for the foreign bonds asset category. Henry A. Frantzen has
beena portfolio manager of the Fund since November 1995. Mr. Frantzen joined
Federated Investors in 1995 as an Executive Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from 1992 to
1995.

Drew J. Collins has been a manager of the Fund since November 1995. Mr. Collins
joined Federated Investors in 1995 as a Senior Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Collins served as a Vice
President/Portfolio Manager of international equity portfolios at Arnhold and
Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College Retirement
Equities Fund from 1986 to 1994. Mr. Collins is a Chartered Financial Analyst
and received his M.B.A. in finance from the Wharton School of The University of
Pennsylvania.

Robert M. Kowit joined Federated Investors in 1995 as a Vice President of the
Fund's Sub-Adviser and Federated Research Corp. Mr. Kowit served as a Managing
Partner of Copernicus Global Asset Management from January 1995 through October
1995. From 1990 to 1994, he served as Senior Vice President of International
Fixed Income and Foreign Exchange for John Hancock Advisers. Mr. Kowit received
his M.B.A. from Iona College with a concentration in finance.

Mr. Grefenstette was a credit analyst at Westinghouse Credit Corp. from 1990
until 1992. Mr. Grefenstette is a Chartered Financial Analyst; he received his
M.S. in Industrial Administration from Carnegie Mellon University.

Linda A. Duessel and Steven J. Lehman are portfolio managers of the utility
stocks asset category. Linda A. Duessel has been a portfolio manager of the Fund
since February 1997. Ms. Duessel joined Federated Investors in 1991 and has been
a Vice President of the Fund's Adviser and Federated Research Corp. since 1995.
Ms. Duessel was an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. from 1991 until 1995. Ms. Duessel is a Chartered Financial
Analyst and received her M.S. in Industrial Administration from Carnegie Mellon
University.

Keith J. Sabol has been a portfolio manager of the Fund since June 1997. Mr.
Sabol joined Federated Investors in 1994 and has been an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. since January 1997.
Mr. Sabol was an Investment Analyst, and then Equity Research Coordinator for
the Fund's Adviser from 1994 to 1996. During 1992 and 1993, Mr. Sabol earned his
M.S. in Industrial Administration from Carnegie Mellon University.

Henry A. Frantzen, Drew J. Collins, Alexandre de Bethmann, and Frank Semack are
portfolio managers for the foreign stocks asset category. Messrs. Frantzen and
Collins have performed these duties since November 1995.

Alexandre de Bethmann has been a portfolio manager of the Fund since November
1995. Mr. de Bethmann joined Federated Investors in 1995 as a Vice President of
the Fund's Sub-Adviser and Federated Research Corp. Mr. de Bethmann served as
Assistant Vice President/Portfolio Manager for Japanese and Korean equities at
the College Retirement Equities Fund from 1994 to 1995. He served as an
International Equities Analyst and then as an Assistant Portfolio Manager at the
College Retirement Equities Fund between 1987 and 1994. Mr. de Bethmann received
his M.B.A. in Finance from Duke University.

Frank Semack has been a portfolio manager of the Fund since November 1995. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Semack served as an Investment
Analyst at Omega Advisers, Inc. from 1993 to 1994. He served as aPortfolio
Manager/Associate Director of Wardley Investment Services, Ltd. from 1980 to
1993. Mr. Semack received his M.Sc. in economics from the London School of
Economics.

Distribution of Institutional 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

Supplemental Payments to Financial Institutions. In addition to receiving the
payments under the Shareholder Services Agreement, Federated Securities Corp.
and Federated Shareholder Services, from their own assets, may pay financial
institutions supplemental fees for the performance of substantial sales
services, distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's Adviser or its affiliates.
Brokerage Transactions

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Aviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use 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.
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 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 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 Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Managed
Growth and Income Fund-- Institutional 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement. By
Mail. To purchase Shares by mail, send a check made payable to Federated Managed
Growth and Income Fund--Institutional Shares to Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are
considered received when payment by check is converted by State Street Bank and
Trust Company ("State Street Bank") into federal funds. This is normally the
next business day after State Street Bank receives the check.
Minimum Investment Required

The net asset value is determined as of the close of trading (normally 4:00 p.m.
Eastern time) on the New York Stock Exchange, 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,
Martin Luther King, Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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.

Confirmations and Account Statements

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

In the opinion of Houston, Donnelly and Meck, counsel to the Trust, 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 SEC) 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 charge or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Shares
and Select Shares. From time to time, advertisements for the Fund's
Institutional Shares may refer to ratings, rankings, and other information in
certain financial publications and/or compare the Fund's Institutional Shares
performance to certain indices.
Other Classes of Shares
The Fund also offers another class of shares called Select Shares which are sold
at net asset value primarily to retail and private banking customers of
financial institutions and are subject to a minimum initial investment of
$1,500. Select Shares are distributed under a 12b-1 Plan adopted by the Fund and
also are subject to a shareholder services fees. Select Shares and Institutional
Shares are subject to certain of the same expenses. Expense differences,
however, between Select Shares and Institutional Shares may affect the
performance of each class. To obtain more information and a prospectus for
Select Shares, investors may call 1-800-341-7400.

<PAGE>

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.

<PAGE>

Addresses
Federated Managed Growth and Income Fund
Institutional 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

Sub-Adviser
Federated Global Research 175 Water Street
Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

stroke
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Federated Managed
Growth and Income Fund
Institutional Shares
- ---------------------------------------------------------------------------

Prospectus

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

Prospectus dated January 31, 1998

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSIP56166K305
3122007A-SS (1/98)

<PAGE>

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

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 Statement of Additional Information for Select Shares
and Institutional Shares of all portfolios of the Trust dated January 31, 1998,
with the Securities and Exchange Commission ("SEC"). The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the Fund at the
address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund are maintained electronically with the SEC at
Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated
January 31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

16
Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Select Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Select Shares and Institutional 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 Fund will invest between 50 and 70% 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% of its assets in equities. The equities
asset categories are large company stocks, utility stocks, small company stocks,
and foreign stocks. The following is a summary of the asset categories and the
amount of the Fund's total assets which may be invested in each asset category:
Asset Category Range
Bonds 50-70%
U.S. Treasury Securities 0-56%
Mortgage-Backed Securities 0-35%
Investment-Grade Corporate Bonds 0-35%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%
Equities 30-50%
Large Company Stocks 22.5-37.5%
Utility Stocks 2.5-7.5%
Small Company Stocks 0-5%
Foreign Stocks 0-5%

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 56% 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% 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% 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.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 10% 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:

Foreign Stocks. The Fund invests in non-U.S. equity securities. a
substantial portion of these will be equity securities of established
companies in economically developed countries. 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 5% of
its total assets in foreign stocks.

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal
funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S. government
securities noted above pursuant to repurchase agreements. Mortgage-Backed
Securities. Mortgaged-backed securities are securities collateralized by
residential mortgages. The mortgage-backed securities in which the Fund may
invest may be:

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

o 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

o 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: o 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.

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

o 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:

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

o 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
o 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 would 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.

Convertible Securities. Convertible securities include a spectrum of
securities which can be exchanged for or converted into common stock.
Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of
usable bonds and warrants; or securities which cap or otherwise limit
returns to the convertible security holder, such as DECS - (Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS - (Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS - (Preferred Equity
Redemption Cumulative Stock (an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES - (Preferred Redeemable Increased Dividend
Securities (which are essentially the same as DECS; the difference is
little more than who initially underwrites the issue). The adviser may
treat convertible securities as large company stocks, small company
stocks, utility stocks, or high yield corporate 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.
Please see "High Yield Corporate Bonds."

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 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other considerations when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

Advisory Fees. The Fund's Adviser receives an annual investment
advisory fee equal to 0.75% 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.

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.

Sub-Adviser. Under the terms of the Sub-Advisory Agreement between the
Adviser and Federated Global Research Corp. (the "Sub-Adviser"), the
Sub-Adviser will provide the Adviser such investment advice, statistical
and other factual information as may, from time to time, be reasonably
requested by the Adviser.

Sub-Advisory Fees. For its services under the Sub-Advisory
Agreement, the Sub-Adviser receives an allocable portion of the
Fund's advisory fee. Such allocation is based on the amount of
foreign securities which the Sub-Adviser manages for the Fund. This
fee is paid by the Adviser out of its resources and is not an
incremental Fund expense.

Sub-Adviser's Background. Federated Global Research Corp.,
incorporated in Delaware on May 12, 1995, is a registered investment
adviser under the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

The Trust, the Adviser, and the Sub-Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a fiduciary
duty to the Fund's shareholders and must place the interests of shareholders
ahead of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are subject
to review by the Trustees and could result in severe penalties.

Portfolio Managers' Backgrounds.

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 Adviser's Investment
Strategy Committee. Mr. Ritter joined Federated Investors in 1983 and has
been a Vice President of the Fund's Adviser and Federated Research since
1992. From 1988 until 1991, Mr. Ritter acted as an Assistant Vice President
of the Fund's Adviser and Federated Research Corp. 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:

Joseph M. Balestrino has been a portfolio manager of the Fund since March
1995. Mr. Balestrino joined Federated Investors in 1986 and has been Vice
President of the Fund's Adviser and Federated Research Corp. since 1995.
Mr. Balestrino served as an Assistant Vice President of the Fund's Adviser
and Federated Research Corp. from 1991 until 1995. Mr. Balestrino is a
Chartered Financial Analyst and received his M.A. in Urban and Regional
Planning from the University of Pittsburgh.

Kathleen M. Foody-Malus and Robert E. Cauley are portfolio managers for the
mortgage-backed securities asset category. Kathleen M. Foody-Malus has
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
Adviser and Federated Research Corp. since 1993. Ms. Foody-Malus served as
an Assistant Vice President of the Adviser and Federated Research Corp.
from 1990 until 1992. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

Robert E. Cauley has been a portfolio manager of the Fund since July 1997.
Mr. Cauley joined Federated Investors in 1996 as an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. Mr. Cauley
served as an Associate in the Asset-Backed Securities Group at Lehman
Brothers Holding, Inc. from 1994 to 1996. From 1992 to 1994, Mr. Cauley
served as a Senior Associate/Corporate Finance at Barclays Bank, PLC. Mr.
Cauley earned his M.S.I.A., concentrating in Finance and Economics, from
Carnegie Mellon University. Joseph M. Balestrino and John T. Gentry are
portfolio managers for the investment-grade corporate bonds asset category.
Mr. Balestrino has performed these duties since the Fund's inception.

John T. Gentry has been a portfolio manager of the Fund since July 1997.
Mr. Gentry joined Federated Investors in 1995 as an Investment Analyst and
has been an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. since April 1997. Mr. Gentry served as a Senior Treasury
Analyst at Sun Company, Inc. from 1991 to 1995. Mr. Gentry is a Chartered
Financial Analyst and earned his M.B.A., with concentrations in Finance and
Accounting, from Cornell University.

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
Senior Vice President of the Fund's Adviser and Federated Research Corp.
since January 1996. From 1988 through 1995, Mr. Durbiano was a Vice
President of the Fund's Adviser and Federated Research Corp. Mr. Durbiano
is a Chartered Financial Analyst and received his M.B.A. in Finance from
the University of Pittsburgh. Henry A. Frantzen, Drew J. Collins, Robert M.
Kowit and Micheal W. Casey are portfolio managers for the foreign bonds
asset category. Henry A. Frantzen has been a portfolio manager of the Fund
since November 1995. Mr. Frantzen joined Federated Investors in 1995 as an
Executive Vice President of the Fund's Sub-Adviser and Federated Research
Corp. Mr. Frantzen served as Chief Investment Officer of international
equities at Brown Brothers Harriman & Co. from 1992 to 1995.

Drew J. Collins has been a portfolio manager of the Fund since November
1995. Mr. Collins joined Federated Investors in 1995 as a Senior Vice
President of the Fund's Sub-Adviser and Federated Research Corp. Mr.
Collins served as a Vice President/Portfolio Manager of international
equity portfolios at Arnhold and Bleichroeder, Inc. from 1994 to 1995. He
served as an Assistant Vice President/Portfolio Manager for international
equities at the College Retirement Equities Fund from 1986 to 1994. Mr.
Collins is a Chartered Financial Analyst and received his M.B.A. in finance
from the Wharton School of The University of Pennsylvania. Robert M. Kowit
joined Federated Investors in 1995 as a Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Kowit served as a Managing
Partner of Copernicus Global Asset Management from January 1995 through
October 1995. From 1990 to 1994, he served as Senior Vice President of
International Fixed Income and Foreign Exchange for John Hancock Advisers.
Mr. Kowit received his M.B.A. from Iona College with a concentration in
finance.

Micheal W. Casey, Ph.D. has been a portfolio manager of the Fund since
January 1997. Mr. Casey joined Federated Investors in 1996 as an Assistant
Vice President of the Fund's Sub-Adviser and Federated Research Corp. Mr.
Casey served as an International Economist and Portfolio Strategist for
Maria Fiorini Ramirez Inc. from 1990 to 1996. Mr. Casey earned a Ph.D.
concentrating in economics from The New School for Social Research and a
M.Sc. from the London School of Economics.

Charles A. Ritter, Scott B. Schermerhorn, Michael P. Donnelly, and James E.
Grefenstette are the portfolio managers for the domestic large company
stocks asset category. Mr. Ritter has performed these duties since the
Fund's inception. Scott B. Schermerhorn has been a portfolio manager of the
Fund since July 1996. Mr. Schermerhorn joined Federated Investors in 1996
as a Vice President of the Fund's Adviser and Federated Research Corp. From
1990 through 1996, Mr. Schermerhorn was a Senior Vice President and Senior
Investment Officer at J W Seligman & Co., Inc. Mr. Schermerhorn received
his M.B.A. in Finance and International Business from Seton Hall
University.

Michael P. Donnelly has been a portfolio manager of the Fund since June
1997. Mr. Donnelly joined Federated in 1989 as an Investment Analyst and
has been a Vice President of the Fund's Adviser and Federated Research
Corp. since 1994. He served as an Assistant Vice President of the Fund's
Adviser and Federated Research Corp. from 1992 to 1994. Mr. Donnelly is a
Chartered Financial Analyst and received his M.B.A. from the University of
Virginia.

James E. Grefenstette has been a portfolio manager of the Fund since August
1994. Mr. Grefenstette joined Federated Investors in 1992 and has been a
Vice President of the Fund's Adviser and Federated Research Corp. since
1996. From 1994 until 1996, Mr. Grefenstette acted as an Assistant Vice
President of the Fund's Adviser and Federated Research, and served as an
Investment Analyst of the Adviser from 1992 to 1994. Mr. Grefenstette was a
credit analyst at Westinghouse Credit Corp. from 1990 until 1992. Mr.
Grefenstette is a Chartered Financial Analyst; he received his M.S. in
Industrial Administration from Carnegie Mellon University.

Linda A. Duessel and Steven J. Lehman are portfolio managers of the utility
stocks asset category. Linda A. Duessel has been a portfolio manager of the
Fund since February 1997. Ms. Duessel joined Federated Investors in 1991
and has been a Vice President of the Fund's Adviser and Federated Research
Corp. since 1995. Ms. Duessel was an Assistant Vice President of the Fund's
Adviser and Federated Research Corp. from 1991 until 1995. Ms. Duessel is a
Chartered Financial Analyst and received her M.S. in Industrial
Administration from Carnegie Mellon University.

Steven J. Lehman has been a portfolio manager of the Fund since July 1997.
Mr. Lehman joined Federated Investors in May 1997 as a Vice President of
the Fund's Adviser and Federated Research Corp. From 1985 to May 1997, Mr.
Lehman served as a Portfolio Manager, then Vice President/Senior Portfolio
Manager, at First Chicago NBD Investment Management Company. Mr. Lehman is
a Chartered Financial Analyst; he received his M.A. from the University of
Chicago.

Aash M. Shah and Keith J. Sabol are the portfolio managers for the domestic
small company stocks asset category. Aash M. Shah has been a portfolio
manager of the Fund since December 1995. Mr. Shah joined Federated
Investors in 1993 and has been a Vice President of the Fund's Adviser and
Federated Research Corp. since January 1997. Mr. Shah served as an
Assistant Vice President of the Adviser and Federated Research Corp. from
1995 to 1996, and as an Investment Analyst from 1993 to 1995. Mr. Shah was
employed at Westinghouse Credit Corp. from 1990 to 1993 as an Investment
Analyst. Mr. Shah received his M.S. in Industrial Administration from
Carnegie Mellon University with a concentration in finance and accounting.
Mr. Shah is a Chartered Financial Analyst. Keith J. Sabol has been a
portfolio manager of the Fund since June 1997. Mr. Sabol joined Federated
Investors in 1994 and has been an Assistant Vice President of the Fund's
Adviser and Federated Research Corp. since January 1997. Mr. Sabol was an
Investment Analyst, and then Equity Research Coordinator for the Fund's
Adviser from 1994 to 1996. During 1992 and 1993, Mr. Sabol earned his M.S.
in Industrial Administration from Carnegie Mellon University.

Henry A. Frantzen, Drew J. Collins, Alexandre de Bethmann, and Frank Semack
are portfolio managers for the foreign stocks asset category. Messrs.
Frantzen and Collins have performed these duties since November 1995.

Alexandre de Bethmann has been a portfolio manager of the Fund since
November 1995. Mr. de Bethmann joined Federated Investors in 1995 as a Vice
President of the Fund's Sub-Adviser and Federated Research Corp. Mr. de
Bethmann served as Assistant Vice President/Portfolio Manager for Japanese
and Korean equities at the College Retirement Equities Fund from 1994 to
1995. He served as an International Equities Analyst and then as an
Assistant Portfolio Manager at the College Retirement Equities Fund between
1987 and 1994. Mr. de Bethmann received his M.B.A. in Finance from Duke
University.

Frank Semack has been a portfolio manager of the Fund since November 1995.
Mr. Semack joined Federated Investors in 1995 as a Vice President of the
Fund's Sub-Adviser and Federated Research Corp. Mr. Semack served as an
Investment Analyst at Omega Advisers, Inc. from 1993 to 1994. He served as
aPortfolio Manager/Associate Director of Wardley Investment Services, Ltd.
from 1980 to 1993. Mr. Semack received his M.Sc. in economics from the
London School of Economics.

Distribution of Select Shares

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 Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Select Shares to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts. Under the
Shareholder Services Agreement, 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 Fund and Federated Shareholder Services.

Supplemental Payments To Financial Institutions. In addition to receiving the
payments under the Distribution Plan and Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance
of substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational
and training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's Adviser or
its affiliates. Administration of the Fund

Administrative Services. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company 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:
Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

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 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 Shareholder
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. Shares cannot
be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

By Mail. To purchase Shares by mail, send a check made payable to Federated
Managed Growth and Income Fund--Select Shares to: Federated Shareholder
Services Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by
mail are considered received when payment by check is converted by State
Street Bank and Trust Company ("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 financial intermediary 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 financial intermediary may be charged an additional
service fee by that financial intermediary.

The net asset value is determined as of the close of trading (normally 4:00
p.m. Eastern time) on the New York Stock Exchange, 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, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

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.

Confirmations and Account Statements

Shareholders will receive detailed confirmations of transactions (except
for systematic program transactions.) In addition, shareholders
wi eceive periodic statements reporting all account activity, including
dividends paid. The Fund will not issue share certificates. Dividends

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. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. 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. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should
be directed to your shareholder services representative at the telephone
number listed on your account statement. 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

Shareholders requesting 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 their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934. The Fund does not accept signatures guaranteed by a
notary public. Systematic Withdrawal Program

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

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. 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. State and Local Taxes

In the opinion of Houston, Donnelly and Meck, counsel to the Trust, 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.

Shares are sold without any sales charge or other similar non-recurring
charges. Total return and yield will be calculated separately for Select
Shares and Institutional Shares.
From time to time, advertisements for the Fund's Select Shares may refer to
ratings, rankings, and other information in certain financial publications
and/or compare the Fund's Select Shares performance to certain indices. Other
Classes of Shares The Fund also offers another class of shares called
Institutional Shares which are sold at net asset value primarily to financial
institutions acting in a fiduciary or agency capacity and are subject to a
minimum initial investment of $25,000 over a 90-day period. Institutional
Shares are distributed without a 12b-1 Plan but are subject to shareholder
services fees. Institutional Shares and Select Shares are subject to certain
of the same expenses. Expense differences, however, between Institutional
Shares and Select Shares may affect the performance of each class. To obtain
more information and a prospectus for Institutional Shares, investors may
call 1-800-341-7400.

<PAGE>

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.

<PAGE>

Addresses
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

Sub-Adviser
Federated Global Research 175 Water Street
Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

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

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, 1998

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSIP56166K404
3122006A-SEL (1/98)

<PAGE>

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

Federated Managed Growth Fund
(A Portfolio of Managed Series Trust)
Institutional Shares

Prospectus
- --------------------------------------------------------------------------------

The Institutional 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 Shares are sold at net asset value. The
Institutional 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 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 Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Institutional
Shares and Select Shares of all portfolios of the Trust dated January 31, 1998,
with the Securities and Exchange Commission ("SEC"). The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the Fund at the
address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund are maintained electronically with the SEC at
Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated
January 31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Institutional Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Institutional Shares and Select Shares. This prospectus relates only to
Institutional Shares. Institutional 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% of its assets in equities. The equities asset categories are large
company stocks, small company stocks, and foreign stocks. The Fund will invest
between 30 and 50% 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:
Asset Category Range
Equities 50-70%
Large Company Stocks 30-50%
Small Company Stocks 5-15%
Foreign Stocks 5-15%
Bonds 30-50%
U.S. Treasury Securities 0-40%
Mortgage-Backed Securities 0-15%
Investment-Grade Corporate Bonds 0-15%
High Yield Corporate Bonds 0-15%
Foreign Bonds 0-15%

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% 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% of its total
assets in large company stocks.

Foreign Stocks. The Fund invests in non-U.S. equity securities. A
substantial portion of these will be equity securities of established
companies in economically developed countries. 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 15% of
its total assets in foreign stocks.
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 four nor more than six 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 40% 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% 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% 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% 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. The Fund may invest in the High Yield Bond
Portfolio, a portfolio of Federated Core Trust, as an efficient means
of investing in high-yield debt obligations. Federated Core Trust is a
registered investment company advised by Federated Research Corp., an
affiliate of the Fund's adviser. The High Yield Bond Portfolio's
investment objective is to seek high current income and its primary
investment policy is to invest in lower-rated, high-yield debt
securities. The High Yield Bond Portfolio currently does not charge an
advisory fee and is sold without any sales charge. The High Yield Bond
Porftolio may incur expenses for administrative and accounting
services. The Fund's adviser anticipates that the High Yield Bond
Portfolio will provide the Fund broad diversity and exposure to all
aspects of the high-yield bond sector of the market while at the same
time providing greater liquidity than if high-yield debt obligations
were purchased separately for the Fund. The Fund will be deemed to own
a pro rata portion of each investment of the High Yield Bond Portfolio.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 15% of its
total assets in foreign bonds.

Acceptable Investments

Equity Securities. Common stocks represent ownership interest in a
corporation. Foreign stocks are equity securities of foreign
issuers.

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 would 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.

Convertible Securities. Convertible securities include a spectrum of
securities which can be exchanged for or converted into common stock.
Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of
usable bonds and warrants; or securities which cap or otherwise limit
returns to the convertible security holder, such as DECS - (Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS - (Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS - (Preferred Equity
Redemption Cumulative Stock (an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES - (Preferred Redeemable Increased Dividend
Securities (which are essentially the same as DECS; the difference is
little more than who initially underwrites the issue). The adviser may
treat convertible securities as large company stocks, small company
stocks, or high yield corporate 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. Please see
"High Yield Corporate Bonds."

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full
faith and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal
funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S. government
securities noted above pursuant to repurchase agreements. Mortgage-Backed
Securities. Mortgaged-backed securities are securities collateralized by
residential mortgages. The mortgage-backed securities in which the Fund may
invest may be:

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

o 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

o 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: o 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.

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

o 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:

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

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% of the value of the securities loaned. Foreign Currency
Transactions. The Fund will enter into foreign currency transactions to obtain
the necessary currencies to settle securities transactions. Currency
transactions may be conducted either on a spot or cash basis at prevailing rates
or through forward foreign currency exchange contracts. The Fund may also enter
into foreign currency transactions to protect Fund assets against adverse
changes in foreign currency exchange rates or exchange control regulations. Such
changes could unfavorably affect the value of Fund assets which are denominated
in foreign currencies, such as foreign securities or funds deposited in foreign
banks, as measured in U.S. dollars. Although foreign currency exchanges may be
used by the Fund to protect against a decline in the value of one or more
currencies, such efforts may also limit any potential gain that might result
from a relative increase in the value of such currencies and might, in certain
cases, result in losses to the Fund.
Currency Risks. To the extent that debt securities purchased by the
Fund are denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates will affect the Fund's net asset
value; the value of interest earned; gains and losses realized on the
sale of securities; and net investment income and capital gain, if any,
to be distributed to shareholders by the Fund. If the value of a
foreign currency rises against the U.S. dollar, the value of the Fund's
assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar, the
value of the Fund's assets denominated in that currency will decrease.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time the Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled. The Fund will not enter into a
forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between 24 hours and 30
days, depending upon local custom. The Fund may also protect against the
decline of a particular foreign currency by entering into a forward contract to
sell an amount of that currency approximating the value of all or a portion of
the Fund's assets denominated in that currency ("hedging"). The success of this
type of short-term hedging strategy is highly uncertain due to the difficulties
of predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the securities
involved. Although the adviser will consider the likelihood of changes in
currency values when making investment decisions, the adviser believes that it
is important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. The Fund will not invest more
than 15% 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other consideration when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

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.

Sub-Adviser. Under the terms of the Sub-Advisory Agreement between the
Adviser and Federated Global Research Corp. (the "Sub-Adviser"), the
Sub-Adviser will provide the Adviser such investment advice,
statistical and other factual information as may, from time to time,
be reasonably requested by the Adviser.

Sub-Adviser's Background. Federated Global Research Corp., incorporated
in Delaware on May 12, 1995, is a registered investment adviser under
the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

The Trust, the Adviser, and the Sub-Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of the employees' own interest. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased
or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of these
codes are subject to review by the Trustees, and could result in severe
penalties.

Portfolio Managers' Backgrounds.

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 Adviser's Investment
Strategy Committee. Mr. Ritter joined Federated Investors in 1983 and has
been a Vice President of the Fund's Adviser and Federated Research Corp.
since 1992. From 1988 until 1991, Mr. Ritter acted as an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. 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:

Scott B. Schermerhorn has been a portfolio manager of the Fund since July
1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice
President of the Fund's Adviser and Federated Research Corp. From 1990
through 1996, Mr. Schermerhorn was a Senior Vice President and Senior
Investment Officer at J W Seligman & Co., Inc. Mr. Schermerhorn received
his M.B.A. in Finance and International Business from Seton Hall
University.

Michael P. Donnelly has been a portfolio manager of the Fund since June
1997. Mr. Donnelly joined Federated in 1989 as an Investment Analyst and
has been a Vice President of the Fund's Adviser and Federated Research
Corp. since 1994. He served as an Assistant Vice President of the Fund's
Adviser and Federated Research Corp. from 1992 to 1994. Mr. Donnelly is a
Chartered Financial Analyst and received his M.B.A. from the University of
Virginia.

James E. Grefenstette has been a portfolio manager of the Fund since August
1994. Mr. Grefenstette joined Federated Investors in 1992 and has been a
Vice President of the Fund's Adviser and Federated Research Corp. since
1996. From 1994 until 1996, Mr. Grefenstette acted as an Assistant Vice
President of the Fund's Adviser and Federated Research Corp., and served as
an Investment Analyst of the Adviser from 1992 to 1994. Mr. Grefenstette
was a credit analyst at Westinghouse Credit Corp. from 1990 until 1992. Mr.
Grefenstette is a Chartered Financial Analyst; he received his M.S. in
Industrial Administration from Carnegie Mellon University.

Keith J. Sabol has been a portfolio manager of the Fund since June 1997.
Mr. Sabol joined Federated Investors in 1994 and has been an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. since January
1997. Mr. Sabol was an Investment Analyst, and then Equity Research
Coordinator for the Fund's Adviser from 1994 to 1996. During 1992 and 1993,
Mr. Sabol earned his M.S. in Industrial Administration from Carnegie Mellon
University.

Henry A. Frantzen, Drew J. Collins, Alexandre de Bethmann, and Frank Semack
are portfolio managers for the foreign stocks asset category. Henry A.
Frantzen has been a portfolio manager of the Fund since November 1995. Mr.
Frantzen joined Federated Investors in 1995 as an Executive Vice President
of the Fund's Sub-Adviser and Federated Research Corp. Mr. Frantzen served
as Chief Investment Officer of international equities at Brown Brothers
Harriman & Co. from 1992 to 1995.

Alexandre de Bethmann has been a portfolio manager of the Fund since
November 1995. Mr. de Bethmann joined Federated Investors in 1995 as a Vice
President of the Fund's Sub-Adviser and Federated Research Corp. Mr. de
Bethmann served as Assistant Vice President/Portfolio Manager for Japanese
and Korean equities at the College Retirement Equities Fund from 1994 to
1995. He served as an International Equities Analyst and then as an
Assistant Portfolio Manager at the College Retirement Equities Fund between
1987 and 1994. Mr. de Bethmann received his M.B.A. in Finance from Duke
University.

Frank Semack has been a portfolio manager of the Fund since November 1995.
Mr. Semack joined Federated Investors in 1995 as a Vice President of the
Fund's Sub-Adviser and Federated Research Corp. Mr. Semack served as an
Investment Analyst at Omega Advisers, Inc. from 1993 to 1994. He served as
aPortfolio Manager/Associate Director of Wardley Investment Services, Ltd.
from 1980 to 1993. Mr. Semack received his M.Sc. in economics from the
London School of Economics.

Joseph M. Balestrino has been a portfolio manager of the Fund since March
1995. Mr. Balestrino joined Federated Investors in 1986 and has been Vice
President of the Fund's Adviser and Federated Research Corp. since 1995.
Mr. Balestrino served as an Assistant Vice President of the Fund's Adviser
and Federated Research Corp. from 1991 until 1995. Mr. Balestrino is a
Chartered Financial Analyst and received his M.A. in Urban and Regional
Planning from the University of Pittsburgh.

Kathleen M. Foody-Malus and Robert E. Cauley are portfolio managers for the
mortgage-backed securities asset category. Kathleen M. Foody-Malus has
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
Adviser and Federated Research Corp. since 1993. Ms. Foody-Malus served as
an Assistant Vice President of the Adviser and Federated Research Corp.
from 1990 until 1992. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

Robert E. Cauley has been a portfolio manager of the Fund since July 1997.
Mr. Cauley joined Federated Investors in 1996 as an Assistant Vice
President of the Fund's Adviser and Federated Research Corp. Mr. Cauley
served as an Associate in the Asset-Backed Securities Group at Lehman
Brothers Holding, Inc. from 1994 to 1996. From 1992 to 1994, Mr. Cauley
served as a Senior Associate/Corporate Finance at Barclays Bank, PLC. Mr.
Cauley earned his M.S.I.A., concentrating in Finance and Economics, from
Carnegie Mellon University. Joseph M. Balestrino and John T. Gentry are
portfolio managers for the investment-grade corporate bonds asset category.
Mr. Balestrino has performed these duties since the Fund's inception.

John T. Gentry has been a portfolio manager of the Fund since July 1997.
Mr. Gentry joined Federated Investors in 1995 as an Investment Analyst and
has been an Assistant Vice President of the Fund's Adviser and Federated
Research Corp. since April 1997. Mr. Gentry served as a Senior Treasury
Analyst at Sun Company, Inc. from 1991 to 1995. Mr. Gentry is a Chartered
Financial Analyst and earned his M.B.A., with concentrations in Finance and
Accounting, from Cornell University.

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
Senior Vice President of the Fund's Adviser and Federated Research Corp.
since January 1996. From 1988 through 1995, Mr. Durbiano was a Vice
President of the Fund's Adviser and Federated Research Corp. Mr. Durbiano
is a Chartered Financial Analyst and received his M.B.A. in Finance from
the University of Pittsburgh. Henry A. Frantzen, Drew J. Collins, Robert M.
Kowit and Micheal W. Casey are portfolio managers for the foreign bonds
asset category. Messrs. Frantzen, Collins and Kowit have performed these
duties since November 1995.

Robert M. Kowit joined Federated Investors in 1995 as a Vice President of
the Fund's Sub-Adviser and Federated Research Corp. Mr. Kowit served as a
Managing Partner of Copernicus Global Asset Management from January 1995
through October 1995. From 1990 to 1994, he served as Senior Vice President
of International Fixed Income and Foreign Exchange for John Hancock
Advisers. Mr. Kowit received his M.B.A. from Iona College with a
concentration in finance.

Micheal W. Casey, Ph.D. has been a portfolio manager of the Fund since
January 1997. Mr. Casey joined Federated Investors in 1996 as an Assistant
Vice President of the Fund's Sub-Adviser and Federated Research Corp. Mr.
Casey served as an International Economist and Portfolio Strategist for
Maria Fiorini Ramirez Inc. from 1990 to 1996. Mr. Casey earned a Ph.D.
concentrating in economics from The New School for Social Research and a
M.Sc. from the London School of Economics.

Distribution of Institutional Shares

Shareholder Services. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, 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 Fund and Federated Shareholder Services. Supplemental Payments to
Financial Institutions. In addition to receiving the payments under the
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of Shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's Adviser or its affiliates.
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.
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 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 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 Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Managed
Growth Fund-- Institutional 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. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement. By Mail. To purchase
Shares by mail, send a check made payable to Federated Managed Growth
Fund--Institutional Shares to Federated Shareholder Services Company, P.O. Box
8600, Boston, Massachusetts 02266-8600. Orders by mail are considered received
after payment by check is converted by State Street Bank and Trust Company
("State Street Bank") into federal funds. This is normally the next business day
after State Street Bank receives the check.
Minimum Investment Required

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, 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, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Systematic Investment Program

Confirmations and Account Statements

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

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

The yield of Shares is calculated by dividing the net investment income per
Share (as defined by the SEC) 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.
From time to time, advertisements for the Fund's Institutional Shares may refer
to ratings, rankings, and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
Other Classes of Shares
The Fund also offers another class of shares called Select Shares that are sold
at net asset value primarily to retail and private banking customers of
financial institutions and are subject to a minimum initial investment of
$1,500. Select Shares are distributed under a 12b-1 Plan adopted by the Fund and
also are subject to shareholder services fees. Select Shares and Institutional
Shares are subject to certain of the same expenses. Expense differences,
however, between Select Shares and Institutional Shares may affect the
performance of each class. To obtain more information and a prospectus for
Select Shares, investors may call 1-800-341-7400.

<PAGE>

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.

<PAGE>

Addresses
Federated Managed Growth Fund
Institutional 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

Sub- Adviser
Federated Global 175 Water Street
Research Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

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

Federated Managed
Growth Fund
Institutional Shares
- --------------------------------------------------------------------------------

Prospectus

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

Prospectus dated January 31, 1998

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

[GRAPHIC OMITTED]FEDERATED SECURITIES CORP.

[GRAPHIC OMITTED]

CUSIP 56166K503
3122010A-SS (1/98)

<PAGE>

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

Federated Managed Growth Fund
(A Portfolio of Managed Series Trust)
Select Shares

Prospectus
- --------------------------------------------------------------------------------

The Select Shares of Federated Managed Growth Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a diversified investment
portfolio of Managed Series Trust (the "Trust"). The Trust is an open-end
management investment company (a mutual fund). The investment objective of the
Fund is to seek capital appreciation. In pursuing its objective, the Fund will
consider the current income of the investments it selects. The Fund invests in
both bonds and stocks. Select Shares are sold at net asset value. The Select
Shares offered by this prospectus are not deposits or obligations of any bank,
are not endorsed or guaranteed by any bank, and are not insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these select shares involves investment risks,
including the possible loss of principal. This prospectus contains the
information you should read and know before you invest in Select Shares of the
Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Select Shares
and Institutional Shares of all portfolios of the Trust dated January 31, 1998,
with the Securities and Exchange Commission ("SEC"). The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information, or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the Fund at the
address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund are maintained electronically with the SEC at
Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated
January 31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Select Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Select Shares and Institutional 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 Fund will invest between 50 and 70% of its assets in equities. The equities
asset categories are large company stocks, small company stocks, and foreign
stocks. The Fund will invest between 30 and 50% 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:
Asset Category Range
Equities 50-70%
Large Company Stocks 30-50%
Small Company Stocks 5-15%
Foreign Stocks 5-15%
Bonds 30-50%
U.S. Treasury Securities 0-40%
Mortgage-Backed Securities 0-15%
Investment-Grade Corporate Bonds 0-15%
High Yield Corporate Bonds 0-15%
Foreign Bonds 0-15%

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 Ratings Group 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. The Fund invests in non-equity securities. A
substantial portion of these will be equity securities of established
companies in economically developed countries. 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 15% of
its total assets in foreign stocks.

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 securites. The average duration of the Fund's Bond Assets will
be not less than four nor more than six 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.

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% 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% 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% 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. The Fund may invest in the High Yield Bond
Portfolio, a portfolio of Federated Core Trust, as an efficient means
of investing in high-yield debt obligations. Federated Core Trust is a
registered investment company advised by Federated Research Corp., an
affiliate of the Fund's adviser. The High Yield Bond Portfolio's
investment objective is to seek high current income and its primary
investment policy is to invest in lower-rated, high-yield debt
securities. The High Yield Bond Portfolio currently does not charge an
advisory fee and is sold without any sales charge. The High Yield Bond
Porftolio may incur expenses for administrative and accounting
services. The Fund's adviser anticipates that the High Yield Bond
Portfolio will provide the Fund broad diversity and exposure to all
aspects of the high-yield bond sector of the market while at the same
time providing greater liquidity than if high-yield debt obligations
were purchased separately for the Fund. The Fund will be deemed to own
a pro rata portion of each investment of the High Yield Bond Portfolio.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 15% of its
total assets in foreign bonds.

Acceptable Investments

Equity Securities. Common stocks represent ownership interest in a
corporation. 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. ("Moody's") (Aaa, Aa, A or Baa) or by Standard & Poor's
Ratings Group ("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 would 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.

Convertible Securities. Convertible securities include a spectrum of
securities which can be exchanged for or converted into common stock.
Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of
usable bonds and warrants; or securities which cap or otherwise limit
returns to the convertible security holder, such as DECS - (Dividend
Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS - (Liquid Yield Option Notes, which
are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS - (Preferred Equity
Redemption Cumulative Stock (an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES - (Preferred Redeemable Increased Dividend
Securities (which are essentially the same as DECS; the difference is
little more than who initially underwrites the issue). The adviser may
treat convertible securities as large company stocks, small company
stocks, or high yield corporate 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. Please see
"High Yield Corporate Bonds."

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:

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

o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full
faith and credit of the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal
funding; and

o notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.

The Fund may also purchase U.S. Treasury securities and the U.S. government
securities noted above pursuant to repurchase agreements. Mortgage-Backed
Securities. Mortgage-backed securities are securities collateralized by
residential mortgages. The mortgage-backed securities in which the Fund may
invest may be:

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

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: o 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.

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

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:

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

o 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

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

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 15% 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. 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. 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. (Further information is contained in the
Fund's Statement of Additional Information within the sections "Brokerage
Transactions" and "Tax Status"). Nevertheless, transactions for the Fund's
portfolio will be based only upon investment considerations and will not be
limited by any other consideration when the Fund's adviser deems it appropriate
to make changes in the Fund's portfolio.
Investment Limitations

The Fund will not:

o lend any securities except for portfolio securities; or

The above investment limitations cannot be changed without shareholder approval.
Trust Information
Management of the Trust

Advisory Fees. The Adviser receives an annual investment advisory fee
equal to 0.75% 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.

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.

Sub-Adviser. Under the terms of the Sub-Advisory Agreement between the
Adviser and Federated Global Research Corp. (the "Sub-Adviser"), the
Sub-Adviser will provide the Adviser such investment advice,
statistical and other factual information as may, from time to time,
be reasonably requested by the Adviser.

Sub-Adviser's Background. Federated Global Research Corp., incorporated
in Delaware on May 12, 1995, is a registered investment adviser under
the Investment Advisers Act of 1940.

The Adviser and Sub-Adviser are subsidiaries 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.

The Trust, the Adviser, and the Sub-Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of the employees' own interest. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased
or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of these
codes are subject to review by the Trustees, and could result in severe
penalties.

Portfolio Managers' Backgrounds.

James E. Grefenstette has been a portfolio manager of the Fund since August
1994. Mr. Grefenstette joined Federated Investors in 1992 and has been a Vice
President of the Fund's Adviser and Federated Research Corp. since 1996. From
1994 until 1996, Mr. Grefenstette acted as an Assistant Vice President of the
Fund's Adviser and Federated Research Corp., and served as an Investment Analyst
of the Adviser from 1992 to 1994. Mr. Grefenstette was a credit analyst at
Westinghouse Credit Corp. from 1990 until 1992. Mr. Grefenstette is a Chartered
Financial Analyst; he received his M.S. in Industrial Administration from
Carnegie Mellon University.

Henry A. Frantzen, Drew J. Collins, Alexandre de Bethmann, and Frank Semack are
portfolio managers for the foreign stocks asset category. Henry A. Frantzen has
been a portfolio manager of the Fund since November 1995. Mr. Frantzen joined
Federated Investors in 1995 as an Executive Vice President of the Fund's
Sub-Adviser and Federated Research Corp. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from 1992 to
1995.

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 Senior Vice President
of the Fund's Adviser and Federated Research Corp. since January 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of the Fund's Adviser and
Federated Research Corp. Mr. Durbiano is a Chartered Financial Analyst and
received his M.B.A. in Finance from the University of Pittsburgh. Henry A.
Frantzen, Drew J. Collins, Robert M. Kowit and Micheal W. Casey are portfolio
managers for the foreign bonds asset category. Messrs. Frantzen, Collins and
Kowit have performed these duties since November 1995.

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.

Supplemental Payments to Financial Institutions. In addition to receiving the
payments under the Distribution Plan and Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Adviser or its affiliates.
Administration of the Fund

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 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 Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Managed
Growth Fund-- Select Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Wire Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

By Mail. To purchase Shares by mail, send a check made payable to Federated
Managed Growth Fund--Select Shares to Federated Shareholder Services Company,
P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are considered
received after payment by check is converted by State Street Bank Bank and Trust
Company ("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 financial intermediary may be subject to a smaller minimum investment.
What Shares Cost

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.

Confirmations and Account Statements

Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions.) In addition, shareholders will
recei eriodic statements reporting all account activity, including dividends
paid. The Fund will not issue share certificates.
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

Shareholders requesting 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 their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
Systematic Withdrawal Program

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

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.
Tax Information
Federal Income Tax

From time to time, advertisements for the Fund's Select Shares may refer to
ratings, rankings, and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
Other Classes of Shares
The Fund also offers another class of shares called Institutional Shares that
are sold at net asset value primarily to financial institutions acting in a
fiduciary or agency capacity and are subject to a minimum initial investment of
$25,000 over a 90-day period. Institutional Shares are distributed without a
12b-1 Plan but are subject to shareholder services fees. Institutional Shares
and Select Shares are subject to certain of the same expenses. Expense
differences, however, between Institutional Shares and Select Shares may affect
the performance of each class. To obtain more information and a prospectus for
Institutional Shares, investors may call 1-800-341-7400.

<PAGE>

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

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

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

Sub- Adviser
Federated Global 175 Water Street
Research Corp. New York, New York 10038-4965

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

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

<PAGE>

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

Federated Managed Growth Fund
Select Shares
- --------------------------------------------------------------------------------

Prospectus

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

Prospectus dated January 31, 1998

[GRAPHIC OMITTED]FEDERATED SECURITIES CORP.

Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
[GRAPHIC OMITTED]

CUSIP 56166K602
3122011A-SEL (1/98)

<PAGE>

- --------------------------------------------------------------------------------
Federated Managed Aggressive Growth Fund
(A Portfolio of Managed Series Trust)
Institutional Shares

Prospectus
- --------------------------------------------------------------------------------

The Institutional Shares of Federated Managed Aggressive Growth Fund (the
"Fund") offered by this prospectus represent interests in the Fund, which is a
diversified investment portfolio of Managed Series Trust (the "Trust"). The
Trust is an open-end management investment company (a mutual fund). The
investment objective of the Fund is to seek capital appreciation. The Fund
invests in both bonds and stocks. Institutional Shares are sold at net asset
value. The Institutional 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 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 Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for
Institutional Shares and Select Shares of all portfolios of the Trust dated
January 31, 1998, with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is incorporated
by reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund are maintained electronically with the
SEC at Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus
dated January 31, 1998

<PAGE>

Table of Contents
Will be generated when document is complete.

<PAGE>

Summary of Fund Expenses
To be added.

<PAGE>

Financial Highlights - Institutional Shares
To be added.

<PAGE>

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") has established two classes of shares of the Fund, known
as Institutional Shares and Select Shares. This prospectus relates only to
Institutional Shares. Institutional Shares ("Shares") of the Fund are designed
to give institutions, individuals, and financial institutions acting in a
fiduciary or agency capacity a convenient means of accumulating an interest in a
professionally managed, diversified investment portfolio. A minimum initial
investment of $25,000 over a 90-day period is required. Shares are currently
sold and redeemed at net asset value without a sales charge imposed by the Fund.
Investment Information
Investment Objective

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

Asset Allocation. The Fund will primarily invest in two types of assets:
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 70
and 90% of its assets in equities. The equities asset categories are large
company stocks, small company stocks, and foreign stocks. The Fund will invest
between 10 and 30% 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:
Asset Category Range
Equities 70-90%
Large Company Stocks 40-60%
Small Company Stocks 10-20%
Foreign Stocks 10-20%
Bonds 10-30%
U.S. Treasury Securities 0-20%
Mortgage-Backed Securities 0-10%
Investment-Grade Corporate Bonds 0-10%
High Yield Corporate Bonds 0-10%
Foreign Bonds 0-10%

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% 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 60% of its total
assets in large company stocks.

Small Company Stocks. Small company stocks are common stocks and
securities convertible into or exchangeable for common stocks, such as
rights and warrants, of companies with a market capitalization (market
price 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 20% 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 Ratings Group 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.

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 20% 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 10% 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
10% 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.

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 established
corporations located primarily in economically developed countries
other than the United States and subject to the Fund's credit
limitations for foreign bonds. The Fund may invest up to 10% of its
total assets in foreign bonds.

Acceptable Investments
Equity Securities. Common stocks represent ownership interest in a
corporation. Unlike bonds, which are debt securities, common stocks
have neither fixed maturity dates nor fixed schedules of promised
payments. Foreign stocks are equity securities of foreign issuers.

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 would 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.